£581,000. That was Sir George Mathewson’s annual salary as chairman of the Royal Bank of Scotland (RBS) when he stood down from the post in 2006. As RBS chairman, Mathewson also enjoyed the benefit of one-off bonus payments – such as the £2.5 millions he was paid after the RBS’s takeover of the NatWest bank in 2000 (a bonus dismissed by Mathewson as something which “would not give you bragging power in a Soho wine bar.”)
Mathewson presided over the transformation of the RBS from the lame duck of British banking into the second-largest bank in Europe, and the fifth largest bank in the world. Its annual profits now amount to over £8 billions, its market capitalisation amounts to over £60 billions, 40% of its profits come from overseas, and it employs more people in America than does Nike.
Apart from making lots of money, Mathewson is also a fervent supporter of independence for Scotland.
In the run-up to this year’s Holyrood elections he publicly backed the SNP in stridently Thatcherite tones: “There are several reasons why I shall vote SNP at the forthcoming Scottish election, the foremost of which is that I believe the SNP offers Scotland the best chance of escaping from the dependency culture that is currently all-pervasive at every level in Scottish life.”
The SNP declared itself “absolutely delighted” with Mathewson’s endorsement. In an earlier statement, issued at the time of Mathewson’s retirement from the RBS, the SNP had declared: “Arguably, the two most prominent industries in recent Scottish history, oil and financial services, have both been shaped by his leadership. The headquarters of one of the world's leading financial institutions now stand on the outskirts of our capital city as a testament to his contribution.”
And now Mathewson combines his role as a consultant to the RBS (£75,000 a year) and various non-executive directorships (including one with Brian Souter’s Stagecoach Group) with chairing the eleven-strong Council of Economic Advisers (CEA), created by the SNP Holyrood government and modestly described by First Minister Alex Salmond as “the most formidable intellectual firepower ever to have tackled Scottish economic underperformance.”
Another member of the CEA is Jim McColl, usually described as the tenth-richest man in Scotland (although he actually lives in Monaco), with a personal fortune currently amounting to around £350 millions. According to the Chief Executive of Scottish Engineering: "Jim doesn't do sentiment. He does hard-nosed business stuff, and that's how it should be.”
McColl bought a 30% share in the Clyde Blowers company in 1992, and increased his share to 70% in 2001. When the company, of which he is now Chairman and Chief Executive, is floated on the stock market in 2009, it is expected to be worth £1 billion. Described as “one of the guiding lights of Scottish globalisation,” McColl has presided over the expansion of Clyde Blowers and it subsidiaries into over twenty countries in Europe and Asia.
A third captain of industry to be found in the ranks of the CEA is Crawford Beveridge, Executive Vice-President of Sun Microsystems, and Chairman of the company’s operations in Europe, Africa and the Middle East, with additional responsibility for the company’s operations in the high-economic-growth BRIC countries (Brazil, Russia, India and China). Crawfords’s main home is in California but, he claims, he “visits Scotland as often as his hectic travel and work schedule permits.”
Crawford, who accepted the award of a CBE (Commander of the Order of the British Empire) in 1995, backed the SNP in this year’s Holyrood elections and supports independence for Scotland. As one of his fellow businessmen put it: “Crawford Beveridge says that to reignite entrepreneurialism in Scotland, we need to stand on our own two feet. I couldn't agree more.”
According to Crawford: "I worry every time somebody has a responsibility to spend money but not to make money. When the Scottish Parliament came into being I was never able to get MSPs as focused as I would want on the economy. Part of the reason is because they didn't have to make money. They received a cheque each month and were told to go and spend it. If you have to make it yourself you will have a lot more interest in how you get the GDP number growing faster."
Sir Robert Smith is the only other businessman included amongst the membership of the CEA. Smith is Chairman of the Weir Group (annual salary: £134,509), Chairman of Scottish and Southern Energy (annual salary: £99,000), a non-executive director of the 3i Group (annual salary: £40,000), a non-executive director of the Standard Bank Group, a non-executive director of Aegon UK, and owner of the Isle of Inchmarnock.
The other eleven members of the CEA are academics of one form or another. Their areas of expertise are considered by the SNP to be relevant to the Committee’s role of “tackling Scottish economic underperformance, … challenging accepted wisdoms, … and directly advising me (Alex Salmond) on how we can achieve our goal of raising Scotland's growth rate to the UK level by 2011."
Andrew Hughes Hallett is Professor of Economics and Public Policy at the George Mason University in Virginia, a post he combines with acting as a consultant to the World Bank, the International Monetary Fund, the US Federal Reserve Board, the Washington-based Institute for International Economics, the European Commission, the European Central Bank, and miscellaneous European governments and central banks.
His main area of expertise is that of the implementation of economic structural reforms geared towards improving competitiveness and performance. Thus, for example, in an article published in June of this year (“The Impact of Tax, Product and Labour Market Distortions on the Phillips Curve and the Natural Rate of Unemployment”), Hallett and his co-author explained:
“Tax reform, market liberalisation and deregulation in the labour markets are widely seen as the key to improved economic performance – particularly in Europe. As a result, structural reform has become a, if not the, leading policy issue in Europe. … The effective reforms will lie in deregulating the labour markets; then reducing business taxes; and then in market liberalisation. Could Mrs. Thatcher have been right after all? … Excessive union power will mean no reforms are possible since the long term gains vanish and we are left with the case where short run costs dominate.”
When a letter from Hallett supporting the SNP and independence for Scotland was published in the “Herald” during the Holyrood election campaign, the SNP was ecstatic about the professor’s endorsement: “This is a another powerful and very welcome contribution to the debate on Scotland's future from a leading world economist … (whose arguments) support the SNP's case that Scotland needs a new approach and fresh thinking so we can prosper as an independent nation in Europe, with lower corporate tax to give us a real competitive edge.”
Another US-based academic sitting on the CEA is Finn Kydland, Economics Professor at the University of California. In 2004 Kydland won a Nobel Prize for research he had co-authored with Edward Prescott in 1977 (on the causes of stagflation) and in 1982 (on the causes of business cycles). President George W. Bush was so impressed that he granted the two academics the honour of a personal audience in the Oval Office at the White House.
Other economists, however, have been rather less impressed with Kydland and Prescott’s explanation for economic slumps, describing their arguments as “possessing as much explanatory power as the mathematically less elegant theory of Stanley Jevons in the nineteenth century, that economic fluctuations were caused by sunspots.” Their notion of “intertemporal labour substitution” as the cause of unemployment during recessions has also come in for particularly sharp criticism:
“In plain English, their argument is that when wages fall, workers substitute leisure for labour. … The unemployed are not really so. They are merely taking time off. Willem Buiter has called this reasoning the `economics of Dr. Pangloss', the reference being to the philosopher who kept telling Candide whenever disaster struck: ‘Surely this is the best of all possible worlds.’ … (According to Kydland and Prescott’s theory) in 1929 folks everywhere developed a desire to substitute leisure for good paychecks."
Sir James Mirrlees, Professor Emeritus at Cambridge University, is a second member of the CEA who has been awarded a Nobel Prize – in 1996, for his work on “asymmetric information.” The latter phenomenon occurs when parties to, say, trading goods or services have different levels of knowledge about the goods or services being traded. More common terms used to describe the phenomenon of “information asymmetry” include “uncertainty” and “incompleteness”.
And “uncertainty” and “incompleteness” certainly loom large throughout Mirrlees’ writings. His PhD thesis of 1963 was entitled: "Optimal Planning Under Uncertainty". Four decades later, uncertainty and incompleteness remain at the heart of Mirrlees’ thought:
“After incomplete markets, we have incomplete contracts, and now theories of incomplete rationality. It seems that progress has been largely towards recognizing the imperfections of the market economy. Increasingly, we are dealing with imperfections in individual behaviour, as well as in the economic relations between people. This is where economics is probably going.”
A CEA member much less concerned with the problem of uncertainty is John Kay, formerly a professor at the London Business School and Oxford University, currently a visiting professor at the LSE, and a man who modestly describes himself as “one of Britain’s leading economists, a distinguished academic, a successful businessman, an adviser to companies and governments around the world, and an acclaimed columnist.”
According to Kay, market economies are necessarily superior to socialist or centrally planned economies (by which he means the now defunct Stalinist command economies) but need to be “embedded in a social, political and cultural context, and cannot work otherwise. … I share the commitment to market economics and market economies. But I see the social context of markets not as a sideshow but as an integral part of how these markets work.”
During this year’s Holyrood election campaign Kay wrote: “I would be tempted to cast a vote for the SNP on 3rd May.” (By which he presumably meant that he would vote SNP if he actually lived in Scotland – rather than being someone who, again in his own words, “commutes between London, Oxfordshire and the south of France, and (whose) favourite recreation is walking in the mountains behind the French Riviera.” The SNP’s attraction for Kay lies in the party’s support for an independent Scotland.
According to Kay, independence would “remove the focus of grievance and the source of subsidy and make Scotland again responsible for its economic destiny. Scotland consumes about 10 per cent more than it produces. … But Scots, with average incomes about 7 per cent below the UK average, pay less per head in tax than the UK average although public expenditure there is about 15 per cent per head higher. This transfer is the economic price the rest of Britain pays for union, and there seems little to show for it.”
Comparing an eventually independent Scotland with post-independence Ireland, Kay writes: “Scotland starts in a stronger position than did Ireland. It should be easier to shed the baseless sense of victimhood of the Scots than the well-founded sense of victimhood of the Irish. With Scotland (unlike Ireland) there is an entrepreneurial history and (like Ireland) a diaspora ready to participate in economic revival. … Hard-headed Scots would take much less than half a century to discard the culture of complaint and the romantic appeal of apocryphal history.”
Alex Kemp – the only Scotland-based academic on the CEA: he is Professor of Petroleum Economics at Aberdeen University – is a member of the Committee because of what he has to say about North Sea oil. Whereas the UK Offshore Operators Association calculates that by 2010 output will decline to 2.6 million barrels a day, and to a million barrels a day by 2020, Kemp has argued that output in 2010 could be running at three million barrels a day, and, “with an awful lot of effort”, daily output in 2020 could still amount to two million barrels a day.
Frances Ruane, former Associate Professor of Economics at Dublin Trinity College and now Director of the Irish Economic and Social Research Institute is one of the only two women members of the CEA. Her specialist area of research is foreign direct investment (FDI), and the role played by this in Ireland’s economic growth. Her conclusions read like the SNP’s economic policies for an independent Scotland.
According to Ruane, the crucial factors which explain Ireland’s “Celtic Tiger” economy are: abandoning attempts to protect declining industries; low corporate taxes to encourage Irish exports and to attract FDI in Ireland; grants to promote investment and to influence company location; encouraging entrepreneurship through “appropriate” tax regimes; exploiting the opportunities for economic growth provided by the European Union; and, overall, “a market-driven, export-led, FDI-led approach.”
How or why Frances Cairncross, the other woman on the CEA, has ended up as a member of the Committee is less clear. Rector of Exeter College at Oxford University, she has at various times worked as a journalist on the “Times”, “Guardian” and “Economist”. Her role on the CEA may be to represent the “sustainability” element in the “sustainable economic growth” which the CEA is intended to promote – she is the author of “Green, Inc.” and “Costing the Earth: The Challenges for Governments, The Opportunities for Businesses.”
As the title of the latter book indicates, Cairncross sees protection of the environment as compatible with the preservation – and promotion – of market forces. According to Cairncross, “resourceful companies” can turn public concern with environmental issues “to their corporate advantage.” The environmental crisis provides “an extraordinary opportunity for enterprise and invention,” and can be resolved by “a mixture of market forces and government controls.”
Even “Scottish Left Review” – which enthusiastically hailed the SNP’s election victory in May as “the beginning of a new game” – has described the CEA as “a gang to advise on policy which consists only of those who already agree with the rights of big business to demand more. Every single person on Salmond’s ‘economic council’ is a paid-up member of the ‘whatever business wants’ school. There is no recognition at all that the economy is something more than a selection of big businesses, nor that the economy impacts on the rest of us.”
But why should “Scottish Left Review”, or anyone else, have expected the SNP to have acted any differently?
After its election defeat of 1999, when it performed far worse than expected, the SNP made a sharp and conscious turn to wooing the so-called ‘business community’. As one “SNP insider” explained to the “Sunday Herald”: "The 1999 campaign was a turning point for Alex and others in the party. After that mauling, we felt that we would never again let ourselves be misrepresented as being anti-business and anti- prosperity. Not having the business community onside makes it very difficult."
In this year’s Holyrood elections Salmond made sure that the ‘mistakes’ of 1999 were not repeated.
In the twelve months before the elections Salmond, John Swinney (who had taken over as party leader for a period after Salmond’s resignation in 2000), Stewart Hosie (who once belonged to the left of the SNP), the SNP’s millionaire MSP Jim Mather, and Salmond’s personal economic adviser Jennifer Erickson (an “independent political and philanthropic consultant” from Washington DC) made two presentations a week to businessmen on the SNP’s economic policies, touting their plans to cut business rates and corporation tax.
As Salmond put it at the last SNP party conference before the May elections: “This support (from big business) for the SNP has not come about by accident. It has come about through the hard work of Jim Mather, John Swinney, Stewart Hosie and Jennifer Erickson taking the case to the business community. We offer Scottish business a competitive advantage to unleash the potential of the Scottish economy.”
The SNP, it turned out, found a receptive audience for its arguments. In the 1999 election campaign a hundred Scottish businessmen had signed a letter endorsing Labour’s economic policies. According to a poll conducted in 2003, only seventeen of them still gave their backing to Labour.
SNPers such as Salmond, Swinney and Mather – all of whom come from a business and banking background – also spoke the same language as Scotland’s captains of industry. As one of the latter put it: "The reason I enjoyed the Salmond-Mather show is because they know what they are talking about. They have a business background."
Following on from his narrow election victory in May, Salmond then entrusted the creation of the CEA to his “political and philanthropic consultant” from Washington (which might explain the disproportionately large number of CEA members based in America).
The composition of the CEA does not ‘reveal’ anything about the politics of the SNP. It merely confirms what was already patently obvious: that the SNP is committed to the creation of an indendent capitalist Scotland in which priority is given to the needs of big business and capital accumulation.
This drive for an independent Scotland is not the political expression of landless peasants and petty artisans groaning under the yoke of English imperialism. It is the political expression of a faction of Scottish capitalism which is already prospering in a globalised world economy and calculates that it would prosper even more if Scotland were to be an independent player in the global economy.
The composition of the CEA reflects the key ingredients of an independent Scottish capitalism. Modelled on Ireland, it would cut business rates and corporation tax to promote foreign direct investment, promote existing sectors of the economy (banking, engineering, and computing), use oil revenues to finance the required structural reforms, and make sure that “excessive” union power was not allowed to stand in the way of this capitalist restructuring. Lip-service would also be paid to sustainability.
The pro-independence faction of Scottish capitalism might be right in their calculations concerning the benefits which an independent Scotland would bring them. Or they might be wrong. But this is certainly not a debate in which the labour movement has any interest in lining up with one side or the other.
And even less so do socialists serve any useful purpose by fantasing that the SNP’s programme for Scottish independence is really – deep down inside, and apparent only to the most perspicacious of socialists – part of a popular struggle against globalisation and imperialism.