Wednesday, 1 August 2012

Economic Responsibility

The article by Gerry Holtham in the latest edition of the IWA’s ‘Agenda’ magazine, reported in yesterday's Western Mail, does not make for cheerful reading.  It is, however, possible to agree with his sums without necessarily agreeing with his conclusions.  In essence, his argument is that the economic situation in Wales is such that we do not currently have the tax base to sustain our current standard of living as an independent country.  It is difficult to argue with that view.
There are, however, two major flaws in his conclusion that Wales should not, therefore, be pushing to follow the Scottish path, but should instead concentrate exclusively on improving its economic position.  Those flaws are political rather than economic and do not detract from his economic analysis.
The first flaw is that, as far as I'm aware, no one is actually arguing that Wales should become independent tomorrow.  Those of us who seek independence for Wales seek it as an endpoint in a process, which process is going to take some years. 
And the second flaw is to assume that the two things (i.e. constitutional progress and economic progress) are incompatible or even contradictory.  Such an assumption takes it as read that economic improvement requires the continuation of the union whilst it happens, and that raises the question about to what extent we believe that the economic problems can or will be addressed within current structures.
I suspect that the inter-relationship between the two propositions is rather more complex than that.  The idea that independence in itself solves Wales’ economic problems is as misguided as the belief that current structures will solve those problems.  The one is based on blind faith that doing it ourselves will necessarily be better, whilst the second flies in the face of decades of experience to the contrary.
The one thing on which I hope most of us in Wales can agree is that we do not want to see Wales continuing to work on the basis that its economic survival depends now and forever on fiscal transfers from elsewhere.  And it seems to me that getting us out of that mindset is as much about taking responsibility as it is about economics.  In that sense constitutional progress and economic progress need to proceed in step; it’s not about one having to precede the other.


Nospin said...

Nationalism /independence as part of the economic solution is no more relevant here than it would be in the NE, Ie it is irrelevant.

I accept that it is a convenient and useful tool for nationalists to use, but common sense shows the two issues are not connected in any way.

John Dixon said...


Up to a point, I agree with you. To the extent that governments can actually influence the economy (and that is a highly arguable point), it's the policies followed which make the difference, not the level of government which promote them. In theory, the problems of Wales could be adressed either within the union or outside it by an independent Wales.

The question, though - and this may be where we part company - is which sort of government is most likely to follow policies aimed at reducing the GVA gap. The answer to that is never going to be couched in terms of incontrovertible fact; it can only ever be a matter of opinion. I believe that a Welsh Government focussed exclusively on the Welsh situation is more likely to follow policies aimed at reducing the gap than is a UK Government focussed on the bottom line for the UK as a whole.

Decades of experience showing the failure of one approach is no guarantee of the success of the other, of course. But it's not a bad reason to think that maybe an alternative just might be more successful. There is, though, no guarantee (as I've blogged a number of times) that a Welsh Government wouldn't simply look at the bottom line for the whole of Wales and close an external gap at the cost of increasing the internal one...

Spirit of BME said...

In your third para you state that you are” unaware of anybody wanting Independence tomorrow “- you are now.
I am a reasonable and tolerant man, so let’s start at 06:30 tomorrow.

John Dixon said...

There has to be an exception to prove the rule, doesn't there? But what I perhaps should have said was that, as far as I am aware, no-one really believes that Wales could move from where we are now to complete independence overnight (although you may be an exception to that rule as well...).

The processes involved, including gaining support, holding and winning a referendum, negotiating the detail, establishing the institutions, and transferring the power, and doing all of those things in an orderly fashion, would take time. During that time, 'events' would change the situation. Basing a decision on the consequences of an immediate overnight move to independence is thus an unrealistic scenario.

It is, though, a scenario upon which opponents of independence base much of their case. My point, which I was trying to use shorthand to describe, is that it's a false scenario, and not one on which we should waste much time. Better by far to take a realistic view of the timescale (in which the longest element is the minor little issue of gaining the support of the people of Wales) and base the argument around that.

Unknown said...

It is refreshing to see Leanne take the bull by the horns, and seek to lead Plaid seamlessly from its history as a party of Language, a battle that it has largely won in terms of the status of our national language - to the party that applies the same energy and imagination to improving the Welsh economy as a precursor to independence. So far, with Adam and Eurfyl doing the hard work, she is confounding our opponents and outshining Carwyn, whose lack of vision she will no doubt dissect in public over the next few years.

Holtham is not our enemy -even though his political conclusions are not ours, his analysis can't be ignored.

G Horton-Jones said...


Tax base and standard of living are not criteria for independence

I remember Vorster in South Africa saying that integration ie the end of colonial rule would be the slippery slope to anarchy in Africa

Spirit of BME is right NOW is the time

bamboo investment said...

I would have to agree with Nospin above to a certain extent. The world has become so globalized that it is no longer possible to look at improving an economy without some reference to the outside world at large. By the same token, a focus by a Welsh government would undoubtedly be more focused on Wales then the UK as a whole would be. It could allow for creative policies to attract investment; for example, something like Ireland does with a flat 12% corporate tax, which has been extraordinarily successful for them in luring multinationals there (putting aside the fact of the boom and bust of the real estate boom, that's a separate issue).

John Dixon said...

"Tax base and standard of living are not criteria for independence"

I agree. Independence isn't about economics - but it does have economic consequences, and the fear of those consequences can be, and is, a factor in the low level of support for independence. People will not vote for something if they believe that we'll all be poorer as a result.

It is, though, something of a chicken and egg question - Holtham's argument seemed to be that we can't be independent until we solve the economics, but part of what I was saying in the post is that we can't make the fundamental changes for ourselves unless we are independent. In practice, I think that solving the economic problem and gaining independence are parallel, rather then serial, processes.