The Confusion of the Right in Scotland

“In The Breakdown of Nations Leopold Kohr shows that, throughout history, people living in small states are happier, more peaceful, more creative and more prosperous. Virtually all our political and social problems would be greatly diminished if the world’s major countries were to dissolve back into the small states from which they sprang.”
— Back cover comment to Leopold Kohr, The Breakdown of Nations, Green Books 2001

There is a strange schizophrenia among those that claim to be supporters of “the Right” in Scottish politics. In economic terms they declare their support free markets, competition and small government. But in political terms they are apoplectically hostile towards an economically more sensible, self-governing Scotland. Yet history and the overwhelming evidence of successful countries suggests that they should be, for their own self-interest, the biggest supporters of Scottish independence.

But what do we mean by the Scottish “Right”? In economic belief terms it is quite easily defined: the Scottish branches of the Conservative and Unionist Party and the Liberal Democrats. Both of these parties are to the “Right” of the Labour Party. Both of them traditionally favour more competition, individual freedom and smaller government. But not, it seems, in Scotland.

The Austrian-born economist and philosopher, Leopold Kohr, described their mentality perfectly in his 1957 masterpiece – a book that should be mandatory reading in all university courses in politics, economics and philosophy – The Breakdown of Nations:

“It is therefore a queer paradox that many of those who have discovered the weakness of huge economic size, are now all out to smash big business and trusts in favour of the resurrection of a small business world, advocate exactly the opposite in the world of politics. There the Unitarian idea of concentration has taken such possession of them that nothing could delight them more than the vision of the monster holding company of a world state. Economically, more than from any other point of view, it would be more consistent with our ideals if we were to have thousands of small states rather than a single big one, that is, if our ideals are individualistic.”
— ibid, p.172

The Unionist journalist, Chris Deerin, summed it up perfectly in the run-up to the 2014 Independence Referendum when he stated that he was convinced to vote No because of the United Kingdom’s “Great Power” influence. He considered that influence a force for good when, in all times and in all places, Great Power influences have been a force for bad. In essence, Mr Deerin also voted against his own economic interests and in favour of an amorphous political philosophy.

But let me retrace my steps for a second. I have described the Scottish branch of the Conservative and Unionist Party as a right-of-centre political party. While it is undoubtedly the case that the UK version of the party views itself as right-of-centre (although that seems to amount to support of Cronies, not Capitalism) the Scottish version is simply “Unionist”. It would quite clearly support any economic policies and any political fantasies that retained the Union. It is certainly not a party of sentient individuals that have their own self-interest at heart, otherwise it would support independence.

There is no need and, indeed, no point in attempting to convince an out-and-out Unionist of the case for Independence. The Union is simply there as an act of faith and, more often than not, bigotry. These are people that would see themselves and their fellow citizens wallow in dung rather than be free of the shackles of an economic policy made to suit a quite different economy centred hundreds of miles away.

The Liberal Democrat branch office is an altogether more puzzling beast. It appears to be made up of a directionless group that have no economic or political compasses. Maybe they have a social compass which thirls them to a rigid belief in ‘gender politics’ above all else or maybe some of them just don’t want to be in a Mainstream party and will vote for anything to consider themselves ‘different’. As far as economic philosophy is concerned they are redundant and a sad shadow of the Grimond-like Liberal Party of my childhood.

It is, though, possible that they still have well-meaning, if misguided, members among them. It is to them that Kohr’s arguments should resonate most.

The Crisis of Bigness

“Instead of union, let us have disunion now. Instead of fusing the small, let us dismember the big. Instead of creating fewer and larger states, let us create more and smaller ones. For from all we have seen until now, this seems the only way by which power can be pushed back to dimensions where it can do no spectacular harm, at least in its external effects.”
— ibid, pp. 74-75

The core of Kohr’s analysis is that most of the world’s problems can be traced back to “bigness” or, in his terms, the “tyranny of size”. States, when they become large relative to their neighbours, seek to dominate them politically and economically. He sets out convincing philosophical and historical proofs of his thesis and contends that, the smaller the state the more likely it is to be peaceful and successful. In economic terms, it is all about designing policies to suit the strengths of the population and the resource structure of the economy.

If anything, there is even more convincing evidence of Kohr’s “small is successful” views today than there was in 1957. Figure 1 shows the countries that are rated ‘AAA’ by Fitch Ratings agency (the minor differences with the other ratings agencies are detailed in the note). Also shown is each country’s population and GDP per capita in US dollars (for 2019). For reference, the UK would be bottom in terms of GDP per capita ($42,514) had it even made it on to the AAA-rated list. Six of the ten countries Fitch rates as AAA have populations below 10m.

FIGURE 1: AAA SOVEREIGN RATINGS ACCORDING TO FITCH – SMALL IS BEAUTIFUL

Source: Fitch Ratings

Note: Standard & Poor’s ratings include Canada (35.5m) on the AAA list but excludes Australia (AA+). Moody’s also includes Canada and adds New Zealand (4.5m).

Why should this be the case? Why are small, rich countries generally better managed than their larger peers? Simply because they can set economic policy more appropriately for their small populations. (The Swiss Federation takes this much further with its 22 cantons having high degrees of autonomy to set local taxes and laws within the system. The fact that it is the richest country on the list, with the exception of tiny Luxembourg, is no accident but, rather, a product of its highly-decentralised decision-making structure.)

But this is little more than Economics 101. In some of the first lessons taught to budding economists ‘Perfect Competition’ is described as many firms and actors competing in a market that is characterised by perfect information, price taking and smallness. The ‘smallness’ assumption is subsumed in the fact that no firm has influence on the price through its own market share.

Now, the world of perfect competition does not exist but small countries, by their very nature, approach it more naturally and more efficiently than large countries. Small countries with internal federations do so even more completely. The result is that the capital structure of the country and the resources within it are employed in a much more appropriate way than in large countries where a large, central metropolis or wealthy area tends to dominate. Kohr wasn’t the only Austrian to recognise the benefits of smallness:

“It is only where responsibility can be learnt and practised in affairs with which most people are familiar, where it is the awareness of one’s neighbour rather than some theoretical knowledge of the needs of other people which guides action, that the ordinary man can take a real part in public affairs because they concern the world he knows… We shall all be the gainers if we can create a world fit for small states to live in.”
— Friedrich Hayek, The Road to Serfdom (1944), Chapter 15

Kohr and Hayek would both be located on the ‘Right’ of the political spectrum but their ideas seem to cut no mustard with the Scottish ‘Right’. And yet the argument is both logical and straightforward.

Perfect information – the most contentious assumption in the perfect competition model – can never exist. But when economic areas are decreased in size the flow of information, where neighbours know each other’s strengths and weaknesses, can approach something akin to best knowledge. Businesses, workers and society gain as a result.

The Curse of Centralism

Might there be a halfway house to Scotland’s economic marginalisation within the Union? I will leave devolution aside because that has always been a trap. Control of all the main levers of economic policy remains with the centre (Westminster). But what of federalism?

The Liberal Democrats and, increasingly, the right-wing of the Labour Party (characterised by Keir Starmer, Gordon Brown and Scotland’s sole remaining Labour MP, Ian Murray) are inclined towards a Federal solution. But again, Kohr has already examined the successes and failures of federalism. He concludes:

“Wherever a large state participates in a federal union, the federation cannot last. In due course, it will either become a centralized state operating in the interest of its largest participant, or it will break into its component parts once the immediate reason for its creation, such as fear of a common enemy, has disappeared.”
— Kohr, op cit, p. 177

The German Federation under Bismarck, where Prussia became the dominant force, is a prime example of the failure of federalism when the centre is too large. The Swiss Federation, perhaps the single most successful political experiment in integration (of different cultures, languages and histories) so far, is an example of a federal system that has worked well. Swiss politicians to this day, are largely known for their anonymity rather than their domination of newspaper headlines. But Switzerland is a country of just 8m people.

There is no doubt that federalism could work in an independent Scotland but, given the nature of the British state, federalism always has been and always will be a non-starter.

Where does this leave the Right in Scotland?

Ignorance, as they say, is no defence from the law. The fact that so many on Scotland’s right are ignorant of what contributes most to economic success is criminal. It is certainly possible that an independent Scotland might make a mess of things – that is true of all countries – but it is just economically illiterate to argue that small-sized economies are disadvantaged in any way. The opposite is true and the evidence of history and economic success of small nations is testament to that fact.

Conservative and Liberal Democrat politicians in Scotland need to come clean with their voters. Their anti-independence position, while often dressed up in economic-transfers clothes, is not about defending business, wealth or the country’s economic health, it is entirely the opposite.

Their arguments are purely political, one must assume that they are self-aggrandising (there is always a UK sinecure – an Honour – awaiting the most outspoken supporters of Union) because otherwise they are just dishonest. Moreover, they are steeped in the status quo – which at least is consistent with Conservative political philosophy – and preservation of their own individual position.

But as an economic position it is sterile and stagnant. It ignores theory, it ignores history and it ignores all of the evidence. Those of us that support the market, competition and minimal government intervention deserve better. That representation will not come from the British Right in Scotland.