JOHN Maclean, Glasgow’s great Marxist revolutionary round the time of the First World War, was a monetarist. He believed in the quantity theory of money, the idea that if a government prints too much money, this will result in a rising rate of inflation.
In support of the theory, he once wrote an article (The Call, November 1919) entitled “Burn Bradbury”.
Sir John Bradbury was permanent secretary of the UK Treasury, and it was his signature that in those days graced English banknotes. Maclean got into his head that the severe inflation of wartime, and the suffering it caused the poor, had been the direct result of Bradbury’s printing notes to finance the production of armaments. If people burned the banknotes, then they might put a stop to the inflation.
It was certainly a somewhat crude monetarist theory, but, without any doubt, from the same stable as the theories that later guided chancellors from Denis Healey to Ken Clarke in what history may come to call the “age of monetarism”.
Side by side with that, I want to set a second piquant notion. In my view, Friedrich von Hayek, the economics Nobel prizewinner so prominent on the letters page of the National this week, would have voted for Scottish independence.
I cannot prove it, of course, because apart from anything else Hayek died in Germany in 1992. But, from a passage in his book The Road to Serfdom, chapter 15, written from the safety of his British exile just as the Second World War was ending, it seems a reasonable surmise that, if he had been in Scotland and qualified to vote in 2014, he would have placed his cross against Yes.
I haven’t the space to quote it all, but here are a couple of crucial sentences: “We shall not rebuild civilisation on a large scale. It is no accident that on the whole there was more beauty and decency to be found in the life of small peoples, and that among the large ones, there was more happiness and content in proportion as they had avoided the deadly blight of centralisation … I believe that here the experience of the small countries like Holland and Switzerland contains much from which even the most fortunate larger countries like Great Britain can learn.”
These two tales go to show that in economics, what goes around comes around. It has long been a discipline full of grand theories, most of which have collapsed – not least, during the last decade, monetarist theory.
When we have many western governments, the British one to the fore, manically creating money which only ends up bolstering the balance sheets of the banks (and the bonuses of the bankers) without creating any inflation at all, it seems clear monetarism is dead. It lies right next to the grave of Keynesianism, the fashionable theory that went before it. But, like derelict cars in a housing scheme, bits of the theories can be recycled to fresh uses.
In the week since my first column, some readers have taken me to task for allegedly espousing various other unsavoury theories, especially neoliberalism. My friend Dr Jim Walker of Hong Kong sprang to my defence, saying there was no such thing. Indeed, I see little resemblance between what I think and the doctrines propounded at the University of Chicago round 1940 or in Chile till 1990. I would settle for liberalism (but only with a small “l”) because I believe in liberty: liberty for individuals, for families, for communities and for nations, above all Scotland.
What interests me, though, is not theories but specific problems. And just now, what interests me most is how to make the Scottish economy grow faster. When I brought this up last week, I didn’t know I was to be the herald of some really bad news. First came the Scottish Government’s annual report for 2015 on the State of the Economy, which showed it grew by 1.9 per cent, a good deal worse than the UK’s figure of 2.3 per cent. And since then have come unofficial private surveys which again point to a Scottish economy heading quite steeply downhill.
That means there is already a lot of unemployment in the pipeline. I wonder what the advocates of sustainability and redistribution, urging us to forget any idea of growth, will say to all those about to lose their jobs. From reading the letters in The National, I see nothing that promises sustainability and redistribution on a timescale of less than two or three decades, whereas the luckless victims of the plunge in growth will soon be worrying how to pay for Christmas.
But it gets worse. I bet that by this time in 2017, George Osborne (assuming the Chancellor survives the EU referendum) will be telling us this: “Look, a year ago I handed over a whole range of new tax powers to the Scottish Parliament. And what has happened since? Your economy has gone belly up. You Jocks are useless.”
Ultimate gibe: “Your economics is as bad as your football.” Amid the guffaws from the Tory benches, what exactly is our answer to be?
It gets worse still. My first target would be for Scotland to equal the UK’s growth rate (this happens to be the Scottish Government’s target too, yet so far we have made little progress towards even that modest goal). If we were to settle for anything less, then Scotland would go from rough parity to getting steadily poorer than England.
Come the second referendum, then, the No side would have an argument it did not have last time. It would be able to say: ‘Vote Yes for poverty’. Again, what is the answer to be?
I think I can harden up the argument I made last week and say that, unless we go for growth, there will never be an independent Scotland.