STIGLITZ: SHOULD SCOTLAND REALLY DUMP THE RICH?

Peter Smaill says Scotland's new orthodoxy is “Inequality leads to lower growth and less efficiency".  

It was trailed first by the academic Stuart Lansley and now the Nobel prize-winner and Scottish Government advisor, Joe Stiglitz.

How do we know? For the last 30 years on some official numbers the “rich” have been getting richer “at the expense” of the “poor”: and economic growth has allegedly collapsed as a result.

Oh yeah? Forty  years ago the Scots were being treated to the view that we were already highly unequal: picking up a name from a flimsy 1966 “Economist” statistic, we had a theatre group , “7:84”, which stated that 7% of the population owned 84% of the wealth.

Eventually, it folded due to Arts Council grants being withdrawn.  Stiglitz finds it offensive, now, that in the USA, that the middling 19% own 50.3% of private capital, but mainly because 1% of the top super-rich have over 33%.  So that’s aggregate 20:84, near as damn it, in the States. Will he therefore be raising his blood pressure as adviser to the SNP Government in semi-feudal Scotland? Should he?

Scotland is not a poor region, partly thanks to North Sea Oil and its finance sector. But it is not divided so very much by wealth and income, but by envy. 7:84 was, in any case,  based on incomplete taxation statistics, and now we have better ways of looking at the situation, albeit methods that are still imperfect. 

Scotland has just 227,000 higher rate taxpayers (taxable income over £32,000) out of the 2.67 million who pay any income tax.

As Andrew Bell of Stirling University explained to a hushed audience at the “Scotsman” conference on the Economics of Independence, the entire take of North Sea Oil taxes (geographical cut) and Scottish income tax are exceeded by the social support spend here. So we already have massive redistribution towards consumers and intermediaries.

The headline income inequalities are exaggerated, because the levellers always illogically talk about pre-tax income disparities -as if existing redistribution measures did not exist.

What of the super-rich, estates over £5million? Scotland only has 7,000 of these, 55 per cent of the UK average per capita.  House prices here have risen at half the London rate over the last decade. 

As a wealth-shunning society we should be growing well, considering the absence of hedge fund managers, successful and rapacious Russian oligarchs, and flighty international celebrities……but, as all agree, Scottish economic growth has generally been anaemic, and entrepreneurship muted for decades.

The enormous Highland estates have always been the stuff of Marxist myth in terms of actual value: the communard Forestry Commission even in the pre-land reform 1970’s was anyhow over six times bigger in acreage than the greatest ducal property.

The puzzle is that the latest data (ONS, June 2013) show that the biggest wealth disparities are not in fact in Scotland, despite the awesome pockets of deprivation in our system so frequently referred to by the middle-class poverty industry.  They are in …London….recently the fastest growing city economy -wise in the UK.  

For example, 41 per cent of children there live in households with wealth under £50,000; in Scotland It is just 27 per cent in these relatively poor households.

And the survey also reveals that much wealth disparity naturally relates to age, assets doubling by value in the mid-forties compared to the mid-twenties, then falling back in older age. 

The tricoteurs de nos temps like to knit for middle-aged heads, and do not realise that accumulation for old age is natural and socially desirable.

With its image purely as home to wealthy elites,  “London” has passed “ the English” as the target of Scots derision, for the penny has finally dropped here that the English regions outside London and the south east are not as rich as Caledonia.

A new envy is born: specifically, we hate London. Ironically, the UK capital is not actually an English city anymore: used to a large and successful expatriate Scots population, it now has minorities from all over the globe and a minority of electors there are actually of ethnic origin from the United Kingdom..

So both Scottish egalitarianism, and London inequality, specifically rebuff Stiglitz’ assumption that equality and growth correlate: the inverse is more plausible today.

Historically, Scotland also challenges Stiglitz: our fastest growth period, with Hong Kong style population and output rises, was in the century up to the First World War.

Poverty was endemic due to the migration of subsistence labour from the land to the burgeoning cities, and no-one would want a repeat: but one look at the mansions of Helensburgh, Kings Park in Stirling or the Grange in Edinburgh will tell you growth and inequality can and did march together (and the architecture was better then).

The Lansley/Stiglitz hypothesis is globally questionable: manufacture of cars and computers continues to rise around the world, and access to these things in the most unequal economies, such as India and China, proceeds apace: no lack of consumer demand there.

That is not to say that some unjustifiable artificial wealth creation has not occurred in the West’s financial sector: always behind it we can see the hand of poor regulation encouraging market failure, and inequitable or unenforceable taxation codes, which require to be tackled whenever detected.

Dump poor rules, not rich investors……

A further swipe at the finances of Scotland’s tiny bourgeoisie- on top of stamp duty hikes, high council tax, pension allowance restrictions - all aimed at an egalitarian society- will do nothing for the poor.  Stiglitz has admitted that his idea means tax hikes, however much the SNP deny it. We once had, at the UK level, marginal  income tax at 98 per cent and inheritance tax at 75 per cent- great times for the tax advisers; but no good for the poor.

The logic of the egalitarian position is that the appearance of a prosperous J K Rowling, a successful Sandy McCall Smith or the dream of a Scots equivalent of Bill Gates in our midst is, or would be, a statistical disaster in social justice terms.

The opposite is true; Scotland numerically and in terms of social utility needs more, not less, millionaires. Their philanthropic power alone justifies a libertarian attitude to them and the intellectual, cultural and commercial diversity that they help build.  

Stiglitz needs to look around: come to our old Council schemes and see the houses and flats with individual satellite TV’s and computers with the data power and access which NASA could only dream of 30 years ago.

Look at the range of international cuisine, once for gourmets only, now on sale in the supermarkets.  See the planes taking off from Scottish airports bearing middle of the road folk, not the toffs, to exotic destinations.

But, alas, we can no longer present to him the delights of then “7:84” Theatre Company.  We’ve moved on, and, once Stiglitz loses his advisor subsidy- so should he…