Thursday, May 29, 2014


David Nicholson, Contributor, covers media, technology and business and how they intersect, posts on FORBES HERE 

“Scottish Independence Referendum: 5  Economic Reasons To Vote ‘NO’ 1 Diseconomies of scale”
Outside the Edinburgh building where I was speaking, there was a statue of Adam Smith, the great 18th Century Scottish economist.  His most famous idea, explained in his book The Wealth of Nations, was to promote division of labour as a means of raising production, thereby realising economies of scale. 
 An independent Scotland would directly contradict Smith’s wisdom and advice, entailing replication of labour and diseconomies of scale.  It would mean setting up expensive and unnecessary new administrative bodies, new tax collecting offices, new customs barriers – all the things that a modern, open, outward-looking economy should minimise.”
I comment on David Nicholson’s first reason because he quotes from Adam Smith (his other 4 reasons are his personal opinions and not germane to Lost Legacy).
The division of labour has an extremely long history (and what is wrongly called ‘pre-history’).  It is not dependent on any single country, large or small.  It did not begin with the Union of the Kingdom of Scotland with the Kingdon of England in 1707, and it would continue long after Scottish independence as it did before.  
The Britsh colonies in North America survived well after their independence and demonstrated the universality of the division of labour and its related consequences in inter-country trade (as did France when it finally shook-off English ambitions to remain an English kingdom -and likewise all over the world).
‘Diseconomies of scale’ are not explained by David Nicholson, so we cannot judge if he is aware of its relative importance or unimportance.  Many products invented, designed, produced, and marketed in Scotland, have been contributed to by foreign economies, are bought in foreign economies, and are competed against by foreign (and Domestic) economies.  It’s called world trade.
Smith advocated ‘freedom of trade’ against ‘mercantile anti-trade’ policies.  David seems to disregard the political eocnomy of Adam Smith.  As a contributoir to the statue of Adam Smith, which he invokes at the head of his article, I did so in part because as a supporter of Scottish independence I support Smith's ideas in total regarding free trade in Scotland. None of such support leads to Scotland being politically a small part of the UK, managed from London.  Long before the 'independence' referendum, I supported vocally devolution from the 1979 referendum onwards.  I shall continue to vote 'Yes' for devolution if the independence referendum fails, and should an 'independence' referendum be repeated, I shall again vote 'yes'.
Independence does not mean “entailing replication of labour and diseconomies of scale”.  Trade circumvents such alleged consequences. There is no danger to the people of Scotland from not having, say, a car industry, because these are physically built elsewhere in several countries beside England that trade with Scotland (and incidentally foreign cars also benefit from Scottish innovation in common fields of commercial interest).
Scotland has a monopoly of Scottish malt whisky, protected by international copyrights.  Most products consumed in Scotland are produced all over the world without Scotland protecting itself by consumming only that which it has produced. Part of what pays for them are products like Malt Whisky, sold everywhere outside Scotland (in small French villages you can buy the very best malt whisky brands).  Scottish oil is also exported across the world,  prices determined competitively, without insisting that all economies of scale in oil production are realised within Scotland - a nonsensical idea!
Incidently, the point about ‘economies of scale’ has little to do with the division of labour - it was about raising productivity per capita of labour to raise total output and thereby lower the unit prices of output. That's part of market capitalism! None of these processes are precluded or indeed inhibited by an independent Scotland.   If such a notion were true than every country in the world would need to join the UK!

The biggest threat to Scotland’s interests are if the UK in 2017 votes to leave the European Union, taking Scotland unwillingly with it (because by voting ‘No’ in 2014 and staying with the UK we would have to go with them).  The fact that ‘NO’ voters continue tying Scotland to the fortunes of Tory/UKIP voters in England is a ‘wake up’ call to Scottish voters.
I suggest that David re-thinks his propositions and his undoubted concerns. 


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