On 11 January, Common Weal Director Robin McAlpine spoke to the UK Parliament’s Scottish Affairs Committee about sustainable employment. The following short paper is Common Weal’s submission to the committee
THE main route to sustainable employment is to generate a productive, high-skill economy. Low-pay, low-skill, low-productivity jobs are inherently insecure and are most likely to be lost when there is an economic downturn. Recent decades have seen a ‘jobs – any jobs’ approach to economic development. This has resulted in the UK taking a ‘laissez fair’ approach which sees creating the conditions for large corporations to make maximum profit as being the means of best creating economic growth which in turn is meant to recycle into the economy creating jobs and prosperity.
This is not what has happened. Instead these conditions have been used by corporations to seek profit not from investment and productivity but from speculation, rent-seeking and mergers and acquisitions. This has meant that big business has taken a higher rate of return on its assets than it has achieved in growth. Far from recycling its wealth into the economy this means more and more wealth has been extracted from the economy, more and more insecure, low-pay jobs have been created, few high-skill industry sectors have emerged, lack of investment in plant and infrastructure means productivity has declined and overall economic inequality has increased.
The alternative is to refocus economic strategy away from a ‘macro’ approach which assumes creating the conditions for corporations to maximise profit is the same as creating wealth in the nation state. Instead we should pursue an industrial policy which seeks to enable, promote and support the types of economic activity which are best at creating the best jobs. This means more productive areas such as production and manufacturing and high-skill specialist services. The following are four substantial areas for action:
“The main route to sustainable employment is to generate a productive, high-skill economy. Low-pay, low-skill, low-productivity jobs are inherently insecure and are most likely to be lost when there is an economic downturn.”
• Create infrastructure for investment, finance and long-term business support which is not based on the short-term profit maximisation of the commercial finance industry. In particular, establish a Scottish National Investment Bank.
• Develop a targeted economic policy based on a co-produced industrial strategy on a sector-by-sector basis. This should include a careful assessment of Scottish strengths and assets (such as our land and sea, our universities and our geostrategic position) to see if national advantage is being maximised.
• Identify areas for direct government intervention which can quickly stimulate job creation in productive areas based on sectors of the economy which produce secure returns such as housing and renewable energy.
• Challenge monopoly control and dominance by creating infrastructure, strategies and shared services to support emerging domestically-owned businesses and assist them in gaining market access.
“Identify areas for direct government intervention which can quickly stimulate job creation in productive areas based on sectors of the economy which produce secure returns such as housing and renewable energy.”
In addition, the following are some overarching goals and aims which are insufficiently discussed as key components of a Scottish economic strategy which is about sustainable high-quality jobs:
• Place: it is no good to take a ‘national average’ approach to jobs. We must create employment opportunities in the places people live. If we don’t we will see increasing geographical inequality. City-based economic development which does not provide a strategy for towns and the rural economy is insufficient.
• Ownership: the most sustainable jobs are those which are created by domestically owned companies which are rooted in the Scottish economy and unlikely to move. Scottish owned businesses are not only more likely to create these, by being much more likely to support domestic supply chain businesses the ‘jobs multiplier’ of domestically-owned businesses is much larger.
• Supply chain: beyond this, we should be looking to secure entire supply chains in the Scottish economy where possible and should be looking at gaps in supply chains to see if there are ways to grown and sustain those businesses in Scotland.
“[Smart specialisation] focusses on what we can do better than others, where our specialism gives us potential market advantage. We should focus on building those enterprises rather than superficially faster-growing ones.”
• Production for consumption: the more we import what we consume, the more we support employment outside Scotland. The more of what we consume that we produce, the more jobs are created in Scotland. Production and manufacturing are too often seen in terms of exports. They should instead become part of a national ‘import substitution’ strategy.
• Smart specialisation: rather than focussing on ‘fast growth enterprises’ where success is measured by how quickly jobs can be created rather than how sustainable those new jobs are, we should focus on ‘smart specialisation’. This focusses on what we can do better than others, where our specialism gives us potential market advantage. We should focus on building those enterprises rather than superficially faster-growing ones.
• Public procurement: still public procurement appears designed to shut out far too many Scottish suppliers and is not used as an economic development tool. This is an
enormous missed opportunity for an economic strategy in Scotland.
Common Weal has published a series of policy papers relevant to many of these issues including:
• Towards and Industrial Policy for Scotland.
• Blueprint for a Scottish National Investment Bank.
• Banking for the Common Good.
Over the last two years Common Weal has focussed on what can be done with the devolved powers of the Scottish Parliament and has assumed that differential policy on reserved issues for Scotland and the rest of the UK (such as monopolies and mergers policy) is unlikely to be achieved. However, on a number of these issues there is or may be a reserved element to policy. For example, our proposal for a Scottish National Investment Bank will require an agreement from Treasury on how to allocate the liabilities of a publicly owned bank.