Who Owns Scotland? The realities of economic power

Richard Leonard

The ownership of the Scottish economy has undergone a profound and fundamental change over the last century. From being owned by regional business dynasties drawing on local sources of investment funding, including local banks, today most of the commanding heights of the Scottish economy are quoted on the London Stock Exchange and are owned by institutions and corporations based either in the South East of England or increasingly, overseas.

By January 2012 the Scottish Business Insider’s Top 500 companies in Scotland, ranked according to annualised turnover and pre-tax profit, revealed a Top 20 dominated by energy, particularly oil and gas multinationals and financial services corporations. With the exception of the drinks giant William Grant & Sons which is family owned, and Scottish Water which is publicly owned, all the rest are public limited companies listed on the London Stock Exchange. Eleven out of the top twenty are wholly owned subsidiaries.

For a broader picture, the Scottish Government itself publishes corporate statistics annually. In recent years these have revealed a trend towards the denuding of Scottish ownership of the economy.

The most recent figures show that amongst larger enterprises (defined as those employing 250 people or more) 64% of employment and 78% of turnover is in enterprises with ultimate ownership outside Scotland. This compares to 54% of employment and 69% of turnover as recently as 2002.

Amongst larger firms in the manufacturing sector alone the results are even starker with 72% of employment and as much as 87% of turnover in companies owned outside of Scotland. This compares to 60% of employment and 71% of turnover in 2002.

And these figures are based on Scottish registered companies only.  They do not include big supermarket chains like Tesco and Asda, or military industrial companies like Rolls Royce and BAE Systems which have a huge turnover, and are major employers in Scotland but do not separately register here.

One major accelerant of this trend has been privatisation. Take the old South of Scotland Electricity Board as an example. Initially broken up into Scottish Power and Scottish Nuclear (later British Energy), its constituent parts are now owned by the Spanish trans-national corporation Iberdrola and the French corporation EDF.

The other catalyst has been the “Big Bang” deregulation of the City of London in 1986 which created the most open and ferocious predator style economy in the world. Built on a Thatcherite nightmare of an economy devoid of ethics, geared to short term gain and greed by the transfer of ownership of existing assets not the creation of new ones, and remorseless in seeking capital gain overseas rather than supporting the indigenous productive base, it was and remains even after global financial meltdown one of the worst examples of power without accountability.

To summarise,  there is no longer a coherent Scottish business network. External institutional investors are dominant and the lines of accountability run outside Scotland. This is not to talk Scotland down but to talk the hard facts of the Scottish economy today. With ownership comes domination, and Scotland’s recent economic history tells of deindustrialisation on an unprecedented scale. A branch plant economy is a perilous place for working people to be in an era where classic free trade economics and laissez faire industrial policy are in the ascendancy.

But the importance of this pattern of ownership to any democratic socialist is that it first illuminates then determines the level we need to intervene at. Economic power does not lie in Scotland. It still predominantly lies at a UK level.

There is another important economic consideration too when looking at calls for an independent Scotland.

According to the most recent Input Output tables, again published by the Scottish Government, the annual value of imports into Scotland from the rest of the United Kingdom is £44 billion. The value of imports into Scotland from the rest of the world is £21 billion

The annual value of exports from Scotland to the rest of the United Kingdom is £34 billion.

The value of exports from Scotland to the rest of the world is £19 billion.

In other words, Scotland is not only in a highly advanced state of industrial integration with the rest of the UK economy, it is also economically interdependent too. As these figures show Scotland not only has a trade deficit with the rest of the UK of £10 billion, most tellingly we export almost twice as much to England, Wales and Northern Ireland as we do to the whole of the rest of the world put together.

Add to this the fiscal relationship well documented by Dave Watson elsewhere in this paper and the fact that Scotland is part of a single currency area too, and we are told even after independence, it is proposed to remain so. Questions then arise about what precisely “independence” would mean economically and industrially. Where is the benefit of Scotland’s elected representatives giving up a direct vote on the fiscal and monetary policy framework of Scotland’s largest market, its biggest economic area and the level where corporate power rests. Of course it can be done, but what would be the advantage?

It was Nye Bevan who wrote in the opening to his seminal work “In Place of Fear” that the fundamental question for socialists was simple “Where was power and which the road to it?”  If we want to build a democratic socialist future for Scotland we need to act at the level where power lies.

A politically independent Scotland may mean the end of Britain as a politically defined entity but it would have little impact on British state power which would continue to dominate the economy of Scotland whether the people of Scotland and our representatives were withdrawn from it or not.

Scottish independence would also mean abandoning the very democratic avenue along which working people in Scotland, jointly with those in the rest of these islands could hold to account and even control corporate and economic decision makers.

If we are to have any semblance of economic and industrial democracy that is the level where we need to intervene. To take another example, the economic power owned by working people but not controlled by working people in our pension and insurance funds is organised at the UK level, with the largest UK pension funds: the BT Pension Scheme (£31 billion), Universities Superannuation Scheme Ltd (£22 billion); Railways Pension Scheme (£20 billion); Royal Mail Pension Plan (£20 billion) and Electricity Supply Pension Scheme (£19 billion) (Pensions Pocket Book 2011) all British wide in their membership and organisation. So if democratic reform of pension and insurance funds is, as I believe it should be, a significant element of a new left strategy to re-direct investment and to provide for both popular socialised ownership and control in the economy it is at the UK level that reform will be at its most effective.

The trade union movement of course is also predominantly organised at that level, which is not to say that a trade union couldn’t cope with the creation of an independent Scotland, of course it could, but the test of independence for us is this: does it make our underlying purpose of shifting power from those who happen to own the wealth to those who through their hard work and endeavour create it nearer or further away?

There is much that remains to be done in a devolved Scotland. Land ownership is still the narrowest in Western Europe with 343 landlords owning 50 per cent of all private land in Scotland, nearly all of them the old aristocracy. This is unfinished business which can be tackled by a devolved Home rule Parliament. It is critical to Scotland’s democratic and economic renewal and provides the means of redistributing not only wealth, but power.

A Scottish style “Marcora Law” giving workers and communities the chance to convert an enterprise to democratic ownership when it is put up for sale, facing a takeover bid, threatened with closure or asset stripping may require additional powers for the Parliament but could be implemented by a re-invigorated Co-operative Development Scotland.

Economic relations determine power relations. The defining feature of capitalism is that the basic means of production are privately not socially owned. Bestowing on the Scottish Parliament and local government powers of common ownership would represent an important challenge to this. Socialised ownership of the economy requires more of a cooperative and less of a command approach to economic policy. Vested interests will not readily cede power and there remains a compelling need for state intervention, but with the emphasis on state intervention to secure popular control rather than popular intervention to secure state control.

If we want to pursue the goal of a more equal, socially, economically and environmentally just Scotland, and realise the vision of the pioneers of the Labour Movement who believed that the salvation of the community lay in collective ownership of industrial capital and land and an end to monopoly and unaccountable corporate power, then it is not to nationalism or patriotism but to democratic socialism that we will find the alternatives and the solutions.

One thought on “Who Owns Scotland? The realities of economic power

  1. “Scottish independence would also mean abandoning the very democratic avenue along which working people in Scotland, jointly with those in the rest of these islands could hold to account and even control corporate and economic decision makers.”

    Because Independence means Scotland would no longer be responsible for devising corporate laws? Because in an Independent country, that would OBVIOUSLY be for a foreign power to do by telling us who we voted for, right? Must be.

    And because the Scottish people, being a minority of the UK at the moment, can and do set corporate laws in Westminster?

    Fantastic Brilliant. We weren’t aware of any of this.

    We’re going Nordic. Because we are Nordic. Get over it.

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