Strength in numbers

EVERYBODY loves to have a crack at accountants, lawyers, bankers and economists; basically, every professional who is paid to give good advice but often gets it spectacularly wrong. The economist, arguably, suffers the most for his art. Who was it who said an economist was someone who didn't have the personality to become an accountant?

Economists have been regular fall-guys for those who rely on their forecasts but would not bet their house on what they say. George Bernard Shaw said that if all economists were laid end to end they would not reach a conclusion, while Winston Churchill reckoned that if you put two economists in a room, you would get two opinions, unless one of them was Lord Keynes, in which case you would get three.

A new batch of opinions will hit the bookshelves this week with the publication of New Wealth for Old Nations, a book subtitled: 'Scotland's Economic Prospects', edited by the team behind the Allander Series seminars that drew some of the world's foremost economists to Scotland to provide an outsider's view of its performance and some ideas on how to improve public policy.

One of the editors, Professor Brian Ashcroft, is probably Scotland's best-known economist, largely through the quarterly surveys that the Fraser of Allander Institute at Strathclyde University conducts for the Scottish Chambers of Commerce. He is professor of economics and policy director at the institute where, for almost 20 years, he has observed Scotland's economy through the turmoil of industrial decline and its reinvention as a services-led economy. He also reinvented himself, from teenage professional musician to economics head boy and data monitor, a working class lad from Stockton-on-Tees in north-east England who left school without any qualifications to become the man with all the numbers that define the Scottish economy.

Typical of an economist, he is full of opinions on how things might work, how they could be improved and made more efficient, but denies any political motive in his work. He is, however, married to a politician, Wendy Alexander, who enjoys a reputation for dynamic and original thought that some say is lacking from frontline Scottish politics. Alexander, the former enterprise minister, is a co-editor of the book, along with Diane Coyle, a member of the Competition Commission and visiting professor of Manchester University's Institute of Political and Economic Governance.

New Wealth for Old Nations - a deliberate play on Adam Smith's founding thoughts in The Wealth of Nations - captures the thoughts of those who addressed the Allander Series held in 2002-03, which was funded by 13 Scottish businesses, entrepreneurs and foundations. So what drove the seminars and the publication of this book?

"Concern about the performance of the Scottish economy," says Ashcroft. "It's an old chestnut, I suppose, but we wanted to bring in outsiders who were experts in areas such as growth and social justice, opportunity and governance. We wanted people from outside who could be above the daily discussion that often generates more heat than light. Sometimes, there is a dialogue with the deaf, or discussion is left to a small number of the usual suspects."

So they came: William Baumol, of Princeton and New York universities kicked off the series at the Glasgow Hilton, followed by others including John Bradley from the Economics and Social Research Institute, Dublin; Nicholas Crafts of the London School of Economics, James Heckman from the University of Chicago, and Paul Krugman, another economics professor from Princeton. Their ideas, among others, have culminated in a 240-page volume whose five key recommendations address population decline, investing in very young children, the importance of becoming skilled imitators, the recognition of city-regions, and the need to reform public services. The editors believe that adoption of these "big ideas", would provide policy-makers with the foundations on which a small country such as Scotland can build a better-performing economy.

They also advise on what not to do: provide large-scale subsidies and promote strategies - including tax-based strategies - based on a low cost base. Throwing buckets of money at problems no longer works, says Ashcroft. And it is no good Scotland trying to win on cost as the Chinese, Indians and Czechs can do things more cheaply.

He believes the collective thoughts of the Allander Series' speakers, and therefore the book's big appeal, is that it gets away from the traditional "solutions" and instead proffers an alternative programme in which economic growth is at the heart of policy-making in all areas of governance: an embodiment of the "Smart, Successful Scotland" mantra devised by Alexander during her term in office. Ashcroft, though, suggests the Executive is not fully sold on the over-riding principles of that strategy.

"The politicians say growth is their top priority, but on many indicators this is questioned," he says. "Growth has to be about regulation, education, planning, efficient government. It is not something that is left to the enterprise and lifelong learning department. It is about the whole of government and the way it organises itself." Ashcroft notes the dispute over proposals for a third party right of appeal on planning, and the controversy surrounding the M74 extension as examples of how economic growth needs to be a central consideration in all government decision-making.

He accepts that in some cases the questions need to be directed at Westminster and Brussels in so much as they control the levers determining macro-economic stability, competition decisions, some transport matters and so on. "But fundamentally we are talking about how Scottish business builds and develops in the world economy and how the conditions are created to make it easier for them to do that."

To that extent, the book's contributors set out a reform agenda that is pro-active rather than reactive: better childcare and parenting support - specifically aimed at the very young to maximise their skills potential - encouraging women to have children, attracting migrants, developing safer streets, and improving teaching methods. All are areas of government that the authors say should be built around the aim of economic growth, a theme strongly advocated by Alexander who says: "The impediments to growth are not in the enterprise department. Considerable progress has been made on business innovation. It is in planning, childcare, water supply, reform of public services - these are outwith the enterprise department and are where the challenges lie."

One theme that prompted much discussion at the time was the suggestion that Glasgow and Edinburgh should "hunt together" as an urban core, creating the potential to become one of Europe's most attractive city regions and thereby avoid the prospect of being by-passed by more go-ahead competitors. Elsewhere in Europe, this is already the norm: Milan and Turin, Malmo and Copenhagen, because collaboration between cities means better use of resources, in terms of physical and human assets. But it is argued that this also requires a radical approach to housing, congestion, crime and the provision of key amenities.

At the purely industrial level, imitation and technology transfer are the new buzzwords, though they echo the success of the Japanese in the latter half of the 20th century, during which they grabbed everything from motorcycles to washing machines, improved on them and then shipped them back to their creators. "Innovating at the margin, we need to do more of that," says Ashcroft.

Critics will point to examples of where Holyrood tried to create these cauldrons of new ideas but failed to achieve the desired result. Project Alba, a scheme designed to put Scotland on the world map in microchip design, was a spectacular disappointment. Ashcroft accepts this to a point, though he says Alba was a victim of a severe downturn in information technology. The intermediary technology institutes, or ITIs, are absorbing 450m of taxpayers' money to commercialise the academic research base and are dangerously close to defying the reform agenda's opposition to large-scale funding. The jury, he says, is out but they do have great potential.

While reform of public policy is a central feature of the agenda, Ashcroft says that it will be the private sector that drives growth. "If you have a vibrant private sector you can grow quickly. The public sector can help it, but it can also help it mess up."

Food for thought


Executive chairman, City Refrigeration Holdings

"I thought the series was superb and it reinforced some of the things that we were thinking about. It proved we need to get to kids earlier.

"That was dynamite and since then I have been going into schools talking to younger age groups, at six, seven, eight rather than 13 and 14."


Chairman, Hamilton Portfolio, founder of Direct Holidays and co-founder of Zoom Airlines

"It was a good idea to bring in people from outside to look at our situation. A lot of what they said was self-evident and proved we were not as bad as some imagined, but I also learned how far down the pecking order we were in a lot of things and how important it was to tackle things such as planning."


Chief executive, Lloyds TSB Scotland

"I hope that the book won't just disappear into the ether and that it will be the starting point for a debate.

"It's great to have the views of outsiders looking in rather than those of us who are already inside just talking to one another. Scotland should use its small size to its advantage."


Managing director, Scottish Equity Partners

"We hoped for some new perspectives to the debate on Scotland's economic direction. The series surpassed our expectations and confirmed that the acceleration of growth is a pre-requisite for broader development and change. The challenge now is to ensure that future policies are based on firmer evidence than has perhaps been the case historically."