Scottish politicians should focus their attention on the transition to renewable energy if they are to raise the nation’s growth rate.
A study of low growth in output and productivity has found economic policy lacks focus and can be too complex.
It forecasts Scotland is on course to see a widening gap with countries such as Norway, the scale of which compares to the entire global output of Google.
However renewable energy is an area where there could be an advantage.
It says government could focus its industrial policy to supporting the renewable sector, though at a cost to other priorities.
The report, by Oxford Economics consultancy, states: “It is not implausible to suggest that there are business opportunities that resemble those that generated Silicon Valley, several decades ago”.
The study says that tax policy – controlled at both Westminster and Holyrood – fails to encourage work, savings or investment.
It suggests major changes to the way the tax system is structured, using a broader range of taxes to spread the burden, saying “fundamental rather than piecemeal reform is needed”.
The report was commissioned from Oxford Economics by the foundation set up by Sir Tom Hunter, the Ayrshire-based entrepreneur and philanthropist.
He commented that the current election campaign features good ideas for spending more, but little focus on how to make more money.
His report is intended to stimulate more discussion of that, and to draw other leaders into the discussion, from business, politics and elsewhere.
The report highlights the lower level of economic output per head in Scotland compared with similar-sized Denmark (Scotland has 75% of its output) and Norway (68%).
New Zealand has output per head only slightly lower than Scotland, partly explained by its geographic isolation.
Singapore and Ireland are also held up unfavourably as comparisons, though they have significant differences that would be hard to repeat in Scotland.
SCOTLAND’S ELECTION: THE BASICS
What elections are happening? On 6 May, people across Scotland will vote to elect 129 Members of the Scottish Parliament (MSPs). The party that wins the most seats will form the Scottish government. Find out more here.
What powers does the Scottish Parliament have? MSPs pass laws on most aspects of day-to-day life in Scotland, such as health, education and transport. They also have control over some taxes and welfare benefits. Defence, foreign policy and immigration are decided by the UK Parliament.
How do I vote? Anyone who lives in Scotland and is registered to vote is eligible, so long as they are aged 16 or over on the day of the election. You can register to vote online.
It forecasts that Scotland is on course to see a widening income gap with these countries over the next 14 years, with the exception of Norway. The scale of the existing gap with Norway is comparable to the entire global output from Google.
To match Denmark and Norway for output per head, it is claimed Scotland would have to treble its recent productivity growth rate, to 3.5% per year, and to match Singapore, it would have to reach 6.5% per year.
The analysis of Scotland’s private sector finds several factors that have long been a concern, but which remain weaknesses for the economy:
- The number of businesses being created, per 10,000 people, is relatively low
- The number of smaller firms that are scaling up to become bigger ones is also lower than comparable countries and regions. The number fell between 2015 and 2018
- The number of companies classified as ‘innovation active’ fell between 2016 and 2018
- The report identifies a problem with graduate skills going under-used, or poorly matched with jobs. It cites evidence that a fifth of graduates in Scotland work in non-graduate roles, and 35% of employers say they employ graduates who are over-qualified for their roles
- Scotland has strength in higher education research, but too few companies have links to it
- Scotland does relatively well at attracting foreign inward investment, but does not seem to gain the benefits of doing so in higher productivity.
Among its findings, it recommends more intensive government intervention. It also urges some deregulation where that can ease the burden for business, but says Scotland already has relatively light regulation.
It considers the case for further government borrowing to improve the chances for the economy to grow. It concludes that could be part of the solution while borrowing costs are low, but borrowing has its limits, and would likely cost more if Scotland were doing it alone.
Sir Tom Hunter said: “It is for everyone in Scotland, from governments, policy makers and businesses to help solve the problem of poor economic growth that Scotland has faced for too many years.
“The report tells us Scotland would need to make changes equivalent in their impact to creating a business comparable in size with Google’s total global output to bring its GDP per head up to the level of Norway’s.
“We need far more focus in our economic investments not only to make significantly better gains but also to understand what’s working and what’s not.
“But that is only half the picture. We need to embed innovation in health and education and poverty reduction to free up finance to invest in growing our economy.
“I hope the calls made in the report for more, and different, economic stimulation from governments, tax cuts and deregulation, and appropriate and targeted state interventions, for example in renewables, will be listened to and acted upon.
“I’m calling on governments, politicians of all parties, industry and interested parties to work together to pave the way for transformational measures that will give the Scottish economy the significant boost it needs.
Oxford Economics’ take on the Scottish economy makes awkward reading for many: the shortcomings and short-term focus of the private sector, as well as the poor results from government policies at Holyrood and Westminster.
Its most striking contribution to the election campaign is to ask fundamental questions about the purpose and roles of government in the economy, which are rarely opened up in Scotland’s current political debate.
The report risks confusing people by pointing in apparently conflicting directions: more borrowing, lower tax, less regulation, more government intervention. But it selects each carefully as possible elements of pick ‘n’ mix policy.
The message is that something radical and ambitious is needed, but that doesn’t mean that we have to go haring off in only one direction, in pursuit of an over-simplified solution.
What it doesn’t consider is the radical option of pursuing goals other than conventional economic growth. There is no longer a political consensus around that, as some look to target improved wellbeing instead.
Inevitably, the report will be seen through the prism of the constitutional question. The report highlights the relative success of small independent nations, such as Denmark and Norway.
But even if this shows how a small, nimble nation can get on to a faster growth path, it does not prove that constitutional change is a necessary condition, and nor does it present that as a sure winner.
What matters to growth is what policy choices are made, in or out of the United Kingdom, and it is clear from this that they are neither simple nor easy.
The SNP said it agreed that “radical and ambitious” policies were needed to secure a green economic recovery.
“We have set out a National Infrastructure Mission, which will see capital investment increase dramatically in the coming years, as well as the Scottish National Investment Bank, to invest in growth businesses, increase support for business research and development, for entrepreneurs and to set out ambitious plans to transform Scotland’s tech sector,” the SNP’s Kate Forbes said.
But she said Scotland’s borrowing powers and ability to invest were restricted by Westminster and the SNP would continue to argue for independence.
The Scottish Conservatives have said they oppose any tax rises that damage growth and they want a “sector deal” for the North Sea oil and gas industry to help as the UK moves to a net zero economy.
An economic recovery plan has been outlined by Scottish Labour, which includes a national training fund guaranteeing job or training opportunities.
Meanwhile the Scottish Greens want to see investment in a “green economic recovery” to create 100,000 jobs in low-carbon industries like renewable energy.
And the Scottish Lib Dems say they will focus on helping small businesses grow and create more jobs in clean-tech and green energy.
Global economy projected to show fastest growth in 50 years – UN News
In its new report released on Wednesday, the agency said that the rebound was highly uneven along regional, sectoral and income lines, however.
During 2022, UNCTAD expects global growth to slow to 3.6 per cent, leaving world income levels trailing some 3.7 per cent below the pre-pandemic trend line.
The report also warns that growth deceleration could be bigger than expected, if policymakers lose their nerve or answer what it regards as misguided calls for a return to deregulation and austerity.
Differences in growth
The report says that, while the response saw an end to public spending constraints in many developed countries, international rules and practices have locked developing countries into pre-pandemic responses, and a semi-permanent state of economic stress.
Many countries in the South have been hit much harder than during the global financial crisis. With a heavy debt burden, they also have less room for maneuvering their way out through public spending.
Lack of monetary autonomy and access to vaccines are also holding many developing economies back, widening the gulf with advanced economies and threatening to usher in another “lost decade”.
“These widening gaps, both domestic and international, are a reminder that underlying conditions, if left in place, will make resilience and growth luxuries enjoyed by fewer and fewer privileged people,” said Rebeca Grynspan, the secretary-general of UNCTAD.
“Without bolder policies that reflect reinvigorated multilateralism, the post-pandemic recovery will lack equity, and fail to meet the challenges of our time.”
Lessons of the pandemic
UNCTAD includes several proposals in the report that are drawn from the lessons of the pandemic.
They include concerted debt relief and even cancellation in some cases, a reassessment of fiscal policy, greater policy coordination and strong support for developing countries in vaccine deployment.
Even without significant setbacks, global output will only resume its 2016-19 trend by 2030. But even before COVID-19, the income growth trend was unsatisfactory, says UNCTAD. Average annual global growth in the decade after the global financial crisis was the slowest since 1945.
Despite a decade of massive monetary injections from leading central banks, since the 2008-9 crash, inflation targets have been missed. Even with the current strong recovery in advanced economies, there is no sign of a sustained rise in prices.
After decades of a declining wage share, real wages in advanced countries need to rise well above productivity for a long time before a better balance between wages and profits is achieved again, according to the trade and development body’s analysis.
Food prices and global trade
Despite current trends on inflation, UNCTAD believes the rise in food prices could pose a serious threat to vulnerable populations in the South, already financially weakened by the health crisis.
Globally, international trade in goods and services has recovered, after a drop of 5.6 per cent in 2020. The downturn proved less severe than had been anticipated, as trade flows in the latter part of 2020 rebounded almost as strongly as they had fallen earlier.
The report’s modelling projections point to real growth of global trade in goods and services of 9.5 per cent in 2021. Still, the consequences of the crisis will continue to weigh on the trade performance in the years ahead.
For director of UNCTAD’s globalization and development strategies division, Richard Kozul-Wright, “the pandemic has created an opportunity to rethink the core principles of international economic governance, a chance that was missed after the global financial crisis.”
“In less than a year, wide-ranging US policy initiatives in the United States have begun to effect concrete change in the case of infrastructure spending and expanded social protection, financed through more progressive taxation. The next logical step is to take this approach to the multilateral level.”
The report highlights a “possibility of a renewal of multilateralism”, pointing to the United States support of a new special drawing rights (SDR) allocation, global minimum corporate taxation, and a waiver of vaccine-related intellectual property rights.
UNCTAD warns, though, that these proposals “will need much stronger backing from other advanced economies and the inclusion of developing country voices if the world is to tackle the excesses of hyperglobalization and the deepening environmental crisis in a timely manner.”
For the UN agency, the biggest risk for the global economy is that “a rebound in the North will divert attention from long-needed reforms without which developing countries will remain in a weak and vulnerable position.”
From Coordination to Collapse in Rigged Economies – Physics
September 15, 2021• Physics 14, 129
A game-theoretical model of a rigged economy predicts the emergence of cartels followed by a risk of instability as the economy becomes more complex.
“The economy is rigged!” This claim, which was voiced by both Bernie Sanders and Donald Trump during their 2016 presidential campaigns, might be the only belief shared by people from opposite ends of the political spectrum. But what does “rigging” mean for the economy and its dynamics? Luís Seoane at the National Center for Biotechnology in Spain has now addressed this question by modeling the economy as a system of “games” that agents can rig—for a price . The study reveals that the rigged economy undergoes a sequence of transitions as its complexity and size increase, with “cartels” forming and then dissolving. Although these transitions appear to imply that economic development will ultimately make the economy fairer, Seoane shows that if an economy’s size does not keep pace with its rising complexity, large fluctuations in wealth distribution can occur, causing inequality to rise steeply and making the economy liable to collapse.
The use of games to study economic phenomena dates back to the work of John von Neumann in the middle of the last century . The theory quickly became the lingua franca for economists and subsequently emerged as an area of inquiry for the physics community. For example, statistical physicists have shown that versions of the “minority game”—in which several agents choose between two possibilities, with the option chosen by fewest agents becoming the winning choice—can be used to explore the rich emergent properties of simple adaptive systems .
Minority games can be used to model situations in which agents compete for scant resources—including financial markets. However, the economy is also marked by phenomena in which the advantage lies with those in the majority, for example, when positive feedback reinforces a particular choice, such as joining a boycott . Seoane shows that rigged economies exhibit features of both minority and majority games [5, 6].
In Seoane’s model, multiple agents engage in a number of games simultaneously. Each game involves choosing one of two possible actions. An agent can also choose to pay to rig a game to favor its choice. The winning choice in each round is the action chosen by the majority of the agents who have paid to intervene. Increasing the number of games played in each round increases the degrees of freedom in the economy and is thus a measure of its complexity. After each round of a game, the winners share a fixed amount of money equally. The value of the winnings multiplied by the number of games played defines the total “wealth” that can be redistributed among the agents in each round. This wealth is thus a measure of the size of the economy and, along with complexity, is a key parameter of the model.
To observe how the optimal strategy for an agent changes as the economy develops, Seoane includes in the model an evolutionary process: Agents can replicate themselves after each round, such that each offspring has a high probability of adopting the same strategy as its parent. Since replication costs a fixed amount, more successful agents reproduce in greater numbers.
Seoane observes that, for a fixed level of complexity, a small economy yields agents with diverse strategies and a general preference to be in the minority when they win (to claim more of the prize pot in each round). As the economy increases in size, more wealth becomes available for agents to create progeny, as well as to pay the intervention costs required to rig games. Then, agents switch from playing minority games to majority games, meaning growing economies transition to coordination between agents (cartel formation), with an accompanying drop in strategic diversity. However, if the complexity (the number of games per round) increases faster than the economy grows, the relative returns per game are diminished, causing agents to seek minority positions across multiple games. This switch leads to the dissolution of cartels and a rise in the diversity of strategies employed by the agents.
Seoane also studies how an economy fares under other size-complexity relations. For example, he finds that when the amount disbursed in each game is constant, such that the size of the economy increases linearly with the number of games, there is a critical “complexity threshold” at which the distribution of agent-population size transitions from unimodal to bimodal. This transition gives rise to extremely large fluctuations in agent populations that threaten the stability of the economy. The distribution of agent wealth also exhibits a crossover at this point, becoming broad-tailed in the large-fluctuation regime, indicating rising inequality among agents. A reader familiar with the world’s economy today will likely see eerie parallels with this regime of the model.
It could be argued that some of the outcomes observed by Seoane come from the specific choices he makes in constructing the model. For example, the transition to coordinated action as the economy grows might result from the assumption that intervention costs are constant. In reality, intervention costs are related to the size of the economy and vary between players. Another important limitation of the model is that all agents are equally able to rig games—an assumption that misses the asymmetric influence of the wealthy in real economies .
Even with these limitations, Seoane’s model is significant in that it provides a framework for others to explore the ramifications of real-world rigged economies, such as those in which information is unevenly distributed among agents. Modifying the model might, for example, reveal how informationally disadvantaged agents can use the emergence of coordination to obtain advantage, as seen in other agent-based models . Such counter-rigging of the system by less powerful players is shown by the history of the medieval merchant guilds. Those institutions used the threat of coordinated embargo to resist arbitrary expropriation by powerful local rulers , proving that a rigged economy does not necessarily imply that David doesn’t stand a chance against Goliath.
- L. F. Seoane, “Games in rigged economies,” Phys. Rev. X 11, 031058 (2021).
- J. von Neumann and O. Morgenstern, Theory of games and economic behavior (Princeton University Press, Princeton, 1944)[Amazon][WorldCat].
- D. Challet et al., Minority games: Interacting agents in financial markets (Oxford University Press, New York, 2005)[Amazon][WorldCat].
- T. C. Schelling, Micromotives and macrobehavior (W. W. Norton, New York, 1978)[Amazon][WorldCat].
- J. Vitting Andersen and D. Sornette, “The $-game,” Eur. Phys. J. B 31, 141 (2003).
- Y. Baek et al., “Market behavior and performance of different strategy evaluation schemes,” Phys. Rev. E 82, 026109 (2010).
- J. E. Stiglitz, “The American economy is rigged,” Sci. Am. 319, 56 (2018).
- V. Sasidevan et al., “When big data fails: Adaptive agents using coarse-grained information have competitive advantage,” Phys. Rev. E 98, 020301 (2018).
- A. Greif et al., “Coordination, commitment, and enforcement: The case of the merchant guild,” J. Polit. Econ. 102, 745 (1994).
About the Author
Cornwall economy still going strong through pandemic – Standard Freeholder
An update presented to Cornwall city council on Monday, has shown that despite some hiccups along the way, the local state of economic development has remained for the most part, positive.
In an optimistic report penned by the economic development department, division manager Bob Peters said the local economy is continuing to rebound from the effects of the pandemic. The six-month update also spoke of the continuing need for new staff members within a variety of workforces.
“Leclerc and Olymel held separate job fairs in August, looking to hire over 100 additional people,” reads the report. “Cornwall’s largest employer, Walmart Logistics, continues to recruit for multiple positions and is making ongoing physical improvements to its facilities. SigmaPoint, Lallemand, Ridgewood, Morbern and other employers are also maintaining high production levels and are very active in recruiting.”
Local demand for retail cannabis has also remained high. Groove Cannabis has opened its doors at the Eastcourt Mall, while work is progressing on the High Ties store in Le Village and the Tokyo Smoke store at the Choice Properties Plaza at Ninth and Pitt streets.
Despite the growth seen locally, landlords are still finding it difficult to fill vacant commercial and office spaces. According to the report, demand for large-scale office spaces has sharply declined and isn’t expected to improve in the short-term.
The department also expects demand for retail space will continue to be weak over the short-term period, with quick-service restaurants and small specialty retail outlets being the exemption.
A new initiative will also see a portion of the Cornwall Business Park being developed. Peters confirmed that Titanium Transport — which recently purchased International Truckload Services (ITS) — will take over the spot ITS had intended to develop and plans on constructing a much larger building.
“In order to accommodate that development, they looked at adjoining parts of land, which was sold a couple years ago to Turtle Island Corp.,” said Peters. “They acquired more land so that they will have a bigger development and to facilitate that, we have agreed to sell 7.5 acres to Turtle Island Corp., subject to the agreement being duly executed.”
In essence, Turtle Island will be moving down the road so that Titanium can build. That will ensure the corporation continues to be a future investor in the park. According to Peters, it’s a win-win situation for the city.
“As in any transaction, there are clauses in favour of both parties to ensure that due diligence is met,” he said. “Until the sell closes, it’s not a done deal. The good news is that with the conclusion, we will see new development in the business park and at a greater scale than we were expecting under the original plans that ITS had.
“It’s very nice to see that Titanium is showing that much confidence in the Cornwall economy and wants to play a bigger role in being a member of our business park.”
Better mental health support needed for pregnant individuals during Covid-19 pandemic: Study – Hindustan Times
‘No longer safe’: Family flees Manitoba city over COVID-19 attitudes – Flipboard
B.C. reports 66 new COVID-19 cases in Island Health, two deaths – CHEK
Silver investment demand jumped 12% in 2019
Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
Iran anticipates renewed protests amid social media shutdown
News24 hours ago
Disgust growing over vaccine protesters' Holocaust comparisons – CBC.ca
Politics23 hours ago
Opinion | Have We Reshaped Middle East Politics or Started to Mimic It? – The New York Times
News15 hours ago
Minister of Agriculture, Food and Fisheries Lana Popham announces plans for permanent, five-month phase out process for fur farms across British Columbia
News14 hours ago
US plans new system for international travel, contract tracing rules
Economy14 hours ago
Canadian dollar beats G10 peers as inflation hits 18-year high
News14 hours ago
Gymnasts Biles, Maroney demand justice in botched FBI sex abuse probe
Health13 hours ago
COVID-19 cases at Central Okanagan seniors facilities plateau as Interior Health numbers decline – Global News
Politics13 hours ago
New Democrats’ Singh looks to dance his way to role as Canada’s kingmaker