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Open Minds on Independence #4: Why smaller is best when it comes to successful nations

SCOTLAND is generally described as a small nation (it’s actually average-sized) it is smaller than the UK but that doesn’t mean it would find it more difficult to prosper as an independent country. In fact it is widely accepted that smaller nations are actually better at creating healthy political and economic systems.

There is no clear or standardised definition about what constitutes a small nation. It’s all about perception. Scotland’s certainly perceived to be small when compared to England in terms of population. Our country’s population was at a record high in 2019 at 5.44 million. The population of England in the same year was 56.29m. The rest of the UK population is 61.33m. In some ways Scotland is a larger nation than England – Scotland makes up 32% of the UK’s landmass, but when you add in territorial waters Scotland is actually one and a half times larger than England, accounting for 55% of the UK’s territorial area against England’s 37%.

The point about territorial waters isn’t an academic one. Scotland’s seas make a big contribution to the country’s natural wealth. In fact, Scotland possesses 96% of the UK’s oil and gas, 63% of its natural gas, 70% of its seafood landings, 10% of Europe’s wave power potential and 25% of Europe’s tidal energy resources.

It’s certainly true that an independent Scotland would be smaller than the UK in population terms, thus the overall size of its economy would be smaller. But Scotland’s economy has traditionally been larger on a per head basis so smaller is not necessarily a problem and could even be an advantage.

The wealth of a nation is best measured in GDP per head and Scotland’s is £900 per head larger than the UK average.

READ MORE: Open Minds on Independence #3: How can Scotland be in debt if it can’t borrow?

So our country is hardly a minnow economically. When you look at the nine smallest nations by population across the European Economic Area, Scotland’s economy is larger than the smallest seven put together (Liechtenstein, Iceland, Malta, Luxembourg, Cyprus, Estonia and Latvia).

We looked at the economic data (pre-Covid and pre-Brexit) for the geographically closest northern, western central and western European nations commonly referred to as “small” and benchmarked their performance against the UK. The smallest in terms of population is Iceland, with a population of 338,349.

The largest is Netherlands, which has a population of over 17 million, which is equivalent to 26% of the UK’s population.

The other benchmark nations compared include Austria, Belgium, Denmark, Estonia, Finland, Ireland, Luxembourg, Norway, Sweden and Switzerland. We looked at the GDP per head, the national debt of a country as a percentage of its GDP, the balance of trade (exports of goods minus imports) productivity indices and pensions as a percentage of average income.

We chose these measures to provide a more well-rounded picture of the economic performance of those countries. The results show that all those benchmark European nations perceived to be “small” have for decades been outperforming the UK, which before Brexit was one of Europe’s largest states and economies.

When it comes to GDP per head in particular the UK comes second to last in the group, beating only Estonia. However, Estonia’s national debt is 10 times less than the UK’s, its exports as a percentage of GDP are more than twice as high and its pensions are almost double the UK’s as a percentage of final earnings – and Estonia is the small nation that the UK performs best against. It has a population of 1.3m and only became independent from the USSR in 1991 but still beats the UK 3-2 overall.

Of all the countries in the benchmark group, the UK had at that point the second worst national debt as a percentage of GDP with 86%. Only Belgium is worse, at 100%. It’s also worth noting that with the UK Government’s mishandling of Covid and Brexit, the UK’s national debt is expected to end up far higher than Belgium’s when we get the final figures.

The UK came last with the worst ratio of exports as a percentage of GDP with 31% and has by far the worst pensions as a percentage of average earnings at 29%.

Ireland comes second last for pensions at 42%, but this is still 13% higher than in the UK. In terms of productivity, the UK again only beats tiny Estonia. Smaller northern European nations such as Denmark and Norway could take an extra day off work and still produce more per worker than the UK, while Sweden could take a half-day.

The smaller independent European nations with the population levels most similar to Scotland – Denmark, Finland, Norway and Ireland – all have economies considerably larger than Scotland’s, which has a GDP of £179bn, despite having a similar-sized population at 5.4m. On a per-head basis, Scotland’s GDP in 2018 worked out at £32,800 per person – £900 higher than the UK’s at £31,900. So something is clearly wrong – but not with Scotland’s economy. Scotland possesses massively higher natural wealth than all of the similar-sized nations listed above, with the possible exception of Norway. It outperforms all of the small nations and similar-sized nations highlighted in this section across the broad range of prosperity factors.

The National:

Yet our economy is £90 billion smaller than the average of our near neighbours with the most similar population sizes and a massive £112bn smaller than Ireland, which has 600,000 fewer people. Why? Because all of those nations are smaller, more agile, they don’t have to pay of the debts of a larger neighbouring country that controls their economy for its own benefit rather than theirs. Being part of the UK is holding Scotland back.

Conclusions

Given its huge economic assets, it naturally follows that Scotland should be performing better than most, if not all, of those smaller nations we have benchmarked against. The fact that it isn’t doing so points to a very important conclusion: being part of the UK is holding Scotland’s economy back and limiting the shared prosperity of the nation.

Ask yourself this: other than possessing the full set of powers of an independent nation and the ability to tailor economic, business, social and environmental policies to the needs of their nations rather than to those of a larger neighbouring nation, what advantages do those nations of similar size to Scotland possess that Scotland doesn’t?

All data points to smaller developed countries having an advantage. But to fulfil its potential Scotland has to become independent. As an independent nation, Scotland would have a smaller population than the UK but it would have significantly larger prospects and ambitions.



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