Scotland’s decision to reject independence could leave the country in the worst of all possible worlds in terms of developing policies to promote value creation in an economy where services are dominant.
The consensus among conventional economists was that independence would have delivered a short-term economic shock. They were probably right. Their arguments were influential.
But, as Economics2030 argues, the decentralisation of decisions about buying and selling affects how much value service transactions create.
A smaller state more in tune with the Scottish people’s natural desire to create value by constructive interaction would have allowed the emergence of a larger realm for autonomous decision-making.
A smaller state, however, is not automatically freer. How Scotland managed its independence would have been more important than independence itself. The decisive No vote makes that a hypothetical issue of little relevance for 25 years, and probably more.
An enthusiastic vote for the union, on the other hand, might have inspired greater involvement by Scotland in critically evaluating decisions made by the UK state and the corporations that influence it.
It is commonly said that the UK has the most centralised state in Europe. Ministers with enormous powers, advised by London-based bureaucrats and lobbied by corporations, can’t make the right decisions about value-creation in services. Only the participants in service transactions at the level of the individual can do that.
State bureaucracies depend upon process-based performance measures such as returns on capital and labour productivity to guide the management of state-controlled healthcare, education and other vital services. This is inimical to the theory and practice of value-creation championed by Economics 2030.
Service value creators need greater autonomy to interact with their customers and colleagues rather than a digitally-developed straightjacket of indicators that substitutes centralised control for discretionary decision-making.
Whether Scotland inspired by the potential of the union would have weakened the bureaucratic grip over essential services is another irrelevant hypothetical. Scotland has said no to independence, but enthusiasm for the union is low.
Scotland already had a local bureaucracy dependent upon income transfers from the centre that is conditioned by the policies of a central bank based in London and a further bureaucracy based in Brussels. This may be supplemented by a new bureaucracy to manage the powers to be transferred from the centre to the local bureaucracy promised by the main UK parties.
Complaints are likely to grow that members of parliament (MPs) from Scotland, Northern Ireland and Wales have a say about what happens in England without the MPs of English constituencies having equivalent reciprocal rights.
One response may be the creation of further bureaucracies, possibly including elected assemblies, for English regions.
The alternative is for MPs representing non-English constituencies to be stripped of the right to vote on matters affecting England. It is unclear how such a complex arrangement could be resolved. Yet another bureaucracy may be needed to make it work.
For those arguing for new approaches to economics that takes into account the implications of the dominance of services, the No vote is, in itself, neither good nor bad.
But the consequences will be.