Skip to Main Content
Have library access? Log in through your library
New Wealth for Old Nations

New Wealth for Old Nations: Scotland's Economic Prospects

Diane Coyle
Wendy Alexander
Brian Ashcroft
Copyright Date: 2005
Pages: 256
  • Cite this Item
  • Book Info
    New Wealth for Old Nations
    Book Description:

    New Wealth for Old Nationsprovides a guide to policy priorities in small or regional economies. It will be of interest to policymakers, students, and scholars seeking avenues to improved growth, greater opportunity, and better governance. Some of the world's leading economists combine their research insights with a discussion of the practicalities of implementing structural reforms. Scotland is the ideal case study: the recent devolution of government in the United Kingdom offers a natural experiment in political economy, one whose lessons apply to almost any small, advanced economy.

    One fundamental conclusion is that policy can make a big difference to long-term prosperity in small economies open to flows of knowledge, investment, and migrants. Indeed the difficulty in introducing growth-oriented policies lies more in the politics of implementing change than in the theoretical diagnosis. Public sector governance is consequently a key issue in creating a pro-growth consensus. And faster growth must be seen to improve opportunities for the population as a whole. Further, setting out the evidence--as this book does for Scotland--is vital to overcoming entrenched institutional barriers to policy reform. The first chapter is by Jo Armstrong, John McLaren, and the editors; and the subsequent chapters are by Paul Krugman, William Baumol, Edward Glaeser, Paul Hallwood and Ronald MacDonald, James Heckman and Dimitriy Masterov, Heather Joshi and Robert Wright, Nicholas Crafts, and John Bradley.

    eISBN: 978-1-4008-3561-4
    Subjects: Economics, Political Science

Table of Contents

  1. Front Matter
    (pp. 1-4)
  2. Table of Contents
    (pp. 5-6)
  3. Preface
    (pp. 7-8)
  4. List of Contributors
    (pp. 9-12)
  5. Introduction
    (pp. 1-10)

    This book asks how to improve growth in a small economy, specifically growth in advanced industrial regions and nations which also have a commitment to social justice and sustainability. The case study is Scotland. To paraphrase Adam Smith, one of the country’s most famous sons, the task is to identify sources of new wealth for old nations. The challenge of understanding what makes economies grow, and how governments can help or hinder, is hardly new; but contemporary challenges provided the impetus for this book. First, how do the long-standing EU members compete after the Union’s enlargement in 2004? Secondly, what...

  6. CHAPTER ONE The Political Economy of Scotland, Past and Present
    (pp. 11-32)
    Wendy Alexander, Jo Armstrong, Brian Ashcroft, Diane Coyle and John McLaren

    This chapter provides an overview of Scotland’s political and constitutional past as well as its economic performance. In the first part of the chapter, we review the political and cultural history of modern Scotland. Scotland’s past success still weighs heavily as both a benefit and a burden, casting a long shadow over the present.¹ As the Scottish commentator Carol Craig (2003) has noted, the Scots have long been an active, outward-looking people. Fighting, exploring, colonizing, inventing, engineering, building, preaching, shipbuilding and coal mining are just some of the roles that Scots have for centuries played in the world. Late eighteenthcentury...


    • CHAPTER TWO SecondWinds for Industrial Regions?
      (pp. 35-47)
      Paul Krugman

      I approach the question of growth in Scotland by reviewing the issues facing regions that flourished during the era of heavy industry, and must now reinvent themselves as postmodern economies. As a group, advanced nations are fairly similar today in productivity, real wages and other measures of economic development. There are, however, large divergences in regional growth rates. I will not try to define ‘region’ precisely, but will simply note that by and large it means a relatively geographically compact area with a population measured in millions rather than tens of millions, and usually with high internal mobility of labour....

    • CHAPTER THREE Four Sources of Innovation and the Stimulation of Growth in the Scottish Economy
      (pp. 48-72)
      William J. Baumol

      The recent enhancement of Scotland’s policy autonomy, together with its reportedly lacklustre performance in innovation and growth, invite re-examination of the country’s options and opportunities. In what follows, whenever I venture to offer any statement about the Scottish economy, it must be recognized as derivative from the very illuminating materials that have been provided to me.²

      The key observations I will offer in this chapter stem from the all-too-obvious conclusion that a reliable stream of innovation is the most important requirement of the remarkable long-run economic growth that has been experienced by the industrialized economies in the past two centuries....

    • CHAPTER FOUR Four Challenges for Scotland’s Cities
      (pp. 73-95)
      Edward L. Glaeser

      One-half of Scotland’s population lives in Glasgow or Edinburgh or in one of the council areas that directly abuts those cities; more than one-half of Scotland’s gross domestic product is made in those areas. These 12 council areas are sufficiently close to one another, and sufficiently interconnected, that it is reasonable to treat them as a single metropolitan region. Moreover, this region is so important to Scotland that it is reasonable to believe that Scotland’s future depends on the success of its urban core. The success of the metropolitan region in turn depends on its ability to address a series...

    • CHAPTER FIVE The Economic Case for Fiscal Federalism
      (pp. 96-116)
      Paul Hallwood and Ronald MacDonald

      In this chapter we try to move the debate about fiscal federalism away from the contentious link between fiscal federalism and political independence for Scotland towards an economic analysis of the issues.² These issues are not unique to Scotland but apply in any country whose government is not entirely centralized.We take the existing constitutional settlement in the UK as given and set out arguments based on economic theory and evidence relating to the devolution of economic powers from Westminster to Edinburgh.³

      For any devolved or federal system to function effectively it must do the following: assign expenditure responsibilities between the...


    • CHAPTER SIX Skill Policies for Scotland
      (pp. 119-165)
      James J. Heckman and Dimitriy V. Masterov

      The Scottish economist Adam Smith attributed the wealth of a nation to the specialization and division of its labour force. In the first book of his magnum opus, he wrote:

      The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example,...

    • CHAPTER SEVEN Starting Life in Scotland
      (pp. 166-186)
      Heather E. Joshi and Robert E. Wright

      Scotland, in line with the rest of Europe, is experiencing low rates of childbearing and its population is ageing. There is an increasing proportion of elderly people in the population, with more people who are growing old than growing up. The ‘birth dearth’ and ‘population greying’ are not unconnected: low fertility is the key influence on the age structure of a population as well as the rate of population growth.

      The main focus of this chapter is on cradles rather than graves. We look at the conditions into which new Scots are being born. We look at the circumstances of...


    • CHAPTER EIGHT High-Quality Public Services
      (pp. 189-209)
      Nicholas Crafts

      Public services matter enormously: people care deeply about education and health, which can have profound effects upon their lives. By definition, public services cannot be efficiently provided by relying on the market alone, so the government has to intervene. At the same time, there is a general perception that public services have underperformed and have not always been well-managed. Expenditure has been increasing rapidly, but has this delivered the results we all want?

      Improving the performance of public services assumes even greater importance in the problematic context of pressures on government budgets (see Chapter 5). Public expenditure in Scotland already...

    • CHAPTER NINE Committing to Growth in a Small European Country
      (pp. 210-231)
      John Bradley

      To be offered the opportunity of reflecting on the Scottish economy is a particular pleasure for an Irish economist. We Irish follow the fortunes of the economies of the Celtic ‘fringe’ of the United Kingdom with singular interest, having been constitutionally part of that fringe until 1922, and remaining locked into close business and economic relationships with Great Britain from then until well into the 1970s.

      After independence, British and Irish people continued to enjoy the benefits of a common work area, travelling back and forth unhindered by passport controls, with a frequency born of long-standing familiarity.

      Ireland parted company...

    • CHAPTER TEN Conclusions
      (pp. 232-244)

      The contributors to this book between them cover a vast amount of evidence on the Scottish economy, with wide-ranging implications for policy. Clear conclusions emerge. These include general imperatives that should guide policy makers in all small economies committed to improving growth, opportunity and governance; the particular character of Scotland’s economic challenges; and, finally, some possible

      first steps for Scotland.

      At James Heckman’s seminar in the Allander Series, one enthusiastic participant asked, ‘Professor, if we do everything you recommend, how will Scotland be different in five years time?’ He paused before replying, ‘If Scotland successfully implements the most vital policy—...