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SCOTTISH ECONOMIC PLANNING DEPARTMENT[1] New St Andrew's House St.James Centre, Edinburgh, EH13TA Telephone 031-556 840. ext, 4017

The Economics of Nationalism Re-examined ... the discovery of North Sea oil will come to be seen as something of a watershed in Scotland's economic and political life. It is commonplace that the discovery of North Sea oil and entry to the EEC are factors of major economic significance for Scotland. Already both issues, especially the former, feature widely in the SNP's election material. The purpose of this paper is to reassess the economic arguments for an independent Scotland in the light of these developments, especially the discovery of oil. It will be shown that the whole framework within which the economic implications of nationalism were argued has indeed been altered. The importance of this is probably greater than is recognised at present by the majority of the public and it may well be, therefore, that the discovery of North Sea oil will come to be seen as something of a watershed in Scotland's economic and political life.

The Case Against Nationalism The traditional economic case against nationalism has always been that a politically independent Scotland would be unable to gain sufficient economic sovereignty to solve her problems successfully. This is partly a question of the scale of the Scottish economy, but more of the extent to which it has become integrated with that of the rest of the UK over the last 270 years.

II A Policy for Development The situation described in the first part of this paper is indeed an astounding reversal of the problems which are usually considered in a Scottish or British context. But it could nonetheless give rise to some serious difficulties and would require careful handling if Scotland was really to derive maximum benefit from it. It is, of course, perfectly possible that these difficulties would not be overcome and that an independent Scotland despite its wealth would continue to have an unsatisfactory economic performance. It takes more than money to eliminate the traditional problems of the Scottish economy and nationalist movements, dependent as they are on strong emotional pressures, have not always been notable for their economic realism. In this respect the example of Ireland's poor economic performance between 1922 and 1956 comes immediately to mind and the SNP is already showing signs of making promises which could be an embarrassment to its economic management. Nevertheless it is obvious that the surpluses from North Sea oil would open up new opportunities for a nationalist Government. The purpose of this second part of the paper is therefore to consider in very brief outline some of the policies a nationalist Government could follow to try to bring about the development and prosperity of the country as a whole.

The Implications of North Sea Oil the full significance of North Sea oil ... still remains in large measure disguised from the Scottish public The analysis in the last section is based on the situation as it appeared before the discovery of North Sea oil. Even after its discovery the full significance of North Sea oil was not immediately apparent and it still remains in large measure disguised from the Scottish public by the DTI's[1] failure to make provision for a proper Government return when the fourth round of licences was issued. So far all that Ministers have said is that they expect North Sea oil to be yielding 70-100m tons of oil per annum by 1980 and that on that basis the Government revenue from rent and royalties from the whole of the Continental Shelf including the gas fields in the southern sector may be of the order of £100m per annum at that time. It has been explained that this estimate does not include the yield from ordinary taxation on the oil companies and it has been stated that licensing policy is currently under review but the significance of this has probably not been fully appreciated by the public.

The first priority, however, would be to spend the surpluses as far as possible in developing Scotland's domestic economy and providing a modern infrastructure. The following paragraphs suggest how this might be done.

Construction

The European Community Membership of the EEC affects the economics of Scottish independence in several important respects. It guarantees access to English and Continental markets in a way which would not be possible otherwise. Without EEC Scotland would always run the risk that England might find it expedient to impose an import surcharge, a quantitative control or even a tariff on goods coming from Scotland. It was largely to eliminate this that Scotland accepted the Union of 1707. Now EEC rules would have the same effect and for all nine member states. In the unlikely event of England leaving the EEC, Scottish access to the other countries could in time largely compensate for any restrictions that might arise on English trade.

Service Industry

Conclusion the advent of North Sea oil has completely overturned the traditional economic arguments used against Scottish nationalism This paper has shown that the advent of North Sea oil has completely overturned the traditional economic arguments used against Scottish nationalism. An independent Scotland could now expect to have massive surpluses both on its budget and on its balance of payments and with the proper husbanding of resources this situation could last for a very long time into the future.