Framework for Scotland to emulate world’s best performing economies

In advance of publication of the Sustainable Growth Commission’s report tomorrow [Friday], this
briefing previews its core finding that an independent Scotland can emulate the world’s 12 best
performing small advanced economies (SAEs), closing the growth gap and driving GDP per head to the median of these best performing economies.

The report concludes that achieving this would be worth additional economic output in Scotland
equivalent to an extra £4,100 per person in Scotland.

Highlighting the strengths of Scotland’s economic assets and advantages, in terms of natural
resources, the education and skills of the people who live in Scotland and sectors with existing and potential global competitiveness the Commission identify ways in which Scotland can match the success of other small countries using powers available now and with independence.

The 12 small advanced economies considered by the Commission are: Austria, Belgium, Denmark,
Finland, Hong Kong, Ireland, Netherlands, New Zealand, Norway, Singapore, Sweden and
Switzerland – with lessons learned from Denmark, Finland and New Zealand in particular.
The analysis shows that small economies have performed better than larger ones consistently by
around 0.7 percentage points per year in economic growth rate, over the last 25 years on average.

This growth performance has meant that the benchmark group of countries has held its share of the global economy, remaining competitive even against large emerging markets, while the share of many large economies, including the UK, has retreated substantially.

The Commission also find that:

  • Small advanced economies have done well in terms of labour market performance, with relatively low unemployment – on average a couple of percentage points under those of larger advanced economies.
  • On average, there is no clear margin between small and large advanced economies in terms of levels of labour productivity.
  • Small advanced economies also tend to do well on measures of the extent to which the gains from growth are broadly shared. Many small advanced economies, notably those in Northern Europe, have low levels of income inequality.
  • Small, competitively strong economies invest in key sectors and clusters, to help them develop positions of advantage in a more competitive and challenging global economy.
  • And the overall performance of our benchmark group is significantly ahead of the UK and the large economies.

Overall, the Commission found that small countries have effective, responsive governments, with a well-developed sense of strategic capacity, high levels of trust and social cohesion, and the ability to adapt in response to changing international circumstances.

Based on this analysis and an assessment of Scotland’s economic strengths the report makes 30
recommendations on growth which if implemented now and with the powers that would come with independence would help Scotland emulate the growth rates of comparable nations.

The recommendations learn key lessons from all 12 small advanced economies with a particular focus on Denmark, Finland and New Zealand. The Commission have used these recommendations to design a ‘Next generation economic model” to drive Scottish economic growth over the next 25 years and beyond.

A key lesson drawn from the best performing small economies in the world is that a sustainable
improvement in living standards can be delivered over a generation of purposeful, cross partisan
strategic effort and focus.

Next generation economic model: key lessons from Denmark, Finland and New Zealand
We require a mature and balanced debate that is ambitious and learns from the best in the world.
While there are many lessons we can learn from all economies, there are aspects of our economy that are unique to Scotland and there will be elements in any one country that we would not or could not seek to emulate.

The 12 points below are the key lessons from across the group of Small Advanced Economies studied by the Commission:

  1. Quality of governance & disciplined public finances
  2. Long-term cross partisan strategy
  3. Focus on innovation
  4. Competitive location for international investment
  5. Exploiting Scotland’s resource endowment sustainably
  6. Export-orientation
  7. Migration-friendly
  8. Flexible labour markets combined with fair & progressive workplace & active employment policies including reducing the gender pay gap
  9. Highly skilled workforce with transferable skills
  10. Taxation for economic development; not competing as low tax location
  11. Inclusive growth at the heart of the strategy
  12. Quality of life as an asset and objective

Commenting ahead of the publication, the chair of the Sustainable Growth Commission, Andrew
Wilson, said:

“Learning from 12 successful small nations, our report will present a framework that demonstrates
how Scotland can emulate the best performing economies and societies in the world. Our sincere
hope is that this can raise the content and quality of debate at a time such a focus is sorely needed.

“As a first step there must be an acceptance that small nations can be successful and that Scotland can be one of those countries. Our work shows that small countries can be amongst the most economically successful countries in the world, with higher standards of living and lower levels of inequality than many larger economies.

“There is nothing intrinsic in any of the best performing economies that Scotland does not have. To secure an improvement in our performance will take purposeful strategic effort for over a generation. We require world class policy, world class institutions and cross partisan effort if we are to achieve our ambition to create a much more successful economy and cohesive and fair society.

“We have produced a design to demonstrate how Scotland can emulate the best performing
economies and societies in the world sustainably. Our sincere hope is that this can raise the content and quality of debate at a time such a focus is sorely needed.

“We believe that the whole report provides the most substantially considered economic policy
proposals for Scotland and independence that have been produced to date, with challenge and
opportunity for all sides of Scotland’s debate.”