Are smaller independent nations economically disadvantaged

Does the UK’s size help Scotland’s economy? 

A key argument against independence is that the size of the UK domestic market is advantageous to the Scottish economy.  

Whereas that might provide some advantage to Scotland it is also worth noting that economic benefits flow in both directions. For example, the fact that Scottish oil revenues kept the UK afloat in the 1970s is something that no one in Government has ever denied.  Also, the fact that Scottish goods exports are 100% per head higher than the rest of the UK’s has helped the UK’s negative balance of trade from collapsing even further.  

Access to a larger market place as a stand-alone issue can be an advantage, but is that advantage outweighed by the disadvantages of not controlling economic, fiscal, and social policy, etc? 

The easiest way to consider this question is to benchmark Scotland’s economic position, as a part of the UK to that of independent northern European nations with the most similar population sizes.

Choosing small independent Northern European nations to compare against means that the economic conditions — regional, political/economic stability as well as proximity and access to the EU Single Market would be all very similar.

Identifying the four nations that fit the benchmark criteria and that possess the most similar population sizes to Scotland (two higher and two lower) gives us this selection:

 

 

 

 

 

 

Now let’s look at the size of each of those benchmark economies.  If being part of a larger economy were a net benefit to Scotland then we would expect to see Scotland’s economy to be larger than the other benchmarked nations.  However, this is clearly not the case. 

 

 

 

 

 

The evidence is striking, those other nations all have economies that are considerably larger than Scotland’s, which has a GDP of £179bn despite having a similar sized population at 5.4m.323  

Scotland is better positioned than all of those small nations across a broad range of prosperity factors. Scotland possesses massively higher natural wealth than all of the similar sized nations benchmarked against, with the possible exception of Norway.  So, if being part of a larger nation was an advantage then Scotland should outperform significantly all those smaller nations. Clearly the opposite is true – how come? 

Scotland’s GDP is £90bn smaller than the average of our near neighbours with similar population sizes and a massive £112bn smaller than Ireland, which has 600,000 fewer people. This clearly demonstrates that smaller independent nations perform better. 

Scotland has 8.4% of the UK’s population, however, Scotland also possesses 34% of the UK’s natural wealth. This means that Scotland’s economy should outperform significantly the rest of the UK’s on a per head basis. As a matter of fact, it does. Scotland’s GDP in 2018 works out at £32,800 per person, a whole £900 higher than the UK’s at £31,900.324 

So, Scotland’s economy outperforms the, larger, UK economy, but not the net economic position of smaller independent benchmarked nations; who also economically outperform the rest of the UK.  

Conclusion

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 it against. The fact that it does not, therefore, points to a very important conclusion: that being part of the UK is holding Scotland’s economy back and limiting the shared prosperity of the nation. 

Ask yourself this question, 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 country – what advantages do those nations of similar size to Scotland possess that Scotland does not? 

All data points to smaller developed countries that have full control of economic and policy levers having an economic advantage. As an independent nation, Scotland would have a smaller population than the UK, but it could have significantly larger prospects and more achievable ambitions.

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