Thursday, 26 August 2010

Nobel Prize winner states the obvious

It seems that the Nationalists are getting in a bit of a lather about an interview with Nobel Prize winning economist Joseph Stiglitz, which was broadcast on an edition of Newsnicht earlier this week.

He was asked by interviewer Gordon Brewer about a footnote (literally) in one of his books, in which he contrasted Norway's oil fund with the UK's approach. Stiglitz claimed that much of the wealth of the Thatcher era was built upon income from North Sea oil revenues, thus in that respect attributing the economic success of that time to government economic policies was illusory. His opinion was that to that extent oil revenues had been squandered, and they should have been invested for the future rather than being spent on current consumption - oil is a finite resource and this asset should have been used to create other assets for future benefit rather than being effectively poured down the drain.

Of course, it's difficult to disagree with his essential point, particularly in view of the current state of the public finances. However, in effect Stiglitz did little more than restate the perennial spend/save conundrum - in this case coming down on the side of the latter - and his insight into this matter hardly seems as devastating as some are making out, apart from the fact that he's a Nobel Prize winner etc, which obviously plays well as far as crude politicking is concerned.

And it's also the case that Stiglitz certainly didn't use the point to provide any kind of nod towards an independent Scotland - he said no more than that the UK's oil revenues had been squandered, and that the SNP's idea of an oil fund was a good idea. If the inability of US senators to differentiate between Scotland and the UK vis-à-vis the Lockerbie bomber's release is anything to go by, then the fact that the SNP advocate an oil fund for Scotland would surely be lost on the American economist.

Moreover, one huge question mark always attaching to the concept of an oil fund is whether in fact an independent Scotland would have been prudent enough to accumulate such an asset. The dominant tax and spend ethos demonstrated by Holyrood - particularly in relation to Labour and the SNP - suggests that this would never have been a foregone conclusion.

Indeed, in an eminently predictable response to the interview, the SNP's Westminster treasury spokesman Stewart Hosie juxtaposed his view of Stiglitz's "devastating attack on the UK's handling of Scotland's oil wealth" and a call for an oil fund to be established "as soon as possible", with an attack on the Coalition's "wrong-headed cuts agenda". Surely a slight contradiction here - wouldn't an oil fund detract from current spending, or would the fund just mean more public borrowing, in effect robbing Peter to pay Paul?

But Gordon Brewer must be a bit miffed that he's not been included in Stiglitz's Nationalist paean - instead his jaw dropped in response to the economist's devastating retorts to his questions, apparently. But a more leading set of questions for the Nationalist cause is difficult to imagine; Brewer will clearly have to try a lot harder if he is to become a Nationalist icon à la Joseph Stiglitz.

New found nationalist icon, of course, because it seems that few - if any - of the Nationalist's now fêting Stiglitz have hitherto paid much attention to his books.

The preamble to Brewer's interview mentioned that the economist's Nobel Prize was awarded for his work on the topic of information asymmetries, but unfortunately his remarks on North Sea oil revenues seemed a bit more mundane than that.

Perhaps his views on asymmetric information in politics would have been more interesting, and certainly an area with copious material!

5 comments:

Anonymous said...

Yes, you will find any reason at all to say why the SNP's policy on an oil fund for scotland is not good. You shoot yourself in the foot by doing so. The oil, with your view prevailing, will continue to be squandered. Even in the face of someone like Stiglitz you try to deny the truth. It's a no brainer. You have to vote SNP to make the proper use of the oil a reality. It is the only party that is interested in investing the oil cash for the future. I'm not sure why that is always so hard to comprehend.

Andrew BOD said...

Stuart

I think you're being a little disingenuous here.

I also watched the interview and it was short and to the point. Brewer brought the SNP's point about an oil fund to the fore and the eminent gentleman answered without any bias. He didn't make any point about Scotland, only the 'UK'. Because the point he was making was one which has been lost on generations of politicians from the main parties.

He was talking about the UK as a 'UK plc' with a "portfolio" of investments, something in which other countries are doing quite well, in completely different ways. We (the UK) has been great at selling things off to foreign investors, and even foreign governments, but Thatcher, Major, Blair and Brown have failed to invest in the UK's future, instead relying naively on the great financial centre of the world.

A UK oil fund is still a distinct possibility, but judging whether it is the right thing to invest in, at this time, and given the circumstance, is another matter.

The SNP's part in this is important. Although essentially, and naturally, about Scotland, without the idea in the first place, it's unlikely Brewer would have even interviewed Stiglitz on this topic, or indeed any.

Stuart Winton said...

Anon

Well of course it's a good idea in theory - assuming you subscribe to the idea of an independent Scotland - but my point was how it would work in practice, and whether the SNP would similarly have squandered the money. And clearly even if Scotland were to become independent tomorrow, the next decade or so doesn't seem the most opportune time to accumulate an oil fund, don't you think? And who knows what the oil market situation will be in twenty years time (say) given the move towards renewables.

Oh, aye, that's another thing the SNP keep banging on about, so it clearly wants to have its fossil fuel cake and eat it ;0)

The SFT looked good on paper, for example, but it didn't quite work out as hoped in practice.

And, as I said, Stiglitz said nothing about Scotland per se. He thought that the UK had squandered the cash - which is the no-brainer in view of the current state of the UK public finances.

Andrew

I think we're largely in agreement here?

Andrew BOD said...

Stuart

We are in agreement on most things, except recognising the SNP as a mechanism of change.

Without the cries for an oil fund, whether in Scotland or the UK, there would have been no comment from a Nobel Prize winner. Without an SNP Government there would have been no Calman.

And actually, Scotland could have had an oil fund, as an independent state or as a devolved country. Forget Norway, I believe there are devolved states/territories in the US and Canada who have such a set-up. Correct me if I'm wrong.

Stuart Winton said...

Don't know Andrew, but constitutionally I don't see why not.

But I suspect it's largely a historical/academic argument now.