GOVERNMENT AND THE SCOTTISH ECONOMIC PERFORMANCE: 1954–1978*

Published date01 June 1983
Date01 June 1983
DOIhttp://doi.org/10.1111/j.1467-9485.1983.tb01009.x
Scorruh
Journal
of
Polilicd
Economy,
Vol.
30,
No.
2.
June
1983
0
1983
Scottish
Economc
Society
GOVERNMENT AND THE
SCOTTISH
ECONOMIC PERFORMANCE
1954-1978*
MADHAVI MAJMUDAR
Paisley College
of
Technology
INTRODUCTION
In the current macroeconomic climate in the
U.K.
it is tempting to regard the
above topic as somewhat less than urgent. Direct or “special”’ regional policy
directed towards influencing the location of private industry in favour of
depressed regions,
if
not dead
is
in abeyance and much is written on the
subject. The objective of this paper is to broaden the concept
of
what
constitutes “regional policy” and how to measure its effects within the
framework of partial analysis.
Taking the conventional indicators
of
Scottish economic performance, it
would appear that the Scottish economy lagged behind that of the
U.K.
over
the period 1954-63
;
revived quite consistently over the period 1963-71
;
with a
gradual slowing down over the period since then. Over the period 1971-78,
growth rate of GDP in Scotland was still ahead of that in the
U.K.
but this was
primarily due to the public utilities and services sectors both of which
displayed higher than the
U.K.
average growth rates.’ The period beginning
with 1963 also marks the period
of
increased government intervention in the
Scottish economy in more than one direction. Most of the earlier studies are
unanimous in identifying continuous improvement in Scottish manufacturing
*This article draws on the book,
The
Renaissance
of
the Scottish
Economy?
by Charlotte
Lythe and Madhavi Majmudar published by George Allen
&
Unwin. September
1982.
I
am most
grateful to Charlotte Lythe for commenting extensively on an earlier draft of this paper.
I
wish to
thank John Duignan for assisting in corrections on style as well
as
for
general comments.
I
have
benefited from the comments received from an anonymous referee as well.
‘See Begg, Lythe
et
al.
(1975)
for the precise coverage
of
items and estimates under special
regional assistance to industry in Great Britain.
*
For
the period
1954-58
average U.K. GDP growth was much higher than that for Scotland,
where GDP was lower in
1958
than in
1954.
At sectoral level, primary manufacturing, public
utilities and services sector, growth rates lagged behind those
of
the U.K.
For
the period
1958-63
there was some improvement in the Scottish GDP growth rate which almost coincided with the
U.K. At the sectoral level, growth rates in the Primary and Manufacturing sectors lagged behind
those
of
the U.K. The next two sub-periods
of
1963-68
and
1968-71
mark a different phase
of
Scottish economic performance.
In
1963-68
the average Scottish GDP growth rate was higher
than that for the U.K., with a distinct revival in primary, manufacturing and public utilities
sectors. This pattern continued over
1968-71
but at a slower rate. The sub-periods
1971-75
and
1975-78
marked important changes in Scottish and the U.K. economic performance.
For
full
discussion and further details,
see
Lythe and Majmudar
(1982).
pp.
81-88.
Date
of
receipt of final typescript:
2
December
1982.
153
154
M.
MAJMUDAR
from the early 1960s, which can be attributed
to
regional policy. The nature of
the posited effect and the measurement of employment gain varied in the
various studies, but the overall direction seems clear.
It
is
suggested in this paper that in measuring the gains from regional policy
it
is important to assess such gains in a broader context, rather than focusing
on direct
or
narrowly defined regional policy alone. Secondly,
it
is argued that
the traditional focus on employment in manufacturing alone is dangerously
narrow given that employment and output do not necessarily respond to the
same stimuli. Thirdly, manufacturing is only a small part of the picture
representing under a third of
GDP
and of employment, and therefore
is
of
particular interest only
if
it
can be shown to affect the rest of the economy in a
significant way.
In this paper central government activity is defined in broad terms to
include central government expenditure on direct regional policy as defined
above, capital expenditure by nationalised industries, grants to local auth-
orities and the wages and salaries bill in public administration and defence.
The point of including these other items is not to argue that they represent
expenditure which may be vaned systematically between regions for regional
policy reasons but that it is plausible in all these cases to consider that there is
some
regional policy component
;
and indeed expenditure on direct regional
policy forms only a small part of the total central government expenditure in
Scotland. Wilson (1979,
p.
88) arguing on slightly different lines points out that
“the cost of regional policy is often assessed as expenditure on various forms of
assistance to industry and labour; but this is too narrow a view and is indeed
inconsistent with the usual assumption that improvement in the infrastructure
is part of regional policy”. Referring to Macdougall Report he points out that
regional policy in the narrow sense of aid to industry, accounts for only a fairly
small part of transfers that take place among different regions whose accounts
were e~amined.~
Table
1
presents estimates of the central government activity in a broader
context, and is sufficiently unconventional to warrant a word of explanation.
Firstly, the total of gross expenditure in this table measures the gross
flow
of
expenditures incurred by the central government in Scotland before deducting
the net revenue flows to central government. Secondly, it does not include full
estimates of the central government subsidies in housing, transport and
communications, because
of
the difficulties of separating the local and central
government elements in the totals for these items. What
is
more important to
emphasise is the fact that the table does enable
us
to present the time pattern
and structure
of
total central government expenditure in Scotland for the
period 1961-78, the years for which these estimates could be constructed.
The first row
of
the table which sets
out
for 1961-78 expenditure on regional
policy, presents the measure usually chosen to indicate the total of central
government regionally differentiated expenditure. Rows
24
indicate the
Set
Wilson (1979), pp. 88-89. It is interesting
to
note that in
this
context, Wilson puts the
extent of transfers through normal
fiscal
arrangements
to
poorer regions in the
U.K.
at a little
under
8
per cent
of
public expenditure.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT