Scotland, Sovereignty and Corporations

Since 1945 the number of nations has soared from about 60 to more than 180. The first wave of new sovereign states came with the decolonization movement of the 1960s and 1970s; the second in the early 1990s with the break-up of the Soviet Union. If Scotland votes for independence it may ignite a third wave. Dozens of would-be nations are waiting in the wings: Wales, Catalonia, Flanders, Breton, the list is long.

In 1957 in his classic book The Breakdown of Nations economist and political scientist Leopold Kohr persuasively and rigorously argued that small nations are the natural order having been throughout history the engines for enlightenment, innovation, mutual aid and the arts. The large nation state, he argued is not a reflection of improved efficiency but of superior force:

It is the great powers which lack the real basis of existence and are without autochthonous, self-sustaining sources of strength. It is they that are the artificial structures, holding together a medley of more or less unwilling little tribes. There is no Great British’ nation in Great Britain. What we find are the English, Scots, Irish, Cornish, Welsh, and the islanders of Man. In Italy, we find the Lombards, Tyroleans, Venetians, Sicilians, or Romans. In Germany we find Bavarians, Saxons, Hessians, Rhinelanders, or Brandenburgers. And in France, we find Normans, Catalans, Alsatians, Basques, or Burgundians. These little nations came into existence by themselves, while the great powers had to be created by force and a series of bloodily unifying wars. Not a single component part joined them voluntarily. They all had to be forced into them, and could be retained by them only by means of their division into counties, Gaue, or departments…

With a population of 5.2 million, a sovereign Scotland would rank just below the median size of the world’s nations. It could rest assured that nations of its size can thrive. Think Finland, Costa Rica, Ireland, Norway. Small nations are easier to administer, more nimble in policy and their governments are more accountable to and reflective of their communities. Indeed, it is the divergence between the values of the Scottish culture and those of the Conservative government in Whitehall that has been a major impetus for independence. That divergence is reflected in the fact that today only one Tory holds a seat from Scotland in the British Parliament.

Prime Minister Cameron’s Conservatives advocate welfare cuts, austerity and privatization. They enthusiastically embrace what the Scots would call the mean values of the Conservatives heroine Maggie Thatcher who summed up her thinking with the famous phrase, “There is no such thing as society.”

The Scots most definitely believe there is a thing called society. The Scottish National Party, which controls the Scottish government and supports independence, wants to get rid of nuclear weapons, raise the minimum wage in line with inflation and begin a sweeping extension of child care. It is also more favorable toward immigration and the European Union than the British government.

“There is more of a communitarian viewpoint in Scotland that sees the value of coming together to provide public services, to acknowledge the strength of community in Scotland,” Nicola Sturgeon, Scotland’s deputy first minister told the New York Times.

But if Scotland does become sovereign it will quickly discover that that sovereignty has been severely restricted by new global rules promoted by increasingly dominant global corporations. Nations may be getting smaller, but corporations are getting larger. Of the 100 largest economies in the world, more than half are global corporations. The Top 200 corporations’ combined sales represent over one quarter of the world’s GDP.

The brute strength of corporations is usually sufficient to cow small countries. To control larger nations, corporations have convinced/bribed/bludgeoned governments to put in place rules that severely circumscribe their authority to express the will of their people. Today corporations can with impunity buy a post office box in the Bahamas and pay no taxes in the United States, or Scotland. Trade agreements grant extraordinary new rights and privileges to foreign corporations and investors that formally give corporate rights precedence over the right of governments to govern their own affairs. If there is a dispute, foreign corporations can skirt domestic courts and directly challenge any policy or action of a sovereign government in often secret proceedings presided over not by judges, but by arbitrators, often corporate lawyers themselves. Dozens of corporate challenges are currently wending their way through these “courts”.

  • US tobacco giant Philip Morris is suing Uruguay and Australia over their anti-smoking laws.
  • US company Lone Pine Resources Inc. is demanding $250 million in compensation from Canada because of lost potential profits from Quebec’s moratorium on “fracking”.
  • The Swedish energy giant Vatterfall has sued Germany for its decision to phase out nuclear power, demanding billions in compensation. In 2010, in an unusual display of concern, 37 academics from developed and developing countries, including eminent writers in the field of investment law, issued a joint public statement decrying the way trade agreements hamper ‘the ability of governments to act for their people’. They maintain, “States have a fundamental right to regulate on behalf of the public welfare and this right must not be subordinated to the interests of investors where the right to regulate is exercised in good faith and for a legitimate purpose.” No one listened.

Perhaps after it gains political sovereignty and attends to its internal affairs, Scotland could engage the global rules that prevent governments from expressing the will of their citizens. As historian Arthur Herman has noted in his book How the Scots Invented the World: The True Story of How Western Europe’s Poorest Nation Created Our World & Everything in It, Scotland has once before had an outsized impact on the world. In the 18th century Scotland’s appreciation for democracy and its strong emphasis on universal literacy made Edinburgh and Glasgow epicenters of intellectual thought. All of us are aware of one of Scotland’s most famous sons, Adam Smith. But very few of us are aware that before he wrote The Wealth of Nations he wrote the 1759 best seller, A Theory of Moral Sentiments. Building on the ideas of Francis Hutcheson, one of the founders of the Scottish Enlightenment, Smith argued that sympathy and empathy could be the twin foundations of a just economy.

From the first lines of the book Smith is clear about where his theory will take him, “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

Later Smith adds:

This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. …We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent.

As authors Fred Kiel and Doug Lennick explain, Adam Smith believed “we are all born with a ‘moral sense’ – that is, he believed humans are innately equipped with consciences. Because of this assumption, he thought that the ‘invisible hand’ of economic self-interest would be governed by the people’s moral sense. Economic self-interest, yes, but in the context of what’s good for all.”

Perhaps Scotland’s independence can usher in a new Scottish Enlightenment, one that again makes morality and sympathy a foundation for designing national and global economies. Is it too much to ask a tiny nation to again re-invent the modern world?

David Morris is Vice President and director of the New Rules Project at the Institute for Local Self-Reliance, which is based in Minneapolis and Washington, D.C. focusing on local economic and social development.

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