Robin McAlpine: This is how Scotland’s Economy can Survive the Coronavirus

An economic plan NOW is every bit as important as an epidemic plan. “Already it is absolutely clear that economic orthodoxy is not even at the races in producing one – because economic orthodoxy is the problem, not the solution”

Robin McAlpine is the director of the Scottish think tank Common Weal.

Cross-posted from Source

In the long term there is a very real chance that epidemiologists could end up killing more people through poverty, starvation and mental health than they save from the virus – unless their intensive measures are matched by intensive economic and social intervention to mitigate the impact.

An economic plan NOW is every bit as important as an epidemic plan. Already it is absolutely clear that economic orthodoxy is not even at the races in producing one – because economic orthodoxy is the problem, not the solution.

There is no free market response to crisis. In a crisis free markets can only do one of two things; profiteer or ask for tax-payer funded subsidies. Both should be rejected immediately.

The solution to this crisis lies in an entirely different set of economic theories – and they’re the ones that underpin Common Weal’s policy work. In this column I’ll look at economic survival; I’ll consider post-crisis economic rebuilding in a later column.

This is how Scotland can survive.

Foundational economics

It is not free market economics which provides the answers but Foundational Economics and welfare economics. These are explained in this Common Weal report or here’s an introduction.

It is not free market economics which provides the answers but Foundational Economics and welfare economics. These are explained in this Common Weal report or here’s an introduction.

The idea behind foundational economics is simple; there are things which are so foundational to modern civilisation that they cannot be allowed to fail – so public policy must treat them as such. They are things like education, transport, policing and justice, food, housing, energy, communications and the health service.

In each case the approach is either collective ownership (even the free marketeers haven’t proposed privatising the police yet) or heavy public regulation. That is what must happen here; the economic plan must start with keeping civilisation functioning; business interests come a distant second and corporate and financial interests aren’t even at the show.

Then there needs to be a focus on welfare. This isn’t a single economic discipline but the interaction of many. Free markets see the welfare of individuals as a function of business activity which is self-serving and exploitative. If the private sector is the source of public wellbeing it should get on with it right now.

Since it can’t it should be set aside in favour of an emphasis on real social welfare. Private interests must wait until the rebuilding phase; this is about people.

Individual welfare

There will be a recurring theme throughout this; no welfare for corporations and big business. No hand-outs, no bail-outs. I will turn to their position in a minute. First, we must protect citizens.

If there was a time that could be done by propping up businesses, the businesses themselves brought that to an end with their outsourcing, freelancing and zero-hours contracts. Even if we propped up businesses they would be laying off staff left right and centre – and sole traders and freelancers will be in serious, serious trouble.

The only way to secure well-being is to ensure income. Rather than quantitative easing or straight-out money printing for big business, it must be brought into play immediately to introduce a Universal Basic Income. Every human in the country must immediately be given sufficient income to live, and money creation should be used to pay for it.

Print the money NOW – there is simply no chance of inflation given the scale of the crisis (or at least there is no chance of aggregate inflation because of the massive loss in demand, but there could be inflation of some specific goods – see the section on food below). That’s step one.

Suspend debt

The financial sector is the second major problem. It has entangled households and small businesses in so much debt that they are a bigger economic threat than the virus itself. There are only two real worries people have – can I eat (and live in a house for renters) and will I lose everything?

The former is dealt with above and below; the latter is simple. All debt payments must be suspended – credit cards, loan repayments, mortgages, business debts. This is not a ‘moral hazard’ (the risk of people behaving irresponsibly) because all these debts will resume in future. A credit card shopping spree is not going to happen.

This means that no-one will lose property or a home, businesses won’t go immediately bankrupt and people can live a subsistence life on a Basic Income as a baseline until this is over.

This leaves renters. Landlords have made enormous gains in recent decades; it is time for them to contribute backwards. All rents should be abolished during this period and that will simply be a ‘hair cut’ for landlords – there will be no recompense.

Of course they too will be on a Basic Income and their debts will be frozen so they too will survive this intact.

Suspend many taxes and replace it with an emergency package

Since this crisis will be deflationary there is an awful lot of scope for finance to be found through money creation – but there will still be a need for tax. So the key is to make sure that it isn’t tax liabilities which cause businesses to go under or people to starve.

Anyone who has lost all their income over the period should be able to apply immediately for a suspension in tax payments – and be taken at their word. However, it should be made clear that there will be ‘legacy checking’ of this – at a point in the future they will need to provide evidence or face serious fines for fraud.

The same applies for businesses – if they are mothballing (see below) they should have their taxes suspended.

Anyone whose income remains intact will be taxed as is. But in turn, windfall taxes on corporations will be needed. They have had endless corporate welfare from the public purse in recent decades and this is now their time to dip into their massive cash reserves.

If the super-rich try to stash their money I tax havens they should be treated as they would be if they were trying to undermine the country during wartime; harshly.

Impose immediate regulation on staple products

Since it is impossible to know the scale of the disruption to supply chains (the UK is horribly exposed because of our low rates of manufacture and production so it is what happens in other countries that will be decisive) forms of rationing must be put in place.

There are many ways to do this, but the most effective might be to set immediate rations of essential goods (food, key grocery items like toilet paper, key medicines and toiletries etc.) and then to compulsorily purchase enough to ensure everyone has sufficient calories and other key essentials.

This could then be distributed via local authorities with every household getting a weekly packages. What is left can continue to be sold via the free market. The one area there may be a risk of inflation is in food prices; if profiteering takes places then strict price controls may be required.


Big business is asking (effectively) to be paid to mothball. There is no realistic prospect that the market will sustain them in the coming period so they want to be given money so they can tread water.

Instead they should simply be mothballed. Let’s take the airlines; no-one is going to be flying. There is no business model – but there will be once this is over. Planes should be parked up, senior managers working on recovery plans for afterwards and government should be working with them to ensure supply chains are ready for their return.

This approach should be repeated in any business which cannot survive this period. Close down – and do nothing about it until they are again able to survive. As long as they don’t lose any assets or workforce they can restart and rebuild as soon as is possible.

Emergency industrial strategy

We should have a national industrial strategy anyway – but we need one now. If we need ventilators, if we need more food production, if we need more toilet paper then a direct intervention strategy should be used. ‘Bribing’ the private sector to do the right thing is the wrong approach.

Businesses should be compelled where necessary (though I have zero doubt the vast majority want to be good citizens and contribute and will simply not require it). Major intervention may be needed – if we’re out of toilet paper the newspaper industry is just going to have to go ‘digital only’ for a while and hand over all that paper…

If there is any hint that this is going to be a prolonged crisis we need to take over land and increase food production. Food is a critical link in all of this and shortages here is the one thing guaranteed to cause social breakdown.

Big finance pays for its gambles

Big finance is a dead-weight on our society. It is massively over-powerful and is constantly lobbying government to act against the public interest. Frankly a politicians should not be near financial lobbyists during this period; the finance industry should make its case at public hearings and nowhere else.

The insurance and finance industries made a fortune when times were good. They have already successfully escaped paying the price when times are bad (the 2008 bailout when ‘bad’ was entirely their own doing) and must not get away with it again.

The government must make absolutely sure that insurance companies pay out every penny. If they go bankrupt we can worry about that later. They constantly gamble against there being a pandemic and naturally they constantly win that gamble. Not now. They lost that gamble and that is on them and them alone.

Emergency workforce

Mothballing the economy will free up an enormous workforce. In part this is circular; the workforce is unavailable because of ‘locking down’ society. But we may well need that workforce for other tasks such as food parcel delivery or helping in hospitals.

This should not be compulsory but I absolutely guarantee you that if citizens’ welfare is protected as above and a call is put out for people to step up and contribute by helping in hospitals (or make-shift hospitals if it gets bad) or delivering essential goods or working on the land to produce food.

Plans for this should be made immediately with training programmes being produced rapidly and a workforce of trainers (teachers, lecturers and so on) should be prepared. But this must be driven only by demand, not government’s desire to look busy; in reality I suspect the last things most hospitals want is well-meaning volunteers getting in the way.


Up until now the Scottish Government has simply shadowed Boris Johnson and repeated whatever he’s said. There is no sense of an actual vision or a plan. This is alarming because Boris Johnson will do the opposite of this – protect corporations and allow the most vulnerable (economically, not medically) to pay the price.

The Scottish Government should ask for emergency powers to do this instead and should actively and publicly lobby for this to happen. It should object in the strongest possible terms if corporate bail-outs if (probably when) ‘protect Big Finance’ become the order of the day in London.

They may not be able to do everything in this plan but they should set it as their preferred strategy so people fully and properly understand whose fault it is if this all goes wrong. And they should do what they can.

Is this war?

If this sounds like war then that’s because it’s a bit like being in wartime – but this is not a war. I repeat, this is not a war. This is a sharp and immediate threat to modern civilisation which MUST NOT be allowed to turn into a longer-term crisis.

To do that we need to act decisively in the short term to protect our way of life in the long term. That is what we are doing medically, that is what we must do economically.

All being well the above situation would apply for two or three months and then the transition back to something like normality can be comparatively smooth. If we try to prop up the economy over this period like nothing is really happening and it collapses the recovery will be long and painful.

A long and painful recovery will create a global closing-in and closing-down and we can’t afford that because down that route lies real war. Act now so we don’t need to fear the future.

Common Weal

Every bit of this is entirely and completely consistent with Common Weal’s philosophy and policy programmes. Our motto – ‘All Of Us First’ – has never been more pertinent. ‘Me First’ will destroy what it touches. I don’t care if its NGOs profiteering, insurance companies screwing the economy or panic buying – putting our self interest above our collective interest will be our biggest mistake.

We should have an industrial strategy by now. We should have a public banking system working for the public interest. We should have a proper national food strategy. We should have a Universal Basic Income. We should have shortened supply chains and improved domestic production.

We should have moved to a business support strategy which favour domestically owned small- and medium-sized businesses with a system of client support that meant we already had relationships with those about to go under (also in the industrial strategy paper). We should have reformed tax and tackled the lack of supply of affordable renting properties.

Had all that been done, had Scotland (and the UK) abandoned the obsession with extreme free-market economics, this crisis would be much, much less severe than it is.

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