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A resilient democracy that must still tackle inequality

The referendum debate is caught in a loop.

It has been framed almost entirely in terms of issues that are largely irrelevant to most Scots. How many big businesses might leave? Would Scotland be allowed to use the pound? How long would it take for Scotland to join/rejoin the European Union? How much is North Sea Oil worth? Is Alex Salmond Vladimir Putin in disguise?

Sigmund Freud called this the narcissism of small differences: obsessing about minor issues to avoid looking at the big picture. And what bigger issue is there than the growth of social equality? Scotland is not quite the land of Jock Tamson's bairns some believe it to be. Indeed, the top 10% of Jock's progeny have wealth that is 900 times greater than the bottom 10%, according to Scottish Government figures. And, as the Joseph Rowntree Foundation confirmed yesterday, this decline in economic equity is being transported down the generations.

The rich have always been with us and isn't the first rule of politics that they always get richer? That's true, but over the last century or so, since the foundations of the welfare state were laid, there has been a significant redistribution of the fruits of economic growth. Indeed, capitalism defeated communism largely by ensuring that the populations of the West had a much higher standard of living than those in the East.

But communism is no more and consumer capitalism isn't what it was either. The availability of ultra-cheap clothing and consumer electronics, often produced by impoverished populations in the southern hemisphere, has disguised the extent to which the economic security of the working classes (and increasingly the middle classes) has been undermined. It used to be that every generation felt richer than the previous one; that home ownership was increasing; that hours worked were in decline; and that more people had pensions to look forward to. Not any longer. These trends have been thrown into reverse by a combination of globalisation, low taxation and technological change.

The French economist Thomas Picketty, author of Capital in the Twenty-First Century, has been credited with identifying this reversion to the Edwardian age of extreme social division, arguing that most of the last century was an aberration. He has been attacked by economists because of his suggestion that capitalism inevitably drives wealth upwards (to most of us that seems like a statement of the bleedin' obvious).

But Picketty is far from alone. The economic commentator Martin Wolf, in a BBC radio series this week entitled The Future Isn't What It Used To Be argues from a slightly different perspective that social mobility has stopped and that our essentially middle-class society of comfort and security is being dismantled by economic change.

The culprit is as much the computer as capitalism, according to another best-selling economic futurist, Jeremy Rifkin. He claims that technological change is not only making industrial workers redundant in automated factories, but also office workers such as estate agents, accountants, lawyers and, whisper it, journalists.

In fact, the only growth area in middle class employment seems to be economists forecasting its end. Blaming computers slightly misses the point. As the Nobel-prize-winning economist, Joseph Stiglitz, points out in the Price of Inequality, technological change isn't the problem; it's the failure of the political system to distribute the benefits more widely through tax and social policies. Capitalism is destroying itself by squeezing the incomes of its consumers and killing its own markets.

So, how is this to be addressed in Scotland, our own small corner of the global village? Aren't we too wee, too poor, too weak and so on? Unionists insist that the only way to challenge the power of big capital is to stick with Britain. Breaking up the UK would only weaken the state's ability to challenge the power of big business. Wasn't it the UK that created the welfare state, the NHS and so on? This was the dominant view of the Left until recently.

Unfortunately, it bears very little relation to what Labour did in office in the last 20 years or so. Tony Blair embraced the politics of wealth with an alacrity that took the breath away . He not only embraced Conservative tax and trades union policies; he fraternised with cheesy celebrities (Silvio Berlusconi comes to mind) and became an enthusiastic plutocrat after leaving office.

It would be naive to think politicians in an independent Scotland would somehow be immune from seduction or coercion by private interests. The narcissists of the Left obsess about what Alex Salmond said about Vladimir Putin, ignoring the more worrying things he said about Fred Goodwin before the banking crash. And what he said about HBOS and other financial institutions. Mr Salmond also acquired a fondness for taking tea with Rupert Murdoch.

It is very difficult for politicians, even those with radical inclinations, to avoid succumbing to the influence of big international companies that employ thousands and spend a lot of money on lobbying and wining and dining. One reason Labour Unionists don't berate the First Minister about the banks is because they know that their former PM, Gordon Brown, was an even bigger cheerleader for the City of London.

However, this is not a referendum about Alex Salmond or Gordon Brown but about Scottish independence. Reducing politics to personalities is the ultimate ideological narcissim. We are being asked to choose whether this country should be governed by Westminster or Holyrood. Scotland is dominated by two essentially social democratic parties: the SNP and Labour. The big question is whether this can continue if Scotland remains in a union dominated by the compromised politics of Westminster.

There is evidence in Europe that smaller countries are less prone to having their political structures overwhelmed by private interests. In Norway, Denmark and Finland there seems to have been a popular resistance to the commercialisation of political life.

Cohesive countries with a strong communitarian ethos are better able to resist a race to the bottom. They have retained strong social solidarity and social protection even as they build enterprising economies (Norway and Denmark are frequently cited by the World Bank as top places in which to start a business).

The Scottish Parliament has already rejected many of the neoliberal assumptions of Westminster politics, on issues such as tuition fees, prescription charges, NHS reform, elderly care and low pay.Indeed, the Scottish Government was the first to express outrage at the latest figures on Scottish inequality.

Scottish democracy is arguably more resilient than Westminster and devolution has allowed a new political space to open in the UK in which a different set of political priorities apply. The question is how to move to the next level and turn the wealth spiral into reverse.

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Local government

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