Despite 30 years of North Sea Oil Scotland has one of the lowest growth rates in Europe, and in some places lower life expectancy than parts of Africa. This is the same country which gave the world some of the greatest scientists, engineers, clinicians, entrepreneurs and financial managers. How does this happen.

At the beginning of the credit crunch we watched a leading politician boast Scotland would suffer less than the rest of the UK, because of the public sector. More public sector jobs meant less contraction during the recession, and a faster recovery. But now the squeals of rage can be heard across the country. It turns out the UK parliament will insist on public spending cuts in Scotland, probably meaning more of contraction in Scotland than south of the border. Now the facts are showing through. The public sector turns out to be a weight the economy can’t carry, without the English helping out.

For years politicians have seen the public sector as a mechanism for improving quality of life. Perversely economists have known public sectors constrain economies ability to grow. Politicians need growth in the economy to fund public sector programmes, and the private sector needs governments to provide for citizens incapable of looking after themselves.

Most countries have found a balance between the two, with Europeans choosing more public sector, and the USA and Asia choosing less. Both have recognised the need to keep the public part below 40% of the total economy. Above that economies start to shrink.

In Scotland the public sector has been 50% of the economy, and growing. Politicians have been able to keep the public happy by asking little of them, and handing out a lot through it. But they’ve only got away with this because the English economy’s been paying for it. Scotland votes universally left of centre, maintaing a socialist government, run by Scots, in power in the UK Parliament. But the rules are changing.

Why is the public sector so bad? Here’s 3 reasons.

Emigration

Public sector jobs have improved considerably in pay and conditions, but the organisations are hide bound with vested interest and inefficiency. Not places for dynamic young people wanting to make their way in the world. They need vibrant, going places, private sector organisations to provide opportunities. They all leave Scotland because private sector chances are few and far between. The country loses its brightest talents to markets in the south. What’s left? The ones who didn’t think they could live with the competition. The average and the under performers. They’re the ones managing the public sector, sort of averagely.

No Value Add

In the private sector businesses have to create value. Outputs greater then the sum of inputs. Profit to pay for more investment, and innovation. Public sectors don’t have the same motivations. They just spend money. It’s a public sector thing. Status is infinitely more important than performance. Politics is more important than leadership. All day meetings are more important than staying late to get the job finished. What counts in the public sector is arguing for more budget, and winning new grants – not working harder for longer finding new ways to do more with less.

Nepotism

Understandably the people with the power aren’t going to let anything rain on their parade. The last thing they want is change to the status quo. So they make sure to favour their mates. The public sector in Scotland is a swamp of “nothing to do with me” and “more than my jobs worth”. Don’t rock my boat – promise I won’t rock yours.

It’s not hard to understand why the public sector is bad for Scotland. More than half of the economy, run by average performers in their own interests, and subjugating any green shoots with the temerity to rise above the ground. Meanwhile the value add created by the private sector is shrinking.

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