Peter Coy‘s Bloomberg Businessweek article about this week’s scheduled referendum on Scottish independence features some interesting observations. First, one need not have a written constitution based on the concept of federalism to have concerns about an overly large central government.
London is the capital of one of the most centralized governments of any wealthy nation. Revenue from taxes flows inward and is then disbursed outward in a thoughtful yet rather lordly way. In the U.S., the federal government raises about 60 percent of all taxes. In the U.K., the figure is 95 percent, giving Westminster and Whitehall enormous power over every corner of the nation, out to the remotest of the Shetland Islands.
Later in the article, Coy quotes experts who pan zero-sum economic fallacies and note the negative impact of overly restrictive development policies.
Those who say that London sucks the vitality out of other cities are committing what economists call the lump-of-labor fallacy: that the amount of work to be done is fixed, so if one person gets a job then someone else is unemployed. The truth is that the rich young City traders everyone loves to hate are buying stuff made throughout the U.K. “I don’t think London’s success means that Scotland suffers,” says Jim Whyte, senior insights analyst at Fitch Worldwide in London.
“It feels to me much more like London lifts Scotland up,” says Edward Glaeser, a Harvard University economist who advised Scottish cities on economic development in the early 2000s. “There’s no question that London does excite envy, but I still see envy as being a mortal sin rather than as a sound basis for politics.” Paul Romer, who runs the Urbanization Project at New York University’s Stern School of Business, argues that instead of complaining about London, other U.K. cities should stop restricting real estate development, which drives up housing costs and stunts their growth.
