Another one of the clichéd arguments against Welsh independence which gets trotted out from time to time is that “Wales can’t afford to be independent because it doesn’t have its own resources – unlike Scotland it doesn’t have oil, and the coal’s all gone”.
Of course there’s a big assumption lying behind that statement – namely that natural resources are what makes a country wealthy. On the face of it this seems so obvious as to be beyond question, but it doesn’t take much thought, or much looking around the rest of the world, to see that it’s really not true.
In fact there’s surprisingly little correlation between a country’s natural resources and its average wealth, and resource-rich countries with high incomes and healthy economies such as Norway are very much the exception rather than the rule. The country with the most oil in the world, after all, is Jeremy Corbyn’s pin-up – Venezuela – currently experiencing 1,000,000% inflation and complete economic collapse. Other oil-rich states like Nigeria, Libya and Angola are not exactly beacons of growth and prosperity. Not for nothing has oil been described as “the devil’s excrement“, and economists talk of “the resource curse” and “Dutch disease” (named for the damage experienced by the Dutch economy after the discovery of the Groningen natural gas field in the 1950s). Countries with comparatively few natural resources, such as Chile (by far the richest country in South America), Finland, Israel and Singapore consistently power ahead. Between 1960 and 1990, countries classified as ‘resource poor’ grew on average over twice as fast as those classified ‘resource rich’.
The reason is that wealth from natural resources tends to distort an economy by sucking resources away from more labour-intensive sectors such as manufacturing and services – which employ people, develop their skills and increase their incomes. This can happen directly, simply by pulling all the country’s investment capacity into that sector at the expense of others (as is typically the case in Arab countries and in the developing world); or indirectly, by inflating the value of the country’s currency and so making imports cheaper than home-manufactured goods – and making exports prohibitively expensive – as was the case with the UK economy during the North Sea Oil boom of the 1980s.
In fact, any type of economic windfall can damage a country’s economy if not managed well – Spain lagged behind the rest of Europe for centuries as an after-effect of being inundated by South American gold in the 17th Century, and the depression in the Welsh coal industry of the 1920s and 30s was primarily caused by the glut of cheap German coal brought in by Lloyd George as reparations after the First World War. Norway has avoided this fate by putting most of its oil revenue straight into the world’s largest Sovereign Wealth Fund, making sure that it can’t circulate in the economy.
So our relative absence of natural resources is no obstacle; on the contrary, it’s almost something to be celebrated, so long as we pay proper attention to the rest of the economy and invest in the most important resource of all, namely people.
Keeping the lights on
Even so, whether from coal, oil or any other source, a modern economy needs energy to prosper and the UK as a whole, let alone Wales, is in danger of running out. In this week’s Spectator, Martin Vander Weyer draws attention to the fact that the cancellation of Wylfa B, compounded with the Westminster government’s refusal to fund the Swansea Bay Tidal Lagoon project and the cancellation also of another nuclear station, Moorside in Cumbria (which was to have been built by another Japanese contractor, Toshiba), leaves a big hole in the UK’s power-generation capacity and threatens ‘brown outs’ if action isn’t taken quickly.
It’s complete fantasy to suggest, as some do, that this gap can be filled by wind power. All over the countryside. monstrous highly-subsidised turbines are blighting the landscape, liberating tonnes of CO2 into the atmosphere as ancient peat bogs are torn into, disrupting communities and generating very little electricity. Solar energy is a little less damaging, but still not the answer on a cloudy day.
Yet Wales is placed very strongly for two very promising sources of reliable next-generation electricity.
One is small-scale nuclear, with Trawsfynydd being tipped as a center for R&D in this area (according to the BBC, the UK government has allocated £40 million to this, though details are scarce) . Small nuclear generators have been used in submarines for decades, safely despite being in close proximity to large numbers of people. This seems a much more sensible area in which to direct Wales’s nuclear expertise – which is still significant – rather than on huge projects like Wylfa B where the economics are very uncertain.
Another is tidal. Quietly and without much fanfare, Wales is building up a significant tidal energy sector both in Pembrokeshire and in Anglesey, co-ordinated by Marine Energy Wales and growing steadily. At present, too much of this consists of pilot installations of systems developed in Scotland or Sweden, but the opportunity is there if we raise our game. There’s still a lot of development work to be done because the technology is difficult, requiring significant heavy-engineering expertise (just look at the size of that tidal turbine in the picture above, and compare it to a wind turbine!). Yet Pembrokeshire in particular is already well supplied with this, through its recent experience in the oil and gas industries. And the prize is great: steady, dependable renewable energy, not subject to the vagaries of the sun and the wind, available most abundantly in the parts of Wales which are currently among its poorest and least developed.
There’s a lot to play for, but for the UK government this is simply too far down its list of priorities. We need a strong, independent Welsh government which can support developments like these with the priority they deserve. It won’t make Wales into Norway overnight, but it will keep the lights on and bring prosperity into some of Wales’s forgotten areas. They key to it will be in developing the know-how ourselves, not just buying it in from elsewhere.