Money in, money out

During this year, many of the world's most important financial decision makers will visit some of the places associated with a man who profoundly changed the world in which we all live. More than 200 years ago, a publication by a Scottish philosopher changed the way the world views market forces and the role of self-interest and productivity in improving standards of living.

Adam Smith is widely regarded as the founder of modern economics. His masterwork, 'The Wealth of Nations' was published in 1776, an auspicious year, and is widely seen as the work which established economics as a subject worthy of study and persuaded many, particularly in the fledgling USA, of the benefits of the free market. Smith studied at the University of Glasgow and later lectured there. Indeed, in the practical, common-sense fashion of the 18th century Scots, 'The Wealth of Nations' began life as lecture notes for his students. The University's Chair of Political Economics is still named after him. However, it is in Kirkcaldy, his birthplace, that Smith is most celebrated.

It was appropriate therefore that it was to the Fife town that the world's most powerful living economist should have come in February. Alan Greenspan is chairman of the US Federal Reserve and has advised five US Presidents. He came to deliver the 14th Adam Smith lecture at the request of the UK Chancellor of the Exchequer, Gordon Brown. Appropriately the lecture was given in the church where Mr Brown's father was a minister.

Mr Greenspan said "The shortlist of intellectuals who have materially advanced the betterment of civilisation unquestionably includes Adam Smith." He described his book as "one of the great achievements in human intellectual history".

A number of projects to celebrate Smith more widely in the land of his birth are currently being considered. These include naming a new college after him and erecting a bronze statue on Edinburgh's Royal Mile to celebrate his massive contribution to shaping the modern world that we live in.

Mr Greenspan will not be the only major world economist to visit Adam Smith's old haunts this year. The UK holds the Presidency of the G8 in 2005 and will host the G8 Summit of World Leaders at Gleneagles Hotel, Perthshire from 6-8 July. The Summit will bring together the heads of state and of government of France, Germany, Japan, the United Kingdom, the United States, Italy, Canada and Russia. The first G8 Summit took place in 1998. Since then, it has evolved from a forum dealing essentially with macro-economic issues to an annual meeting that addresses a wide range of international economic, political, and social issues. The agenda in Scotland will include the integration of Africa in the global economy, climate change, countering terrorism and supporting reform in the Middle East.

And, of course, this Summit will be given a definite Scottish flavour. Already a tartan has been designed by a Perthshire man, Brian Wilton, and features the green and purple colours which appear on the G8 Summit logo. Each nation is also represented in the design by eight lines of white, which unite to form the cross of St Andrew. The special tartan was selected by the Prime Minister's wife from a number of entries from Scotland and as far afield as the USA. The fabric also features a line of red, the only colour which appears in each of the G8 nation flags. According to Mr Wilton the red line also symbolises "the common thread that binds them together in their efforts to aid developing countries."

Describing the G8 summit as an ideal opportunity to present the best of Scotland to a worldwide audience, Scotland's Deputy First Minister said: "The G8 tartan will provide an eye-catching and traditional back-drop for us to show off what we have to offer as a modern and vibrant place to work, live, study and do business."

Our renowned economists did not cease with the passing of the 18th century. More recently Alec Cairncross, a Lesmahagow lad was chief economics advisor to the UK government in the 1960s and went on to establish the UK's first academic research department for the study of economics, at Glasgow University. He helped launch the Economic Development Institute at the World Bank and was its first Director. EDI offers training in economic development for officials of member countries with particular emphasis on training people from developing countries in the use of economic policy. He was one of the first Cambridge PhDs in economics and is regarded as the outstanding Scottish economist of the twentieth century. The Cairncross Lecture, on an aspect of contemporary British economic history, is held each October in his honour. It is sponsored by the St. Peter's College Oxford Foundation. Cairncross wrote "Economics is a subject that never stales. It lights up the major changes taking place in the world and allows one to take the measure of many of the uncertainties that surround our lives".

Despite its long Scottish root, Cairncross noted that world recognition of the importance of economics was a modern phenomenon. A century ago there were fewer than 30 university teachers of the subject in the UK and no professional economist was employed by the government. Now of course, thousands of professional economists are employed by government, national banks, the IMF, the World Bank, and the private sector.

Important suppliers of jobs for economists are Scotland's banks and financial services companies. Recent research shows that Scotland's importance as an international financial centre is not fully recognised, even amongst financial decision makers. Respondents to a specially commissioned report placed Scotland much lower than its true ranking of sixth in Europe.

Two of Europe's top seven banks by market value are Scottish. And between them, banking, life and pensions, general insurance, and asset management employ more than 100,000 people in Scotland and almost as many again indirectly. That is around 10% of our work force. Employment in the sector has grown by more than 20% in the last ten years. Indeed, Royal Bank of Scotland (now ranked fifth in the world by market capitalisation) has almost completed its new HQ site near Edinburgh Airport which will house more than 3,000 staff and will have its own private shopping street with cafes, restaurant and even a supermarket. Perhaps our international reputation for being 'careful with money' is still paying off!

One source of supply for this growing workforce are the graduates of Scotland's excellent universities. Ten Scottish universities, for example, run courses on economics. An easy way to find a relevant course is through the British Council Scotland website. A search on "Finance" reveals 82 courses at 9 institutions.

An aspect of Scotland's financial life which sometimes surprises our students and other visitors are the colourful banknotes which circulate here. Bank of England notes are accepted alongside notes from the Bank of Scotland, Royal Bank of Scotland and the Clydesdale Bank. There are some £20 billion of Scottish banknotes in circulation, acceptable throughout the UK, and feature such diverse images as Edinburgh Castle, King Robert's statue at Bannockburn, and Dundee's missionary to Africa, Mary Slessor. These banknotes reflect Scotland's strong and pioneering tradition in finance. We were the first country to produce multicolour banknotes; Scots were instrumental in setting up the Bank of England and the Bank of France; and we introduced such innovations as the overdraft, the financial trust movement (which played a major role in opening the American west), branch banking, the chequebook and electronic banking. And those who keep up to date with children's literature will know that a new currency involving galleons, sickles and knutes was invented here.

So for all those senior economists visiting Scotland this year, we have one suggestion. Check your £50 notes! Most appropriately, the Clydesdale's £50 note features the man we started with, Adam Smith.