IN his wide-ranging and visionary new book The Levelling – What Happens Next After Globalisation, Michael O’Sullivan makes the case that small countries’ economies will become ever more relevant as globalisation transforms into what O’Sullivan calls “multipolarity” with China, the USA and the European Union as the poles in a new world order.

In these exclusive extracts from The Levelling – a reference to The Levellers political movement who campaigned for popular sovereignty in 17th century England – O’Sullivan deals with Brexit and how it may impact on Scotland and elsewhere.

He also suggests the first independence referendum was “fought by spreadsheet” and that Scotland needs to promote its economic strengths.

The renowned investment banker and academic makes three immediate points: “First, the world is watching Brexit for signs that it marks a new beginning for Britain and potentially the end of the European Union, or vice versa.

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“Second, small countries around the world, from Singapore to Dubai, not to mention emerging markets and reviving cities, will be examining the way policy makers in Scotland and Ireland deal with the multiple challenges posed by Brexit.

“Third, for 80 million Americans, at least, the nexus of Ireland, Scotland, and England is part of their cultural identity, and this debate has broader emotional resonance.”

O’Sullivan has a positive view of Scotland’s future: “After Brexit, Scotland will be the next test case, in that it may hold another referendum on independence sometime in the 2020s. Though many who held that Brexit would benefit the British economy also said that Scottish independence would be an economic disaster, this does not need to be the case. The post-Brexit era will present a range of opportunities as well as the need for a competitive discipline. Scotland, for instance, has not yet had a chance to build the policy capability to make the most of its brand as a country and of its access to markets.

“Indeed, until recent decades, the absence of very distinctive Scotland-facing policies from London has been a real constraint on Scotland; most notable has been the absence of a policy response to the (global) process of deindustrialisation that Scotland experienced starting in the 1980s. Today, its economic model will need to be the small-country one.”

Scotland should play to its strengths, he suggests: “In Scotland, the first referendum on independence was fought largely on the basis of the potential for independence to bring economic gains or losses. Indeed, it must have been one of the first independence debates to have been fought by spreadsheet. It was marked by a noisy and often misleading debate on what currency Scotland might have: the pound, the euro, or a new Scottish currency that would start life pegged to the pound.

“Another way of framing this argument is to say that too much of the 2014 referendum debate was focused on high-level macropolicy – on currency and public finance – and not enough was focused on the future investments that needed to be made so that an independent Scotland could act to position itself for success in the global economy. Scotland will need to make investments in establishing institutions and building capability – for example, a Monetary Authority and an Office for Budget Responsibility (OBR) – style institution on the fiscal policy side.

“A key lesson from the international small-economy experience is that there is a need to develop economic strengths in the economy; for Scotland, these strengths range from finance to tourism, renewable energy, and life sciences.”

Nor should anyone count on the Commonwealth bailing out Britain: “Overall, Brexit is unleashing a range of powerful dynamics and opportunities across the United Kingdom and Ireland.

“One reality is that the small-economy model will become more relevant in that part of the world. Another is that Britain’s interaction with the Commonwealth will change in the same way that England’s relationship with Scotland and Ireland will change.

“Brexit itself and a changing dynamic between developed and developing countries will curb the geopolitical relevance of the Commonwealth for its members, many of whom recognise it as a colonial construct.”

The Levelling: What’s Next After Globalization by Michael O’Sullivan (PublicAffairs) is out now.