So why are Scots going bankrupt in record numbers? According to last week’s survey, 60% of new bankrupts are under 30, and they typically owe more than £60,000 to credit card companies. Scotland’s new bankrupts are very different from their impecunious predecessors. They’re not struggling sole traders, but instead are in full-time employment. Nor are they fighting trade recession, but rather seeking to escape from the burden of crippling debts. Insolvency used to carry a huge stigma; now there are signs that bankruptcy is the new in-the-black.
So what happened to the canny Scot who would rather be thought a miser than a spendthrift? Was he ever grounded in fact? Christopher Whatley, a professor of history at Dundee University, thinks he was, and says that for hundreds of years Scots lived up to their penny-pinching reputation. “Households struggled to make ends meet and so every penny was carefully husbanded,” he says. “In the 19th century, respectable Scots, who included the skilled working class, looked at their expenditure and made sure they didn’t overspend. To have to resort to the parish or the poor house was a reputation-ruining act in many communities, and continued to guide social behaviour well into the 20th century.”
Faced with the social disgrace that followed, Scots feared debt almost more than anything else. And if frugality was a religion, owing money was a sin. In England the Lord’s Prayer calls Anglicans to forgive “trespassers”. In Scotland we pray to be forgiven for our debts.
But the rocketing number of Scottish bankrupts needs to be considered alongside another sign of our growing financial illiteracy. These days, one in 10 Scots doesn’t even have a bank account. And this is the country that has founded more banks than any other. And not just banks. Almost every aspect of the modern financial system was devised by a Scot. Adam Smith, the man who anatomised the effects of the market, is a Scot, while the great liberal economist JK Galbraith was brought up by Scots emigrants in Canada.
Thrift, saving cash and resources and restricting expenditure, was the traditional Scottish response to the economic risks of modern life. The Scot’s reticence to part with his cash became his most famous characteristic. The Scotsman Samuel Smiles, in his bestselling book Self Help, published in 1859, hymned the virtues of financial self-reliance; “Possessed of a little store of capital, a man walks with a lighter step, his heart beats more cheerily.”
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Such Victorian certainty seems a million miles away from the glittering baubles offered by consumer culture, and yet the image of the penny-pinching Scot hasn’t gone away. From the late John Smith to the dour Gordon Brown, a Scot has served to reassure Labour voters that their money will be prudently handled.
When two American researchers, Thomas Stanley and William Danko, came to investigate how American millionaires made their money they discovered that inhabitants with Scottish roots made up 9.3% of the country’s millionaires, and that Scots were five times more likely to be worth a million or more than the average American. And the secret of these wealthy Scots? Frugality. The researchers concluded that wealthy American-Scots “have been able to instill their values of thrift, discipline, economic achievement and financial independence in successive generations”.
The relaxation in bankruptcy laws has partly been motivated by a desire to encourage entrepreneurship. But today’s Scottish bankrupts don’t seem to be failed entrepreneurs, just young people who have allowed their spending to spiral out of control. We’ve turned from canny Scots to cannae-do-without Scots. And that’s no joking matter.