So we have seen how in the last ten years the Government’s education policies failed to help Britain maintain its competitive advantage, something which experts agree is “of great concern”. The effects of this will be felt for some time in the future, and so too will Britain’s economic problems.
Britain came out of recession on Tuesday, just. And here’s hoping that the 0.1 per cent growth rate doesn’t collapse into a negative figure next quarter, as happened during Thatcher’s recession.
And as we do so, we emerge as less of a major economy than before. Britain is now the world’s 7th largest economy, down a couple of places. It has been overtaken by the Russian Federation and is on the way down while Brazil, Mexico and others are on the rise.
And not only is the size of the British economy being outstripped by other nations, so too is our spending power. Britain is now saddled with a debilitating debt, courtesy of the bank bailouts.
It means Gordon Brown and David Cameron can only fight this election on the issue of cuts. Neither is offering a sparkling new set of positive policies. Instead, one is simply offering to cut less than the other. British politics is entering a period of frugality.
Early in, late out
We have paid a premium for education, war and our financial centre – for trying to assert a more influential role in the world than we can justify. Now we are paying off our debts. We will have to do so by offering up both money and power.
All through this slump, Gordon Brown insisted Britain would “lead the world” along the path out of it. It didn’t. He also insisted, slightly incoherently, that we had not led the world into this recession. It was all America’s fault, he said. That is debatable. But it is unequivocal that we did not lead the world back out of the trough. We are the last major economy to emerge from recession.
When it comes to the economy, Gordon Brown and Tony Blair spent the last ten years demonstrating to a T the folly of the democratic politician who believes his own hype. Gone, we were told, were the days of boom and bust. This was while we were enjoying a big old boom.
But it was only in the bust that they noticed that night follows day.
The short-term plan to attach a turbo-booster to the economy in the form of the City of London failed. Now we’re left trying to tweak more out of the economy by making all the other constituent parts more efficient.
And we are caught in a difficult situation. Part of the reason Britain was able to be artificially rich was because it worked hard at courting big business and bankers and creating an ideal environment in which they could trade. The problem was that it was an under-regulated environment.
So now the leaders need to regulate more, but doing so might push away the big businessmen, financiers and oligarchs who have helped make Britain wealthy. This means that if we attempt to solve the inherent instability problem, we run the risk of making ourselves comparatively poorer.
For the democratic politician, the choice between doing something that will be good for the nation in the long-term, or good in the short term, is an easy one to make. The short term fudge is preferable every time.
It has taken Barack Obama’s announcement in the US to embolden the British government enough to even talk of limiting the size of the banks, despite calls coming from the Liberal Democrats for months. Britain doesn’t even lead on ideas to fix the problem.
And no doubt the words will be watered down by the time they are turned into reforms. The government here, for all its talk of getting tough, looks weak. It knows it can’t curb the banks, because it needs the banks. So instead Brown suggests a Tobin tax. At least that way, when the crash comes again, we’ve saved up some bailout cash.
Budget slashing
Part of the reason Britain was able to punch above its weight in the international ring in the past was because it could afford to. No longer. “Budgets will be slashed at the Ministry of Defense and the Foreign and Commonwealth Office, affecting Britain's ability to project power, hard and soft,” observes Newsweek.
In Afghanistan, it means we are now planning to talk to the Taliban – a cheaper option than battling against them. The FT says they are increasingly casting themselves “in the role of Pashtun nationalists”, but I believe the British government is also quietly doing the same.
It is easier to negotiate with nationalists than religious extremists. It is easier to make concessions to them than to terrorists linked with Al Qaeda, with whom we are supposedly still in a semi-permanent state of war. And then we can extract ourselves from a costly war, and era of war, and beginning cutting defence costs in a new era of peace.
That will also have implications for our costly nuclear deterrent. Whether Trident is decommissioned or refurbished is a looming political issue. Given the cost and public ambivalence towards it, it may well go.
Another looming issue is Europe. As our power is pared down it makes sense to seek refuge in a union, and not a transatlantic one, but something more European. It will be time to admit we are not able to stand aloof from the EU, but will have to become part of it.
How easily that happens depends on who wins May’s elections. If it’s the Tories, we will struggle to make the shift. If it’s Labour or a coalition borne of a hung parliament, the transition might be easier. Either way, moving closer to Europe will also mean the glory days of the City of London are over.
For the economy, the last ten years were tough. They started with such promise. The boom was underway and the bust so far off the radar the government assumed it wasn’t there. But it was. It ran up and slapped the government in the face.
And it left Britain, already adjusting from 50 years of decline in economic might, to adjust down some more. Just as Blair and Brown believed their own hype on the economy, so they did on war and hard power. They believed Britain could achieve militarily something that it could not…
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