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British decline presents new opportunities

In the post-recession world we should focus on pursuing fairness at home

The tale of British success remains a potent one. Britain launched the industrial revolution; emerged victorious from two world wars; gained a permanent seat on the UN Security Council and became one of the five official nuclear powers.

Thus, the sense of decline fuelled by the recession, the humiliation of our political class and the mounting casualties in Afghanistan has been particularly painful.

The subject of British decline is picked up in this week's issue of Newsweek, Stryker McGuire writes:

Even in the decades after it lost its empire, Britain strode the world like a pocket superpower. Its economic strength and cultural heft, its nuclear-backed military might, its extraordinary relationship with America - all these things helped this small island nation to punch well above its weight class. Now all that is changing as the bills come due on Britain's role in last year's financial meltdown, the rescue of the banks, and the ensuing recession.

Like many others, notably on the conservative right, McGuire commits the error of explicitly linking Britain's decline to its rising public debt. Even if the national debt rises to around 80 per cent in five years time, from its current level of 56 per cent, this will remain lower than the predicted G7 average.

As Peter Wilby writes in this week's New Statesman, "In 2008, Japan's debt was 170 per cent of GDP, Italy's 104 per cent, Germany's 65 per cent and the US's 61 per cent. Through most of the 20th century and much of the Victorian era, UK national debt was far higher than it is now."

But elsewhere, McGuire correctly argues that the collapse of the housing market and the decadence of the financial sector have left the economy without any obvious source of growth. He concludes: "The great test of the next prime minister and probably the one after that, will be not only to redefine Britain's place among great nations but also to renew the kind of spirit that has ruled Britannia in the past."

Yet the assumption that Britain should fight to maintain its position in the international pecking order ignores an alternative approach. Instead of struggling to project power abroad, we should focus on pursuing fairness at home.

This must begin with a programme of radical constitutional reform. The great error made by numerous commentators has been to discuss the political crisis and the economic crisis in isolation from each other.

In truth, far more than the expenses scandal, it is the financial crisis that mandates immediate constitutional reform; a set of 18th century institutions were shown to be utterly incapable of dealing with a 21st century crisis.

John Keane (whose latest tome The Life and Death of Democracy I am currently reading) makes this point well in today's Guardian:

Let us remember the true cause of the deepest slump since the Great Depression: democracy failure bred market failure. Unelected regulatory bodies and elected politicians, parties and governments let citizens down.

In the post-recession world, this sceptred isle will be forced to become a more pragmatic and a more modest nation. The £20bn renewal of Trident, little more than a national virility symbol, must be cancelled. Military intervention abroad, humanitarian or otherwise, will become increasingly unthinkable.

Politicians will no longer be able to promise the public services of Sweden with the tax rates of the US. An aging society will require all of us to pay higher taxes to fund an acceptable care system.

The so-called 'special relationship' with the US will continue to diminish as successive administrations focus on deepening relations with advancing powers, notably China, India and Brazil. Even Conservatives will be forced to admit full engagement with the European Union is the most attractive way of exercising influence.

Such reforms are long overdue and the chance to recast Britain as an egalitarian and progressive society, along the lines of the Nordic states, is now available. It is one the next government must take.