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.

George Eaton is political editor of the New Statesman.

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Why Angela Merkel's comments about the UK and US shouldn't be given too much weight

The Chancellor's comments are aimed at a domestic and European audience, and she won't be abandoning Anglo-German relationships just yet.

Angela Merkel’s latest remarks do not seem well-judged but should not be given undue significance. Speaking as part of a rally in Munich for her sister party, the CSU, the German Chancellor claimed “we Europeans must really take our own fate into our hands”.

The comments should be read in the context of September's German elections and Merkel’s determination to restrain the fortune of her main political rival, Martin Schulz – obviously a strong Europhile and a committed Trump critic. Sigmar Gabriel - previously seen as a candidate to lead the left-wing SPD - has for some time been pressing for Germany and Europe to have “enough self-confidence” to stand up to Trump. He called for a “self-confident position, not just on behalf of us Germans but all Europeans”. Merkel is in part responding to this pressure.

Her words were well received by her audience. The beer hall crowd erupted into sustained applause. But taking an implicit pop at Donald Trump is hardly likely to be a divisive tactic at such a gathering. Criticising the UK post-Brexit and the US under Trump is the sort of virtue signalling guaranteed to ensure a good clap.

It’s not clear that the comments represent that much of a new departure, as she herself has since claimed. She said something similar earlier this year. In January, after the publication of Donald Trump’s interview with The Times and Bild, she said that “we Europeans have our fate in our own hands”.

At one level what Merkel said is something of a truism: in two year’s time Britain will no longer be directly deciding the fate of the EU. In future no British Prime Minister will attend the European Council, and British MEPs will leave the Parliament at the next round of European elections in 2019. Yet Merkel’s words “we Europeans”, conflate Europe and the EU, something she has previously rejected. Back in July last year, at a joint press conference with Theresa May, she said: “the UK after all remains part of Europe, if not of the Union”.

At the same press conference, Merkel also confirmed that the EU and the UK would need to continue to work together. At that time she even used the first person plural to include Britain, saying “we have certain missions also to fulfil with the rest of the world” – there the ‘we’ meant Britain and the EU, now the 'we' excludes Britain.

Her comments surely also mark a frustration born of difficulties at the G7 summit over climate change, but Britain and Germany agreed at the meeting in Sicily on the Paris Accord. More broadly, the next few months will be crucial for determining the future relationship between Britain and the EU. There will be many difficult negotiations ahead.

Merkel is widely expected to remain the German Chancellor after this autumn’s election. As the single most powerful individual in the EU27, she is the most crucial person in determining future relations between the UK and the EU. Indeed, to some extent, it was her intransigence during Cameron’s ‘renegotiation’ which precipitated Brexit itself. She also needs to watch with care growing irritation across the EU at the (perceived) extent of German influence and control over the institutions and direction of the European project. Recent reports in the Frankfurter Allgemeine Zeitung which suggested a Merkel plan for Jens Weidmann of the Bundesbank to succeed Mario Draghi at the ECB have not gone down well across southern Europe. For those critics, the hands controlling the fate of Europe are Merkel’s.

Brexit remains a crucial challenge for the EU. How the issue is handled will shape the future of the Union. Many across Europe’s capitals are worried that Brussels risks driving Britain further away than Brexit will require; they are worried lest the Channel becomes metaphorically wider and Britain turns its back on the continent. On the UK side, Theresa May has accepted the EU, and particularly Merkel’s, insistence, that there can be no cherry picking, and therefore she has committed to leaving the single market as well as the EU. May has offered a “deep and special” partnership and a comprehensive free trading arrangement. Merkel should welcome Britain’s clarity. She must work with new French President Emmanuel Macron and others to lead the EU towards a new relationship with Britain – a close partnership which protects free trade, security and the other forms of cooperation which benefit all Europeans.

Henry Newman is the director of Open Europe. He tweets @henrynewman.

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