Expert View: America is in retreat and so is Gordon Brown

5 will be remembered as the year the UK economy stumbled

My invitation to spend Christmas at the South Pole reads: "Let's see it while it's still there." The penguins have been turned down for more tropical climes, but this nevertheless seems a fitting end to a year dominated by the extraordinary developments in the world economy, and the price we are paying for them in all-too-visible climate change. 2005 was China's year, and the year of Hurricane Katrina.

My world view has changed fundamentally in the past 12 months. Like many commentators, I started the year believing that, in globalisation, we were witnessing Americanisation - the export of US values across the world, whether through the operation of free markets or, in the case of Iraq, hamfisted political interference.

Globalisation remains a reality, as those of us in international businesses can testify. My travels in 2005 took in Abu Dhabi, Bangkok, Chicago, Dubai, Edinburgh, Frankfurt, Gothenburg, the Hamptons, Ipswich, Jena, Kuala Lumpur, Lubeck, Madrid, New York, Oberstdorf, Paris, Qatar, Rome, San Francisco, Tangier, Ulm, Vorarlberg, Washington, York and Zurich. Xanadu next year.

But what has become clear to me is that America is not so much triumphing as in slow economic retreat. What is going on is the old-fashioned industrialisation of a huge chunk of the world's economy, and principally Asia, which grew by a colossal 7.5 per cent in 2005. A year-end revaluation of China's GDP now makes it larger than Britain's.

This has had four major effects in 2005: an extraordinary bull market in commodities, a disruption in world capital flows, increased protectionism in the US, and, of course, global climate change.

If you were in commodities in 2005, you made a fortune. Many of my stock holdings have doubled, reflecting events like $70-a-barrel oil or the 1,000 per cent price rise in the metal molybdenum. This in turn has fed through to a massive rise in global savings as the beneficiaries wisely provide for a rainy day. As Alan Greenspan observed in this his last year as chairman of the US Federal Reserve, this has led to significant distortion in bond and currency markets.

As the world's capital dump, the US has benefited hugely from Asia's industrial revolution: interest rates have stayed low for much longer than most expected and the dollar has not suffered the collapse that seemed likely in January. Economically, the US has shrugged off Katrina and achieved 4 per cent growth. But at the same time the mood music, whether in New York or Washington, has become more sombre. This has been the year when an outbreak of 1930s-style protectionism returned to haunt us, when trade talks stumbled from one crisis to the next, and Con- gress sought to stop Chinese bids for American companies.

As ever, all this easy money in the US has also brought scandals in its wake. In 2005 we finally saw justice done to the dot-com fraudsters - Bernie Ebbers, Andy Fastow, and Dennis Koz- lowski. Poor old Martha Stewart got swept up in the belated rush to justice and spent five months in jail. But no sooner had we closed the door on a shameful period for Wall Street than new scandals arose. Hedge fund headlines were legion, like Bayou and Wood River, while Lord Black no longer reigned at the Telegraph and Phillip Bennett fell taking Refco down with him.

With so much dynamism in the world economy, it seems bizarre that 2005 will be remembered here as the year Britain's economy stumbled. Growth slowed in the autumn to half what the Chancellor had predicted as we started the year. Gordon Brown's constant tinkering and stealth taxes finally had an effect, while many argued that the massive spending on health was money down the drain. Government's share of GDP went through 42 per cent and Britain became one of Europe's heaviest-taxed countries.

In consequence, 2005 may well be remembered as the year when it became clear Gordon Brown would never be prime minister. Well not everything's been bad this year then.

Christopher.walker@tiscali.co.uk