Satyajit Das: Nations need to abandon old ties to succeed in the new Great Game

Midweek View: The UK faces challenges in this environment. Its excellence in manufacturing and industries has declined

For nations without a large domestic economy, adequate resources and a need for export markets, a retreat from global integration poses challenges. For example, smaller nations cannot influence exchange rates to the same extent as the major powers. Instead, countries require pragmatic strategies to prosper.

In a world of low growth and increased competition, economic nationalism reasserts itself and free trade and movement of capital may decline. Alternative trading blocs to counter the shift to closed economies may evolve. The recent rush to negotiate bilateral free trade agreements reflects this pressure.

Countries rich in natural resources may ally themselves with major nations, such as the US, Europe or China, becoming preferred suppliers of food, energy or raw materials. In turn, they can reciprocate by becoming markets for products or services and investment.

African countries are pursuing this policy, concluding long-term supply agreements for agricultural or mineral products sought by China. In return, China is expanding investment, trade and development aid preferentially with these nations, co-ordinating transactions by Chinese businesses and banks.

Australia has emerged as an important source of raw materials for China. Russia has become an energy and commodity supplier to Europe. Within the framework of Nafta, Canada has become an important energy supplier to the US while Mexico provides low-cost labour to American businesses.

Strategically located, smaller nations such as Switzerland or Singapore can become important centres providing trading, logistics, financial or investment services.

The UK faces challenges in this new environment. British excellence in real economy activities, like manufacturing, has declined, although there are notable exceptions. With the decrease in North Sea production, its oil industry cannot be a prominent growth engine.

In services, Britain continues to be a force, but its once-prominent role in entertainment, fashion, art and other soft-power industries has also declined.

With its banking sector trying to recover from imperial over-reach, London’s role as a financial services centre is increasingly under challenge, both from Europe and the US. In the 2000s, London became the world’s dominant finance hub. Non-intrusive, market-responsive “light touch” regulation was a factor in its success. Damage to London’s reputation from matters like the Libor fixing scandal and stricter regulation would allow New York and European centres to regain competitive ground.

An equivocal relationship with Europe also remains problematic. After the Second World War, American Secretary of State Edward Stettinius told US President Roosevelt that Britain’s problem was “emotional difficulty ...  in adjusting to a secondary role after always accepting a leading role as a national right”.

Great Britain took many years to recognise the benefits of the EU, with less than full engagement, having chosen, perhaps fortunately, not to adopt the single currency.

In reality, Europe remains a major trading partner and market. In practical terms, Europeans will question London’s role as the Continent’s main financial and trading centre, particularly for the euro, as long as it remains equivocal. The rise of anti-Europe political movements and also the planned referendum about EU participation are unhelpful.

The UK still has formidable advantages – its language, its law which is the basis of commercial and financial contracts globally, its elite universities, its cultural heritage and its history as an entrepot commercial and financial centre. But it will need to manage these advantages cleverly.

In the new Great Game, nations will have to abandon historical ties and biases, trading off political status against economic prosperity and security. In the TV series Downton Abbey, Cora Crawley asks her mother-in-law: “Are we friends, then?” The Dowager Countess’s reply is instructive: “We are allies, my dear, which can be a good deal more effective.” Smaller nations, unable to retreat into closed economies, will need to adjust strategies  to make the most of the new world order.

Satyajit Das is a former banker and author of 'Extreme Money' and 'Traders, Guns & Money'

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee