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'

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

PROMOTED VIDEO
Arts and Entertainment
Actor and director Zach Braff
tv

Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
tv

Life and Style
i100

Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes hobby look 'dysfunctional'
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
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

Property Underwriter

£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week