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
Arts and Entertainment
Supporting role: at the Supreme Court, Rhodes was accompanied by a famous friend, the actor Benedict Cumberbatch
booksPianist James Rhodes on the extraordinary legal battle to stop the injunction of his memoirs
Arts and Entertainment
Jesuthasan Antonythasan as Dheepan
filmDheepan, film review
Sport
Steven Gerrard scores for Liverpool
sport
News
peopleComedian star of Ed Sullivan Show was mother to Ben Stiller
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?