Better a sub-contractor to America, than to have no influence at all

'Tony Blair realises the way to be successful is to hitch your wagon to the American star'
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The Independent Online

Britain lost its empire – but has found a new role as sub-contractor to the American one. You can see the political side of this in our Prime Minister's relationship with President Bush. Later this week Tony Blair flies over to Texas to see Mr Bush for a top-up briefing, after jetting around the world since 11 September as the President's ambassador extraordinary, seeking to hold together the coalition of support.

You can see the military side in our role in Afghanistan, the largest foreign deployment of British troops since the Gulf war – though it should be said the main lesson of this conflict has been the huge superiority of the US military over that of its European allies. Our own military resources, however excellent in quality, are tiny by comparison to those of the States.

But what has escaped much notice are the economic aspects of this role – the extent to which our economy has become the key sub-contractor, supplying talent to the American one. Sub-contractor does not mean subservient. For many years we have been accustomed to US subsidiaries operating plants here: Ford, IBM, Compaq, whatever. Here we were very much in a junior role, and many of these plants have either been shut or run down.

Now the relationship is different. We are not supplying production-line workers making goods designed abroad in plants built on US lines. In one sense we are not supplying workers at all; we are supplying talent.

There is, of course, one highly visible sign of this: the entertainment industries. We do wonderfully well as sub-contractors to Hollywood – aside from Australians and New Zealanders, Britons are the only foreign talent that is habitually represented at the Oscars. We think of it as quite normal that our top actors should have homes in Los Angeles, in the same way that Madonna has moved to London.

But most people appreciate neither the size of these industries – it is largely thanks to entertainment that the UK has the second largest surplus in trade in fees and royalties – nor the extent to which US money finances apparently "British" movies. For every Notting Hill, which was British-financed, there are a host of Harry Potters, which wasn't. We are highly successful as performers, and that's fine because these are industries where a lot of the money is extracted by the talent. But we should not kid ourselves that we are anything other than sub-contractors.

If entertainment is an obvious example of this role, a less obvious one is financial services. The City, on balance, seems to be gaining market share in international financial services, which is great because even in a poor year, such as this, it is a huge earner for Britain. But investment banking is almost entirely foreign-owned, and, unsurprisingly, US-owned businesses, such as Goldman Sachs and Morgan Stanley, are top of the tree.

We get the jobs and the boost to the economy that this brings. A lot of the key decision-making takes place in London, often by British rather than American staff. But while from the point of view of an individual City worker it does not really matter whether his or her employer is American or not, we have to accept that the City's success does depend hugely on the continuing success of US finance.

You can see the intermingling of the British and US economies at a company level too. Take pharmaceuticals: GlaxoSmithKline is notionally British, but in terms of employment is more American. Take oil: BP on the same measure is more American too. British Aerospace? Well, yes, clearly British – except that some 40 per cent of its shares are owned in the US. And so on.

Now you could say that these are just examples of globalisation, and that is true as far as it goes. The two key additional points, though, are that what we call globalisation is actually a game played by American rules, and that we are the natural junior partner to the United States in assisting its commercial expansion.

The US not only accounts for nearly a third of world GDP, but in most fields dominates its technology. For the entire post-war period the US has been by far the largest economy, but as international trade was much smaller relative to output even a decade ago, it did not externalise this power. In the 1990s the economic stagnation in both Japan and, to a lesser extent, continental Europe, further enhanced America's dominance.

The British role has been partly to give an entrée to European markets and partly to fill in gaps in American expertise or talent. Because we are not North Americans, it is sometimes easier for Britons to carry out this role than it would be for Americans.

So just as Tony Blair has a unique role in explaining US foreign policy to the rest of the world, so British investment bankers can undertake international business with a sensitivity that New York bankers would fail to have. And just as our actors and directors can sometimes do jobs with a finesse that Americans would find it hard to match, so our troops can perhaps undertake tasks that even American forces would find tricky.

In all these cases it is not that the US cannot find the people to do any particular job. Somewhere among the 280 million of them there will be someone who can. It is more that it is convenient to the States to have another group of people who, by their background, think and operate slightly differently, but who can do the job, so to speak, to American specifications. Intuitively, Tony Blair, like many other successful Britons, realises that the way to be successful in the world is to hitch your wagon to the American star.

Does this matter? Some Britons may feel uncomfortable about this role, perhaps because they are aware of the brutal way the US squeezed Britain of its remaining wealth at the end of the Second World War, or perhaps because they see Europe as a potential counterbalance to US power. But in narrow economic terms, at least, it has been to our huge benefit. It was in fair measure thanks to this relationship that we have again become the second largest economy in Europe to Germany, passing Italy and France. This economic success gives us more political influence in Europe, even if our closeness to the US sometimes upsets our partners.

Besides, what is the alternative? Better, surely, to have the modest influence of the prime sub-contractor to the world's great new imperial nation, than to have none at all.