Can we stop Britain being flogged off to the super rich east?

Go West! That was the advice fortune hunters used to receive. But in today’s global economy all the old assumptions are being turned upside down.

Shoppers in a Dubai mall Shoppers in a Dubai mall

As living standards plummet in Britain and other developed economies, one must now travel eastwards to find the countries which are racing up international league tables. Notions about the prosperity of the Western world, which once seemed set in stone, are suddenly in grave doubt.

Under current policies, we are heading for a future as, at best, a middle income nation whose best days are behind it. At worst, Britain could again become synonymous with shabbiness and austerity.

Change is happening with unprecedented speed. China is on course to overtake the USA as the world’s biggest economy by 2020. India is hard on its heels. These nations are making their mark thanks to labour forces equipped with a work ethic the like of which went out of fashion here many years ago.

Change is happening with unprecedented speed

Patrick O'Flynn

Next month the Beijing Olympics will show off the awesome achievements of China. Sport is often a telling barometer of national fortunes. In recent months there has been a virtual takeover of world cricket by India. Its newly prosperous television audiences are driving the game towards a 20-overs-a-side future. In football the Premier League wants to create an extra fixture for the booming Asian market.

 

While China and India largely depend on selling cheap goods and services to the West for their stunning economic growth, the same is not true for many other booming Eastern economies. The oil and gas exporting countries of the East have got us over a barrel.

Our continued dependence on oil is so acute we in the West are ready to pay them over $140 for a barrel, compared to just $40 a couple of years ago. Tens of billions in extra revenue is flowing out of our pockets and into Russia, central Asia and the Middle Eastern producers as a result.

An accident of geography has given these nations – most of which are chronic underperformers when it comes to poducing finished goods and services – massive windfalls.

And they are using the money we are paying to them to buy-up our economic assets. The sovereign wealth funds of the East are purchasing huge stakes in Western banks and blue chip companies. 

Their buying power is awesome. Abu Dhabi has an investment fund of £400billion, Kuwait over £200billion, Singapore £160billion and the new China Investment Corporation £150billion. 

The crown jewels of the British economy – the shares which have traditionally funded our occupational pension schemes – are increasingly ending up in the hands of Eastern state bankers. In recent weeks Barclays has seen a Qatar-based fund take an eight per cent shareholding in it. How much of the surplus HBOS stock ends up with the wealth funds remains to be seen but it is likely to be a hefty slice.

In the West only Norway, with a £300billion investment fund, can compete. That nation used its North Sea oil and gas windfall to put money aside for the future. In Britain we blew ours on a giant national spending spree. Had we created our own sovereign wealth fund one estimate suggests it would be worth £450billion by now.

But we didn’t. So future dividend payments by many of our biggest industrial and financial names will go towards paying for the retirements and public services of people in Asia rather than in Britain. Likewise, massive government debt and interest repayments will leak away eastwards. This financial turnaround has massive implications for British politics. Our assumption that in concert with America we can be the world’s policeman will go out of the window. Gordon Brown was yesterday reassuring Israel about Britain’s determination to stop oil-rich Iran from becoming a nuclear power. But he has already overstretched our armed services and has no credible way of delivering on that pledge. 

Only last week Russia and China combined to veto proposed United Nations sanctions against Zimbabwe. Never mind piling pressure on China over Tibet, soon we will not even be able to pressurise it over its links with the Sudan administration that sponsors terror in Darfur.

How telling that Chinese security goons were allowed to be in charge of the Olympic torch when it was paraded through the streets of London and that Russian spies are suspected of committing murder in our capital city and yet cannot be extradited to stand trial. 

Money brings power. A lack of prosperity caused the old Soviet Union to lose the Cold War. With its vast reserves of natural gas and control over pipelines across central Asia, Russia is in a far stronger position now.

On the domestic front Britain must become leaner and fitter to cope with a world of high energy and food prices. We will simply be unable to afford to sustain millions of working age people who do not work, while much greater value for money will have to be squeezed out of the public sector. Whether the £100billion a year NHS will remain affordable is open to doubt.

And we will all pay dearly for Labour’s failure to build a new generation of nuclear reactors or to create adequate gas storage facilities.

 

Many more of our hard-earned pounds will end up in Russian and Saudi pockets as a result.

We will still have the priceless advantages of English being the world’s business language and London one of its main financial hubs but the decade ahead will be full of challenges. Britain will have to aggressively earn its living in the world once more and those with nothing to offer will be offered nothing in return.

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