The Task at Hand for The British Statesman

The geostrategic position of the United Kingdom has been slowly declining since the end of the second world war. From the collapse of empire, economic stagnation, and now increasing isolation from our neighbours, Britain has fallen into mediocrity. To a certain degree, this was inevitable. The empire had to go, and the limitations on the countries post war economy meant they would never be able to compete with the United States and the Soviet Union. However, over the last two decades, Britain’s position has declined further without any justifiable reason. The lack of influence the government now has over world affairs has reached a point of national emergency. They are unable to orchestrate even a somewhat decent situation for the British people.

A business analogy applies here. The best businesses are those with extremely strong brands. Take Coca Cola and Apple as examples. The love consumers have for their brands provides them with an “economic moat” that, if managed well, keeps the enemies at the gates. However, moats require maintenance. If not, competitive advantage will be lost, as new businesses emerge to take their place. They must not rest on their laurels when it comes to brand maintenance – it is the most important thing for continued profitability. The same applies for nation states. The United Kingdom, in recent history, has maintained a unique brand of Pax Brittania, where Britain led a period of relative peace in Europe after the defeat of Napolean. Even after 1945, the UK carried over this diplomatic reputation as they took leading roles in post-war organisations such as NATO and the UN. Over the few decades, this brand has been completely eroded. For the government to obtain a better deal for the British people, they must reinvent how people hold the United Kingdom in their minds. No easy feat.

This essay is a thought piece on how Britain can effectively reestablish their economic moat - AKA their brand. Though my position may seem extreme, I remain neutral. However, an emergency calls for action. The British people deserve better from their government.

What should this brand be? The UK’s previous reputation for “soft power” is not the way to return from mediocrity. The only way is to develop a reputation of boldness and selfishness. The world needs to know that the UK government is only concerned with British people. And they will not hesitate to take action to better the common situation of their citizens. To be clear, I am not suggesting armed conflict here. I’m advocating for strategic manoeuvring such that the government is able to negotiate a better deal for its people.

The United States government defines ten forms of national power:

1.       Diplomatic Power

2.       Informational Power

3.       Military Power

4.       Economic Power

5.       Cultural Power

6.       Technological Power

7.       Financial Power

8.       Intelligence Power

9.       Political Power

10.   Geographic Power

The US, with its large, productive population and advantageous geographic location, has the fundamentals to compete on all ten of these battlegrounds. Britain is not so lucky. Therefore, they must concentrate their forces in a few areas with the greatest payoff.

Shake With Your Right Hand, But Hold a Rock in Your Left

The UK spent £53.9 billion on defence during the 2023/24 financial year – 2.3% of GDP. This is down from 5.5% in the mid 1980’s. For comparison, the US military budget for last year was 3.7% of GDP.

In comparison to the US budget, and the countries historical spending, the UK is underfunding its military at present. Spending levels have not materially changed in the last 20 years, even given the deterioration of the nation’s strategic position. The country cannot rely on the European Union anymore. The country cannot rely on the United States, given President Trump’s “America First” policy. The UK is more isolated now than it has been at any time since 1940. Why has defence spending not adjusted to this new situation? There is no valid reason.

The British military cannot fight a war alone. They lack the manpower, equipment, and logistical framework. UK forces are currently designed to “plug in” to an American division, rather than independence. The assumption amongst members of the government and the military is that this is a non-issue due to the strength of our alliance with the US. This, however, only works if British and American diplomatic interests are aligned. This assumption is increasingly becoming a reality of the past. The US will continue to act in its own self-interest entirely.

Take the Iraq war for example. In certain senses, The US benefited from the fall of Saddam’s regime. It was a statement of American might; it bolstered its alliance with Saudi Arabia and strengthened the nation’s military-industrial complex. Now, I don’t believe the US came out ahead once all was said and done in Iraq, but there were some benefits. The benefits to Britain? They committed to a protracted conflict in which soldiers were lost, and billions were spent, which could have been invested in bolstering the nations strength. The British people certainly lost out due to our dependence on our cousins across the Atlantic.

Britain must ramp up its defence spending – with a singular objective in mind. Independence. If the UK can unilaterally fight wars with its pre-existing global power projection capacities, the government will gain more geopolitical influence. Smaller nations will become dependent on Britain’s protection, and the government will be able to have a greater say in organisations like NATO. Evidently, we will always play second fiddle to the US. But a return to Britain’s stature of the 1980’s would grant the government an extra-ordinary amount of political capital for geopolitical negotiations. And of course, they don’t have to expand that capital on military matters. A concession on defence could be exchanged for a favour on trade policy, for example.

The Napoleonic Approach – Concentrate Your Forces

Transforming Britain into an economic powerhouse is a pipe dream – the chronic productivity problem the country has is extremely complex. I’m certainly not equipped to begin to approach it, and neither are the current authorities on the subject. Britain can, however, put measures in place to develop specific industries in a strategic manner. I caution that the UK must concentrate their forces and pick a singular industry to target – one which they aim to dominate. This industry must be selected very cautiously. The government must avoid industries of the most importance (such as artificial intelligence) due to the competition from other nation states. They must also not pick an industry, in which supporting will use up excessive political capital, or the goodwill the government has with the public (such as the oil and gas industry). Other restrictions include geography – which excludes agriculture as a possibility.

The Pharmaceutical industry poses itself as the answer. This would involve attracting an inflow of manufacturing capacity, research funding, and talent, with the end of being able to exercise significant control over the supply of pharmaceutical products to different parts of the globe.

Firstly, the UK government should put laws in place to reduce tax and regulation on pharmaceutical manufacturing facilities. These should be extreme enough to prompt a large majority of pharmaceutical companies to migrate the entirety of their manufacturing bases to Britain. For the largest companies, the UK government should take a hands-on approach in arranging this move.

Secondly, the government should announce a specialised immigration programme for skilled talent from the biotechnology centre. Specifically, this should involve a fast-tracked process, monetary compensation, and an extremely high skill bar for entry. To wrestle control of this industry, Britain needs to bring in the best people for the job.

Lastly, the government should set up a new stock exchange, specifically for biotechnology stocks. Typically quite small and volatile, it would be easy to attract prospective listees if the requirements for listing were less than elsewhere. An example of an effective model is the TSX.V, a Canadian exchange, which is a public venture capital marketplace.

Upon implementing these changes, Britain will be in control of every step of the drug development pipeline. Controlling essential goods is the key to power. Unlike other industries, this is a war the UK can win.

Control The Money

Britain has long been a great financial centre. Trillions of pounds flows through the City of London and the countries overseas territories each year – an area of strength the UK should continue to develop. The more of the world’s assets which are under UK control, the greater the leverage the British government has.

Firstly, the government must assert greater control over its overseas territories such as the Cayman Islands and British Virgin Islands. This will be a difficult issue to approach with the populations of these islands. However, money talks. Britain should be willing to fund these territories government expenditures entirely. They should also launch investment programmes to grease the wheels of courting public opinion.

Secondly, once the government can assert greater control, they should engineer a scenario which makes these overseas territories extremely attractive to those wanting to store assets offshore – more so than other popular locations such as the Bahamas. This can be done by:

1.       Reducing all applicable tax and expenses.

2.       Increasing the ease of doing business and moving assets between overseas territories, particularly movement from the overseas territories to the City of London and vice versa. Regulations should be made such that all the largest investment banks and asset managers relocate their headquarters to the City of London. The bulge bracket of investment banks are an extremely important lever of financial power.

3.       Increase the amount of privacy on offer to listed owners of corporations.

The government should also put in place meaningful further benefits in place for assets denominated in Sterling. Real power lies with those who control the worlds assets and currency. People primarily think of this as regarding individuals and institutions which control large amounts of assets (the Rothschild family – all bankers – as a prime example). It also applies to the nation states most able to exercise power over them.

I could go on, but opportunity cost can’t be ignored. Sometimes less is more. I appreciate the thought on this matter.

Best,

Ed