Last week, The Economist – surely the single most influential publication in the business world – reported on the growing trend of big corporations from the emerging nations to invest inthe established Western economies, mainly by buying companies. Britain says the paper, is particularly attractive because there are few barriers to buying British companies and the country has many of the world’s best legal, accountancy and marketing brains, plus the City of London offers immensely valuable expertise and experience alongside its access to vast amounts of capital. British companies have gone under the hammer to corporations from Mexico, Thailand, Singapore and, most notably, India. Indeed India’s Tata is now the UK’s biggest manufacturing employer, with a pay roll of some 40,000 people.
The Economist cites Pankaj Ghemawat, the Harvard guru of globalisation (and author of the recent book, World 3.0: Global Prosperity and How to Achieve It*) who argues that many of the new southern hemisphere business giants will favour flexing their global muscles by putting FDI into countries that were once their European imperial masters. Britain, which had the world’s biggest empire, could do very nicely if the Tata experience is repeated and big businesses from former colonies buy into the UK, through either purchase or greenfield investment. So too could France, Belgium, the Netherlands, Spain and Portugal, all of which had substantial imperial possessions. My bet is on the UK doing best for the reasons given above, but also because its current coalition government is dominated by Conservative Party believers in free market economics, deregulation and conditions that promote maximum flexibility in the labour market. Having the freedom to further deregulate the labour market is one of the reasons why many on the British Right want to greatly reduce the UK’s ties with the EU, which has championed employee rights for decades. The EU is holding back Britain’s ability to compete is the argument of the anti-EU lobby, though they usually chose to side-step the fact that 40% of the UK’s trade is with EU nations. Loosening Britain’s ties with the EU at a time of massive economic instability seems rash and dangerous to many business leaders who employ millions of British workers and profit handsomely from trade with the EU.
During the 1990s the Conservative Party got close to destroying itself over the issue of EU involvement and the rifts that the argument created helped the party lose three general elections in a row between 1997 and 2010. In the years since then most of the senior Conservatives on the pro-EU wing have retired or died. Today it is a party overwhelmingly averse to the EU and it is only the presence of the pro-EU Liberal Democrats in the coalition that is preventing some senior Conservative ministers speaking out in support of the Euro sceptics. The issue of Europe has the potential to break up the coalition, though a more likely outcome is a compromise that sees Britain finding a way to reform its labour laws and regulations without loosening its bonds with the EU.
Further labour deregulation could open the floodgates to FDI from old imperial possessions, an irony that will not be lost on the British Left or the Trade Union movement, both of which for most of the 20th century implacably opposed imperialism and the exploitation of cheap colonial labour. In the old empires it was control of the seas that mattered. Today it’s simply economic muscle that calls the shots and it’s the South that’s growing stronger daily. Whether domination by economic interests from Mumbai or Beijing is more comfortable for Britain than shared sovereignty with European neighbours is a question that perhaps only time can answer.
*World 3.0: Global Prosperity and How to Achieve It is available on Amazon and through good booksellers.