May 13, 2002
Time Atlantic
Maybe it's time for Britain to secede. No, not from the European Union. From the United States of America. Eight months into the U.S.-led war on terrorism (and maybe on Iraq too), all those old jibes about the U.K. being the 51st state are hitting too close to home for many Britons. Prime Minister Tony Blair's new position as George W. Bush's very best European chum might be good geopolitics--Blair believes only an active ally can temper the conservative President's instinctive unilateralism--but it hasn't played nearly so well at home, particularly among Blair's base of Labour supporters. The phrase "America's poodle" comes up a lot in the press and down the pub these days. So does "pussycat." Marking her brother-in-law's fifth anniversary in power last week, writer Lauren Booth (Cherie's sister) put it rather more vividly in the daily Independent: "He may be on the world stage, but he's just nosing Bush's crotch."
When it's not the P.M.'s own family and party griping about this too-special relationship, it's his fellow European leaders. Continentals have always been baffled by their island cousins' obsession with the pound, Imperial measures, and their God-given right to extra-curvy cucumbers. And now that the euro is up and running and Europeans are ready to move on to even bigger projects, like E.U. enlargement and real political union, Britain's aloofness is that much more irritating. "I wonder what makes this great nation so confident when dealing with a vastly more powerful nation over 3,000 miles away," said European Commission President Romano Prodi in a speech at Oxford last week, "but afraid to play a full part in shaping the future of the Continent to which it belongs."
Must Britain choose between the U.S. and Europe? A searing new book, The World We're In by Will Hutton, reviewed opposite, offers an unequivocal yes--and declares Europe the deserving winner of British affections. The book is a sequel of sorts to Hutton's 1995 The State We're In, an indictment of markets-first politics that was a surprise best seller during the waning of Tory rule and remains an almost sacred text among the many leftish Brits who feel betrayed by New Labour's rightward drift. But this time around, America rather than Thatcher and the City of London is the villain of the piece. With 40% of British respondents to a recent MORI poll for TIME saying that their government has been too supportive of U.S. foreign policy since Sept. 11, Hutton has scored a well-timed hit, which won't hurt The World We're In in the buzz department. But although Hutton has some sharp words for U.S. military and political unilateralism, the former business journalist's chief complaint remains economic. The American influence, he argues, is making Britain poorer.
Come again? Conventional wisdom holds that Britain--by far the most U.S.-like economy in Europe, with flexible labor markets, shareholder-driven corporations and high, debt-fueled consumer spending--has weathered the global economic slowdown pretty well, considering. Unlike Germany, the U.K. has so far avoided recession since September. British unemployment, already far below the likes of France and Italy, hit its lowest level in over 25 years this March. London, the natural landing place for big American banks and English-speaking multinationals, remains the envy of Europe's financial centers. "The language and our institutional openness made us easy winners in globalization," says Hutton, who now runs a London think tank-cum-consultancy called the Work Foundation.
But maybe it was too easy. "We've used globalization as an excuse for not asking all these questions," says Hutton. Such as? For a start, why hasn't the the vaunted flexibility of the British workforce done more to cure the county's stubbornly low productivity? A third of British men now regularly work a very American 50 hours a week or more, but the U.K. overall still is only about as productive (per capita) as France, land of the strict 35-hour workweek. Not an attractive bargain. Or what about the state of Britain's public services? Privatization and tax cuts clearly haven't been kind to them. So no matter how much more money the average Briton might have in his pocket today, it still can't buy him reliable service on any of Britain's broken-down, strike-prone railways. Nor can it push him to the front of the queue at an overcrowded NHS hospital.
For these woes and more, Hutton prescribes ditching American laissez-faire and turning toward Europe. A wholehearted embrace of the European Union--and, of course, the euro--is just the first step. He also wants a return of government to vital public services and a radical shift in the way the U.K. runs its businesses. Although the U.S. didn't invent stock-price-driven management--"Long before America had shareholder value, we had short-termism," Hutton says--the power of the U.S. capital markets in the 1990s helped cement the dubious notion that quarterly earnings come first. It's too easy to make a list of once-great British companies that blew it by chasing City fads: start with Marconi. Hutton argues that Britain would be more productive if, as in Germany and France, companies had to answer to interests besides professional money managers, such as government shareholders, regional banks and strong unions. That, he says, would focus CEOs' minds on the long term.
Hutton's brief for so-called stakeholder capitalism isn't new. What gives it fresh rhetorical power now is the sight of so many of the icons of America's late, great bull market--from Enron to WorldCom--taking the fall. Yet here's the rub: continental Europe itself isn't so convinced that it has the winning formula. After years of underperforming the U.S., Europe's managers and policymakers are slouching toward neoliberalism too. (Hutton thinks the U.S. bubble has definitively burst, but America's GDP growth of 5.8% in the first quarter of 2002 suggests this call may be too pessimistic, or at least early.) After a wave of Socialist-approved privatizations, French managers must increasingly answer to foreign shareholders. Lower capital-gains taxes in Germany should spur the breakup of the corporate cross-holdings that protect Deutschland Inc. And the loudest advocates of labor flexibility on the Continent aren't American investment banks, but Europe's central bankers. Hutton is right: the U.K. should be more engaged with Europe. But it will still have to come up with its own answers for its problems.
