Britain can still be a power in a changing world

First published in the Telegraph on 9 October 2009

It was not the decoration of the Hagia Sophia that left Alistair Darling’s mouth agape last week, nor the grandeur of its dome. It was the fact that this place of worship, in the heart of Istanbul, was built more than a millennium before St Paul’s Cathedral.

Mr Darling’s visit, amid a round of meetings, was a profound reminder of the way civilisations come and go. When London was still a tiny Anglo-Saxon town, Istanbul was, like Athens and Rome before it, the world’s cradle of civilisation and commerce. And now we are turning full circle, with Britain facing the biggest decline in its economic influence since the rise of its empire, and ancient powers such as China, and for that matter Turkey, re-emerging as global powerhouses.

Five years ago, the UK was the world’s fourth-biggest economy, behind the US, Japan and Germany. Since then, it has been overtaken by China, which has since leapfrogged Germany and is poised to overtake Japan. The recent fall in sterling has put Britain behind France, and India and Brazil may nudge us further down the economic leader board.

Of course, a country’s position in such ranking tables is of far less importance than other precepts: a high standard of living; strong, democratic institutions; decent health care and public services. But the shift comes at a fragile juncture, when the apparatus of international politics and economics is being overhauled. Out go the old institutions such as the G7, which has dominated international economic policy-making. In come far broader groupings such as the G20 (which actually consists of 22 nations) and, perhaps, a beefed-up council for the IMF.

The risk is that Britain may be marginalised to a greater degree than is fair or necessary. Even this new, all-inclusive world of international diplomacy has its VIP areas – and the UK, it is fast becoming clear, is no longer assured of entry. Although Mr Darling was fighting tooth and nail behind the scenes to avoid it, new plans being circulated by American officials would see Britain surrender its permanent individual seat at the IMF and be entirely excluded from a new G4 grouping of America, China, Japan and the euro area.

Is there any point in raging against the dying of the light? Absolutely. While there is little one can do to resist the forces of demography, which will help push the emerging world ahead, the UK should remain one of the world’s top 10 economies for some time. Moreover, Britain retains certain qualities which should strengthen its voice on the world stage.

These are not the airy-fairy factors traditionally cited by cloudy-eyed diplomats – British values of fairness, liberty and community; a common-law system that much of the world inherited; music and literature that inform culture in every corner of the globe. If you were admitting countries to the high table on that basis, you would have to reserve a permanent place for the Romans and the Greeks, or even the Byzantine Empire, which built the Hagia Sophia.

It is important to distinguish a country’s legacy from its actual assets – and Britain has at least five major strengths which should bolster its international importance even as its economic pre-eminence diminishes.

First, and most obviously, it retains the world’s lingua franca, giving British employees inbuilt access to international business, where their Chinese or Brazilian counterparts have the added obstacle of learning English.

Second, the pound remains one of the world’s key reserve currencies, and although China’s renminbi and the Indian rupee will become increasingly important, there is little reason (unless this or a future government debauches the currency) to suspect that sterling will lose this status.

Third is the strength of the university system. British schools may well be beleaguered and ill-managed but UK institutions still occupied 18 places in the Times Higher Education supplement’s recent league table of the top 100 global universities, including four of the top six. For this reason, tens of thousands of foreign students flock to the UK to study every year.

Fourth, Britain, and in particular London, remains one of the world’s most important financial hubs. Indeed, a survey from the World Economic Forum found yesterday that the UK has actually overtaken the US as the world’s leading financial centre.

Finally, and perhaps most compellingly, it is a little-known fact that Britain has a toehold in running the world’s major institutions – everything from the United Nations to the IMF and World Bank – that far outstrips its economic status. For all our scepticism about the European project, Britons run vast swathes of the European Commission. Like it or not, international bureaucrats are a key export. With the forces of recession exerting a huge strain on international relations, as politicians are tempted to guard their citizens’ financial interests with an arsenal of protectionist measures, this export is in great demand.

After the Second World War, Britain was one of the architects of the multilateral system that has brought prosperity and security to hundreds of millions. We should resist any suggestion that we should not help shape the world in the future.