The Rise and Fall of the Great Powers (96 page)

If the Federal Republic finds the economic challenges less intractible than foreign- and defense-policy problems, the same cannot be said for the United Kingdom. It, too, is the legatee of a historical past—and, of course, of a geographical position—which strongly influences its policy toward the world outside. But, as we have seen in earlier chapters, it is also the country among the former Great Powers whose economy and society have found it hardest to adjust to the shifting patterns of technology and manufacturing in the post-1945 decades (and in many respects in the decades before). The most devastating impact of the global changes has been upon manufacturing, a sector which once earned Britain the title “workshop of the world.” It is true that among many of the advanced economies of the world, manufacturing’s share of output and employment has been steadily shrinking while other sectors (e.g., services) have grown; but in Britain’s case the fall has been much more precipitous. Not only has its proportion of world manufacturing output continued its remorseless decline
relatively
, but it has also decreased
absolutely
. More shocking still has been the abrupt switch in the place of manufactures in Britain’s foreign trade. While it may be difficult to prove
The Economist’s
tart observation that “since 1983, Britain’s trade balance on manufactures has been in deficit for the first time since the Romans invaded Britain,” it is a fact that even in the late 1950s exports of manufactures were three times as big as imports.
⁹⁸
Now that surplus has gone. What is more, the decline in employment occurs not only in older industries but also in the “sunrise” high-technology firms.
⁹⁹

If the fall in Britain’s manufacturing competitiveness is a century-old tale,
¹⁰⁰
it has clearly been accelerated by the discovery of North Sea
oil, which while producing earnings to cover the visible trade gap has also had the effect of turning sterling into a “petrocurrency,” sending its value to unrealistically high levels for a while and making many of its exports uncompetitive. Even when the oil runs out, causing sterling to decline further, it is not at all clear that that would
ipso facto
lead to a revival in manufacturing: plant has been scrapped, foreign markets lost (perhaps permanently), and international competitiveness eroded by higher than average rises in unit labor costs. Britain’s shift into services is somewhat more promising, but it nonetheless remains as true here as in the United States that many services (from window cleaning to fast food) neither earn foreign currency nor are particularly productive. Even in the expanding, high-earning fields of international banking, investment, commodity dealing, and so on, it seems clear that the competition is, if anything, more intense—and in the past thirty years “Britain’s share of world trade in services has fallen from 18 percent to 7 percent.”
¹⁰¹
As banking and finance become a global business, increasingly dominated by those (chiefly American and Japanese) firms with massive capital resources in New York
and
London
and
Tokyo, the British share may diminish further. Finally, future developments in telecommunications and office equipment are already suggesting that white-collar jobs may soon follow the path already trodden by blue-collar workers in the West.

None of this, one hopes, portends a cataclysm. A general growth in world output and trade would help to keep the British economy afloat, even if its share of the whole gently declined and its per capita GNP was steadily being overtaken by many more nations, from Italy to Singapore. The decline could intensify, if a change of government led to large increases in social spending (rather than productive investment), higher taxation levels, a drop in business confidence, and a flight from sterling; it might slow down, with a government which adopted a less strict monetary policy, evolved a coherent “industrial strategy,” and cooperated with fellow Europeans in marketable (and nonprestige) ventures. It also may be true, as one economist maintains,
¹⁰²
that British manufacturing is now altogether leaner, fitter, and more competitive, having undergone an “industrial renaissance.” But the auguries for a spectacular turnaround are not good; the relative immobility and lack of training in the labor market, the high unit costs, and the comparative smallness of even the largest British manufacturing firms are very considerable handicaps. The output of engineers and scientists is still dismally low. Above all, there is the poor level of investment in R&D: for every $1 spent in Britain on R&D in the early 1980s, $1.50 was spent in Germany, $3 in Japan, and $8 in the United States—yet 50 percent of that British R&D was devoted to nonproductive defense activities, compared with Germany’s 9 percent and Japan’s minuscule amount.
¹⁰³
By contrast with its chief rivals (except the
United States), British R&D is both much less related to industry’s needs and much less paid for by industry itself.

The large proportion devoted to defense-related R&D brings us onto the other horn of the British dilemma. If it was an unambitious, obscure, isolated, pacific state, its slow industrial anemia would be a pity—but irrelevant to the international power system. Yet the fact is that, although much shrunken from its Victorian heyday, Britain still remains—or claims to be—one of the leading “midsized” Powers of the globe. Its defense budget is the third- or fourth-largest (depending upon how one measures China’s total), its navy the fourth-largest, its air force the fourth-largest
¹⁰⁴
—all of which, it might be thought, is significantly out of proportion to its geographical size (a mere 245,000 square kilometers), its population (56 million) and its modest, declining share of world GNP (3.38 percent in 1983). Furthermore, despite its imperial sunset, it still has very extensive strategical commitments abroad: not only in the 65,000 troops and airmen in Germany as its contribution to NATO’s Central Front, but also in garrisons and naval bases across the globe—Belize, Cyprus, Gibraltar, Hong Kong, the Falklands, Brunei, the Indian Ocean. Despite all the premature announcements, it is still not one with Nineveh and Tyre.
¹⁰⁵

This divergence between Britain’s shrunken economic state and its overextended strategical posture is probably more extreme than that affecting any other of the larger Powers, except Russia itself. It therefore finds itself particularly vulnerable to the fact that weapon prices are rising 6 to 10 percent faster than inflation, and that every new weapon system is three to five times costlier than that which it is intended to replace. It is made the more vulnerable in consequence of domestic-political constraints upon defense spending; while Conservative administrations feel it necessary to contain arms spending in order to reduce the deficit, any alternative regime would feel inclined to chop defense expenditures in absolute terms. Quite apart from this political dilemma, however, there looms for Britain a fundamental and (soon) unavoidable choice:
either
to cut allocations to all of the armed services, placing each of them in a less than effective state;
or
to cut some of the nation’s defense commitments.

Yet as soon as that proposition is stated, the obstacles emerge. Command of the air is taken to be axiomatic (hence the RAF’s superior budget), even while the cost of new Euro-fighters is spiraling out of sight. By far the greatest British overseas commitment is to Germany and Berlin (almost $4 billion), but even now those 55,000 troops, 600 tanks, and 3,000 other armored vehicles are, despite high morale, underprovisioned. However, any reduction in the size of the BAOR (British Army on the Rhine) or fancy-footwork scheme to keep half the troops in British rather than German garrisons is likely to trigger off such
political
repercussions—from German grief, to Belgian emulation,
to American annoyance—that it could be totally counterproductive. A second alternative is to reduce the size of the surface fleet—the Ministry of Defence solution of 1981. until the Falklands crisis upset that scheme.
¹⁰⁶
But while such an alternative probably has the most advocates in Whitehall’s corridors of power, it looks ill-timed in the face of Russia’s rising naval challenge and the increasing American emphasis upon NATO having an “out-of-area” thrust. (And it is certainly a contradiction for the advocates of enhancing NATO’s conventional forces in Europe to agree to reductions in the alliance’s second-largest fleet of Atlantic escorts.) A more possible candidate for “cuts” would be Britain’s expensive and (while emotionally understandable) vastly overextended commitments in the Falkland Islands: but even that retrenchment would probably only postpone a longer decision for several years. Finally, there is the investment in the very expensive Trident submarine-based ballistic-missile system, the costs of which seem to rise month by month.
¹⁰⁷
Given the Conservative government’s enthusiasm for an advanced and “independent” deterrent system—not to mention the way in which the Trident boats may actually be altering the overall nuclear balance (see below, p. 506)— that decision is only likely with a radical change of administration in Britain, which in turn might throw more than future defense policy into question.

At the end of the day, however, the awkward choice is there. As the
Sunday Times
has put it, “Unless something is done soon, this country’s defense policy will increasingly consist of trying to do the same job with less money, which can only be bad for Britain and NATO.”
¹⁰⁸
This leaves the politicians (of
any
party) with the alternative of reducing certain commitments, and enduring the consequences thereof; or of increasing defense expenditures still further—and Britain spends proportionately more (5.5 percent of GNP) than any other European NATO partner except Greece—and thereby reducing its own investment in productive growth and its long-term prospects for an economic recovery. As with most decaying Powers, there is only a choice of hard options.

The same dilemma confronts Britain’s neighbor across the Channel, even if that has been concealed by the lack of sustained domestic questioning of France’s defense policy, and by a significantly better (if still flawed) economic performance since the 1950s. At the end of the day, Paris, like London, has to grapple with the problem of being only a “midsized” Power with extensive national interests and overseas commitments, the defense of which is coming under steadily increased pressure from escalating weapon costs.
¹⁰⁹
While its population is the same as Britain’s, its total GNP and its per capita GNP are larger. The French produce more cars and more steel than the British and have a very large aerospace industry. Unlike Britain, France remains heavily
dependent upon imported oil; on the other hand, it still runs a considerable surplus in agricultural goods, which are heavily subsidized by the EEC. In a number of significant high-technology fields—telecommunications, space satellites, aircraft, nuclear power—the French have shown a strong commitment to keeping abreast with worldwide competition. If France’s economy was badly dented by the Socialist administration’s dash for growth in the early 1980s (just when all its major trading partners were retrenching fiscally), the stricter policies which followed seem to have reduced inflation, cut the trade gap, and stabilized the franc, all of which ought to allow for a resumption in French economic growth.

But whenever France’s economic structure and prospects are compared with those of its powerful neighbor across the Rhine—or with Japan’s—the precariousness shows through. While France is still spectacularly adroit in exporting fighter aircraft, wines, and grain, it “remains relatively weak in selling run-of-the-mill manufactured goods abroad.”
¹¹⁰
Too many of its customers have been unstable Third World countries that order lavish projects like dams or Mirages and then have difficulty paying for them; by contrast, the “import penetration” of industrial goods, automobiles, and electrical appliances into France indicates broad fields where it is not competitive. Its trade deficit with West Germany grows year by year and, since French prices always rise faster than those in Germany, will in all probability lead to further devaluations of the franc. The northern landscape of France is still scarred with decaying industries—coal, iron, steel, shipbuilding—and much of its automobile industry is also feeling the strain. And while the new technologies seem full of promise, neither can they absorb France’s many unemployed nor are they receiving the levels of investment necessary to keep pace with German, Japanese, and American technologies. More worrying still for a country as economically (and, of perhaps greater import, psychologically) attached to agriculture is the looming crisis of global overproduction of grains, dairy produce, fruit, wine, etc.—with its increasing strain upon French and EEC budgets if farm-support prices are maintained and its threat of social unrest if prices are cut. Until a few years ago, Paris could rely upon Community funds to aid in restructuring agriculture; now, most of that cash is likely to go to the peasants of Spain, Portugal, and Greece. All this may leave France without the capital resources necessary for a much larger R&D effort and for sustained, high-tech-based growth over the next two decades.

It is in this larger context, of fixing priorities for France’s future, that one needs to view the debate over national defense policy. In many ways, there is much that is impressive about French strategy, and military actions, in recent times. Recognizing (and assertively voicing) the increasing doubts about the credibility of the American strategic
nuclear deterrent, France has provided itself with its own “triad” of delivery systems for use in the event of Soviet aggression. By keeping in its own hands every aspect of its nuclear deterrent (from production to targeting), and by insisting that its entire force of missiles will be loosed at Russia if deterrence fails, Paris feels it has a more certain way of holding the Kremlin in check. At the same time, it has maintained one of the largest land armies and has a substantial garrison in southwestern Germany and a commitment to come to the Federal Republic’s aid; while being outside the NATO command structure, and thus able to proffer an independent “European” voice on strategic issues, it has not dislocated the military need for reinforcing the Central Front in the event of a Russian attack. The French have also maintained an extra-European role and—by means of occasional military interventions overseas, the presence of their garrisons and advisers in Third World countries, and their successful arms-sales policy—offered an alternative influence (and source of supply) to either the USSR or the United States. If this has sometimes irritated Washington—and if French nuclear testing in the South Pacific has rightly annoyed the countries of that region—then Moscow in its turn can hardly be comforted by the various and sometimes unpredictable displays of Gallic independence. Furthermore, since both the right and the left in France support the idea of the nation’s playing a distinct role abroad, French claims and actions for that purpose do not provoke the domestic criticism which would occur in virtually all other Western societies. All this had led foreign observers (and, of course, Frenchmen themselves) to describe their policy as logical, hard-nosed, realistic, and so on.