Global Races

Tony Payne - Director of SPERI

I will stop quoting speeches in a moment, but bear with me for just a little longer, because we do need to look quickly at Cameron’s response.  He was forced (by domestic political competition) to clarify significantly what he understood to be the pressures of external economic competition in the global race.  He in turn made the following very interesting statement to his 2013 party conference in early October:

‘We are in a global race today.  No one owes us a living.  Last week, our ambition to compete in the global race was airily dismissed as a race to the bottom … that it means competing with China on sweatshops and India on low wages.  No – those countries are becoming our customers … we’ve got to compete with California on innovation; Germany on high-end manufacturing; Asia on finance and technology. And here’s something else you need to recognise about this race … All those global companies that employ lots of people – they can set up anywhere in the world’.

So where have we got to and what are we to make of this new debate?   It seems that both main British political leaders are now in agreement, not only on the existence of a global ‘race to the top’, but also on what it means.  In a nutshell, they argue that the country’s economic future depends crucially on successful economic competition with the leading players in different key sectors of the global economy and that the key to winning this race is to attract multinational companies to choose Britain as the base from which to conduct their global operations.

The trouble is, however, that this doesn’t constitute a very accurate or sophisticated way of thinking about how countries need to relate to the global political economy.  Why? First, it is companies, or possibly sectors, that actually do the competing.  In an age of globalisation national economies are essentially rather curious and highly porous collections of enterprises based on their territory.  They don’t ‘compete’ directly amongst themselves. Second, races are supposed to have finishing lines - even marathons - and are generally organised so that the runners run in the same direction.  In the real global economy the reverse is the case: the ‘competition’ never ends; nobody ever wins definitively because new competitors always emerge from somewhere or other; and everybody is moving in different directions and trying different ploys.

A better basis on which political leaders can think about how to lead their countries into the global political economy is the concept of ‘strategic global repositioning’. It may be a bit of a mouthful, but what it implies is that the ‘managers’ of all countries have to think and act strategically about how and where to seek to ‘position’ (and, as necessary, ‘re-position’) their national economies in relation to the development efforts of all other countries.  Amongst other things, this involves deciding which sectors of the economy to give particular support to (industrial policy), what skills the people of the country are most deficient in (education policy) and what mix of openness and protection best sustains nationally located enterprises (trade policy).

In all this policy-making there is a case for being offensive and defensive, according to sector, situation and need.  It is not necessarily sensible just to open up to every incoming form of foreign investment and expect that to do the trick.  What is required is some serious strategic thinking about how to position (in this case) Britain in the global political economy in the light of its history and location, its economic strengths and weaknesses, its assessment of what other countries are seeking to do in their interests, its capacities in the negotiation of global rules of economic conduct, and many, many other factors to boot.

Cameron and Miliband have grasped that Britain exists in a fast-changing, increasingly open and liberal global political economy.  But they and their advisers still need to think through more deeply the implications of this and to find a less crude way of talking about it with the British people than the over-simplistic notion of a global race (of any nature).