April 26, 2023 - 1:50pm

Yesterday evening British Foreign Secretary James Cleverly gave a speech at Mansion House, trying to set out a path for a constructive relationship between Britain and China. Cleverly’s speech went aggressively against the grain, calling out what he considers to be bad thinking in foreign policy circles. 

The Foreign Secretary took aim at the so-called “Thucydides Trap”, which states that a rising power will always conflict with an incumbent. “We have agency, we have choices,” he said, “and so do our Chinese counterparts.” The fact that this even needs to be stated shows how far our foreign policy discussion has been degraded. There is no inevitable force of history driving conflict between America and China — indeed, the whole notion of “forces of history” that override human decision-making is superstitious thinking.

What ends up happening between the United States and China will happen because of the choices that we make, just as Cleverly said in his speech. Likewise, what happens between Britain and China will be determined by the decisions made by British politicians and policymakers. 

The question is whether British politicians and policymakers have sufficient agency to determine their own future, or whether they will follow Washington down whatever path it chooses — no matter what the British Foreign Secretary says. If it turns out to be the latter then, sadly, it will finally be clear that Britain has lost what remains of its sovereignty with respect to big foreign policy decisions.

The reality is that Britain is in an impossible position. The national economy is in trouble. The country’s manufacturing sector has been gutted, and what remains is deeply stitched into global supply chains. Britain’s main exports are services — especially financial services — and these rely on good relations between countries much more than manufacturing exports do. If the world shatters in two, with America going one way and a Chinese-led bloc going the other, Britain will be torn in half.

The consequences of this rupture will be a precipitous decline in British living standards. Britain already has the highest inflation rate in Western Europe. Think of this as a canary in the coal mine. If the tectonic geopolitical forces driving the inflation continue to intensify, those inflationary pressures will get worse and worse. Inflation will eat away at British living standards. The cost of living “crisis” will, in a few years, cease to be a crisis and become the new norm.

With falling living standards will come less funding for the institutions, like the military and the diplomatic corps, that Britain uses to project power abroad. If some politicians think that “standing up to China” will increase Britain’s pull on the world stage, they clearly have very little conception of how the British economy is set up or what happens to countries that fall into terminal stagnation and decline.

The stakes could not be higher. The Europeans are gradually signalling that they will go their own way with respect to the China question should the United States decide to launch a new Cold War — or, God help us, a hot one. Yet the European economy, with its powerful manufacturing base in Germany, is far less fragile than Britain’s.

“Our task,” Cleverly said last night, “is to shape the course of future events, not succumb to fatalism.” Historians will likely read those words. This might be as a last-gasp effort by the Foreign Secretary to ward off a looming disaster that ultimately failed. Or, rather, as the beginning of a constructive new approach that narrowly saved Britain from crashing against the rocks and destroying itself.

Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics