Mircea Codruţ MARIN, PhD*
Abstract: Ieşirea Marii Britanii din Uniunea Europeană are consecinţe geopolitice majore şi marchează schimbări relevante din perspectiva duratelor lungi ale istoriei. Pentru prima data de la începutul Modernităţii şi structurarea sistemului mondial, polul financiar bancar al extremităţii europene a Eurasiei se poate muta din Londra pe Continent. Aceasta ar echivala cu pierderea de către Marea Britanie a ultimului instrument de proiectare a intereselor politice la nivel global şi a statutului de putere mondială.
Argumentul nostru este acela că dezvoltările înregistrate de sectorul bancar britanic în ultimele patru decenii (din 1973 în 2016), care au conservat poziţia Londrei în sistemul de schimburi dintre capetele Eurasiei (între Europa de Nord Vest şi Asia de Sud şi Sud Est) se datorează integrării europene, care prin dezvoltările sale economice a compensat pierderile înregistrate de economia Marii Britanii ca urmare a anchilozării şi decolonizării.
Emergenţa unui nou centru financiar pe Continent ar fi susţinută de marile fluxuri monetare şi comerciale desfăşurate acum de la un capăt la altul al Eurasiei, între China şi Germania.
Inherent to the human being, as it refers to the fulfilling of one’s basic needs, the economical interests have a royal place among the triggers of the individual and the collective behaviour, shaping politics and policies, fostering associations and adversities at any scale. As a consequence of this fact, any international political order is a reflection of an economical order. Postulating, one may say that one change in the economical order of things impacts the political order of things, directly proportional. As economy, and politics, happens in space involving and affecting spatially determined human communities, a spatial shift of assets and trading spots from one country to another redefines the balance of power. The extent of this redefinition is loosely given by the value of the assets and by the significance of the trading spot within the given market system at the moment.
For its supporters, there are no geopolitical losses in the Brexit affair, only gains. Decoupling Britain from the European-Continental arrangement would restore the countries wide (world-wide) range of opportunities and options, the freedom of winding toward all azimuths in the more and more complex and multipolar world of the 21st century. For such a future, Britain would maintain intact its arsenal of political, military and economical means – that it would be free to manage by its own will and according to its own interest far from any concession (self) imposed by the common policies, harmonization or sovereignty transfer to the European Union. Such reasoning implies that all (or at least most) heavy instruments appropriate to wield a nation’s influence across seas and lands at global level would still be strong (their strength being totally undue to the EU membership).
London’s role as a financial center of global importance is, undoubtedly, an instrument that Brexiters bet heavily on for the future out of the European Union.
Any Brexiter would agree that while the Royal Navy does not longer rule over the seas and as the sun sets on the Crown’s domain, for at least half a century (the end of the World War I marked the loss of the military leading position, while the end of the World War II and the start of the decolonization process marked the loss of the leading political position), the City is, at this historical hour, the last asset that may conserve Britain’s great power status. After all, since 1947 (15th of August, when India proclaimed its independence, a formal death certificate of the British Empire, which used to be the first super power of modernity) it was only the financial sector that stayed resilient and slackened the imperial decay through economic influence on and over the former colonies. One optimistic Brexiter would say – why it would not work from now on too.
Even if we admit that there is logic in this reasoning we affirm that finally it would prove to be deceptive as it ignores some important facts and trends within the global economy that structures the political order à longue durée.
First, since the end of the World War II to the opening of European accession negotiations (discussions start in 1969, while the formal accession takes place in 1973, European Union), there was no change within the morphology and direction of the global economic flows. During the 50s, 60s and 70s, London and Liverpool harbours were the final destinations of the most important share of the shippings delivered by the South-Eastern, South Asian and Eastern and South African new independent nations – from one head to another of the Eurasian geopolitical axis – through the Suez Canal or the Atlantic waters in no different way than it happened since the beginning of the 18th century. Reasons of this are of political, historical, economical and institutional nature. All along the two and a half centuries of its imperial rule, Britain struggled with success to keep out its Continental competitors far from Asian-African raw materials and other commodities producing areas. While former Continental enemies and allies were confronted during these first three decades of the post war world with the problems of reconstruction and system rebuilding (Germany, reduced to the West Germany) or the struggle to save their own colonial empires (France), there was no other power to challenge the British position or to determine a reorientation of the raw materials exports. The new independent nations themselves were not able at that moment to find alternatives for their production as they lacked industrial infrastructure or other exporting partners (China was still an undeveloped country, and the Soviet Union was itself an exporter of raw materials). Trading and shipping activities, nonetheless, were carried by the same companies and lines on pre-independence patterns of business making. As regional financial centers (like Singapore, Hong-Kong or Shanghai) did not exist at that time, London represented for its former colonies the only option for deposits and credit, trading and quotation setting. Yet, as the big and small Continental economies of the Western Europe (West Germany, France, Benelux countries) recovered from war and redefined as developed economies, during the 60s their need for raw materials met on the international market the sellers formerly under British rule that were forbidden to them until very recently. As the number of buyers increased the most important share of exports began to be directed toward those who due to their economic dynamism where determined to buy more – this was the case of West Germany, Benelux countries and France rather than Britain, and that determined a shift of the core of the Asian-African raw materials exports to the North-Western pole from the Insular harbours (London and Liverpool) / Britain to the Continental harbours Hamburg, Amsterdam and Antwerp / West Germany, Benelux countries, France, during the 70s.
Second, London emerged as a world center of banking and finance together with the economical expansion and industrial development of the British economy. For loosely one hundred and fifty years, between the last half of the 18thcentury and the beginning of the 20th century the British economy was the largest, the most dynamic, the most advanced and nonetheless the richest in raw materials. This was achieved with both economical and foreign policies instruments. The economy indicated the foreign policy directions and goals – to be achieved with any means (including war). At least till the construction of trans-American railway linking the East and West coasts in one continental size US economy, the British economy had no match. Equally, the economy supported the foreign policy, proving to be the decisive argument in the victories reputed in all the major confrontations of this period – the Napoleonic wars, the Crimean War, the Great Game and the World War I. Among its Continental rivals of that age – Napoleonic France, the German Empire or the Czarist Russia – were either less industrialized and less dynamic (France and Russia) or cornered on the continent and impeded to play a significant role beyond the shores and seas of Europe (Germany). The German Empire is the only Continental (read Eurasian) power that succeeded at that time to achieve the attributes of a significant challenger – in terms of economic dynamism, technological advancement and industrial-military means for a world range foreign policy, yet, nonetheless, the creation of the German Imperial fleet is a reality of the last two decades of the 19th, a late development. While at the beginning of the 20th century the industrial production slightly shifts from solid fuels (carbon) to liquid fuels (oil), the British industry loses the momentum. This is reflected in the nation’s inability to be decisive in the World War I. The beginning of the end is still a lucky day for Britain as the Continental competitors (both allies and enemies) are unable to make any move – France due its structural slowness (owed to its agricultural core) and Germany due its war burden and defeated status. The World War II post war situation is not very different – the major change is that the United States overtake unquestionably the superpower status that previously belonged to the British Empire as a champion of the West. Divided and in ruin, Germany cannot take any advantage of the outcomes of decolonization, during the 50s and the 60s, accessing the raw materials in Asia and Africa, denied by the British rule for decades. Yet, as the West Germany reaffirms as a liberal-democracy with a dynamic economy supported by an efficient production model and advanced technologies and, not less important, integrated in an wider economic system compiled by the Common Market economies, the Continent itself emerged as a much greater economy than the British one, able to determine a detour of the raw materials export flows from producing countries to consumer industrialized countries. After the World War II, due to the beginning of the decolonization process, during the 50s and the 60s, London becomes a financial center far bigger than its host economy, yet British economy is not rivaled by any Continental counterpart. This is changed during the late 60s when due to post war recovery and European integration, the Continent itself (the future Euro-zone) becomes a much larger economy. The opening of the ascension discussion in 1969, proved to be a right decision taken at the right moment, meant to avoid an economical attractiveness competition far beyond Britain’s capabilities and resources, that could have led to an emergence of a new financial center on the Continent on the expense of London. Through the European integration, London becamedue its traditions, know-how, contacts and liquid and solid reserves, the financial center of the Continent, continuing to grow capitalizing the European economy developments.
While a Brexiter would see the continuous growth of London as global financial sector, during the last five decades as an assurance for a brighter future, I would point that this growth is owed totally to the European integration and not to the British economy internal development and position within the global market. The British economy proved sluggish and unable to take full benefits of the Common Market and the globalization process – British companies were not champions in extending their production chains across Europe or the World, making Britain an engine of growth and thus consolidating its political influence at regional and global level.
The growth of the London’s financial sector between 1973 (the entrance) and 2016 (the exit) was determined by the strategic business decisions of the major economic agents of the European market to use the City for their most important and extensive financial operation, mostly not by using British financial operators but by establishing own branches. This was possible not only due to the European system based on the free circulation of capitals but as well to the economic integration. Even if an eventual Brexit agreement (or even a British national policy) would offer to the banks and other financial companies a privileged regime this is not enough to maintain capital from fleeing London. Barriers impose costs, and costs can be handled through business strategies, so they are no determinant in absolute. What is more important is on which side of the line happens the gross of the economic developments – on the British side or the European side?
The epicenter of the European economy is the Euro-zone, with Germany, France and Benelux countries forming a core to which are linked production chains toward the limits of the European space and beyond. In this arrangement Germany is connected to China on sea (via the Indian Ocean through the Suez Canal, via the Pacific Ocean through the Panama Canal), on land (via the new trans-Eurasian networks of roads and railroads) establishing a new polarization of economic and financial flows of global scale and weight. These financial and economical flows are attractive by themselves more than anything that British policy makers may offer to the financial companies.
Some Brexiter may argue against this statement that there are many other financial centers hosted by much smaller economies – see Zürich or Hong-Kong – such a parallel is simply refuted looking closer to the morphology of the two centres and to the function they perform within the economic system. Zürich’s primary function is to deposit money and other values in a neutral political space – its primary strong point is its independence to any economic development and any economy. Hong-Kong is a full financial center offering banking services, financial services, trading platforms for both shares and commodities in the core of a regional economy – it is what London can no longer be after Brexit. London emerged as a financial center in strict correlation with the British economy. Since the first goldsmith-bankers that around 1633 offered to the English merchants, tradesmen, noblemen and statesmen a national alternative to foreign borrowers (German, Italian and Dutch, London) so they would be able with no other interference to finance their commercial endeavors both on the Island and over seas, the financial sector of London served the British economy and state to attain their goals of expansion, conquest and control. The type of branches – saving, borrowing, insurance, commodity, currency exchange, clearings – and the various instruments – from deposits to derivatives – developed by the City bankers express the various stages and roles of the British power within the international system – financing and insuring the overseas expeditions, financing the prospection and exploitation of commodities, trading the commodities exploited overseas and setting the currency rates used in the international trade.
History may provide many accounts for policy makers and national strategists. One of these is the saga of Frank Goldschmidt from the Goldschmidt bankers family, who, in 1863, after the merger of Bischoffsheim, Goldschmidt & Cie bank with Banque de Crédit et de Dépôt des Pays-Bas, operation that eventually led to the establishment of BNP Paribas, leaves the Continent for England to become a City banker attracted by the dynamism of the British economy. This is an example of how capital and investors migrate following economic opportunities. It is not the place that matters, not the flag, but what really happens there. The Brexit would simply rise a wall (not necessary a tariff) between London and the Euro-zone economy.
The consequence of this is not simply economical, it is also political and geopolitical. The financial flows generated within the Euro-zone would finally concentrate within its growth triggering engine – the German economy. This would imply the rise of Frankfurt am Main as the most important financial center at the Western head of the Eurasian continent. In geopolitical terms and in the logic of longues durées it is a major shift (for three hundred years, all along modernity, after three systemic wars – Napoleonic wars, the World War I and War World II, and other major processes like colonization and decolonization the financial pole Western extremity of Eurasia was situated on the Island not on the Continent).
A FINAL NOTE:
On March 12th, 2019, on the day of submitting this article, the British Parliament rejected Prime minister’s Theresa May proposal of a Brexit deal negotiated with the European Commission. At this point, which seems, given the previous defeats of the Cabinet in the attempt to obtain the Legislative support, of no return, the United Kingdom chose to refuse any EU concession in order to avoid any obligation or compensation. We consider that this outcome does not affect the views expressed in the article.
Brexit with no deal offers, indeed, to the United Kingdom the total freedom in drawing its policies and strategies to cope for its post-EU life. From a politician’s point of view, this may look like the best position. It is not the case of a banker or some other financial investor. They will have to confront with barriers and make business with the Continent in far worse conditions than their counterparts from the associate countries in the European Neighbourhood (which enjoy the terms of the European Neighbourhood Policy) or the countries the EU perfected treaties with.
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