The growth of new Europe and Asia
As UK Chancellor Gordon Brown takes his leave of the Treasury and wanders up the road to Downing Street, he will need to think more about the world, and less about the minutiae of UK public finances. The UK Prime Minister-in-waiting has always liked to...
As UK Chancellor Gordon Brown takes his leave of the Treasury and wanders up the road to Downing Street, he will need to think more about the world, and less about the minutiae of UK public finances. The UK Prime Minister-in-waiting has always liked to play his role on the international stage but will have to devote even more of his time to international matters. Top of his agenda will, no doubt, be Iraq, but there are plenty of other issues he will be thinking about.
There is, for example, Britain's place in Europe. Adoption of the euro is firmly ruled out but what about Britain's influence in the continent's affairs?
Europe's political map has been redrawn since the fall of the Berlin Wall. This has all sorts of implications but, from Britain's point of view, the most obvious is a gradual loss of influence elsewhere in the world.
This can be seen in a number of different ways. Attempts to change the EU Constitution may have been opposed by the French and Dutch but they might just as well have been opposed by the British. Of the EU27 countries, for some such as the six founders and Britain, there is an inevitable conflict between their own sovereignty and the success or otherwise of the whole EU.
A desire to reform the International Monetary Fund and provide a bigger voice for countries like China is admirable but reform will inevitably reduce the voting rights of others.
A belief in the sanctity of free cross-border capital flows is difficult to criticise - it does, after all, create the conditions for a more efficient allocation of economic resources - but it is a conviction more easily upheld if all nations support appropriate standards for corporate governance, shareholder rights and legal due process. Those countries with the increasing financial muscle to acquire foreign assets - China, Russia, Iran, Venezuela and others - do not exactly have a blemish-free record when it comes to the defence of property rights.
Mr Brown has strong convictions in favour of free trade but he knows that not all countries share his views. It is evident that in Washington the mood is clearly shifting towards a more aggressive stance against China, which has replaced Japan as Capitol Hill's economic bête noire.
On the international stage Britain's influence is reducing but it is not the only country in relative decline. The Germans, French, Italians and Spanish are in a similar situation. Even the Americans have to face this new reality. Why is this happening?
The answer lies with the economic emancipation of billions of people who were previously under the yoke of Communism or some form of totalitarian regime. Today, China, India, Vietnam and the many countries that make up central and eastern Europe are making extraordinary economic progress. Freed from the shackles of state control, they are making their own contribution to the global economic order. This should be a matter for rejoicing. Many people in the west, though, are rather more circumspect. For some, the success of these emerging markets is less about economic emancipation and much more a threat to their own individual livelihoods. This is, potentially, an unstable situation.
There is also fear of growing income inequality, which in turn creates a sense of alienation within individual nations. Globalisation brings many benefits - including a narrowing of income differentials across nations - but also seems to create widening income and wealth discrepancies within nations.
What should democratically-elected politicians make of this dilemma? The biggest danger of all is that the whole edifice of globalisation crumbles, as developed countries attempt to protect their voters' (i.e. workers') interests, and emerging markets compete for access to raw materials.
There are no straightforward answers. Nevertheless, there is undoubtedly a shift in the balance of global power affecting not just the UK but also the rest of Europe and, importantly, the US. The world is definitely changing.
• This report was compiled by Peter Calleya, manager corporate strategy and research, HSBC Bank Malta plc, on the basis of economic research and financial information produced by HSBC International Bank.
There is, for example, Britain's place in Europe. Adoption of the euro is firmly ruled out but what about Britain's influence in the continent's affairs?
Europe's political map has been redrawn since the fall of the Berlin Wall. This has all sorts of implications but, from Britain's point of view, the most obvious is a gradual loss of influence elsewhere in the world.
This can be seen in a number of different ways. Attempts to change the EU Constitution may have been opposed by the French and Dutch but they might just as well have been opposed by the British. Of the EU27 countries, for some such as the six founders and Britain, there is an inevitable conflict between their own sovereignty and the success or otherwise of the whole EU.
A desire to reform the International Monetary Fund and provide a bigger voice for countries like China is admirable but reform will inevitably reduce the voting rights of others.
A belief in the sanctity of free cross-border capital flows is difficult to criticise - it does, after all, create the conditions for a more efficient allocation of economic resources - but it is a conviction more easily upheld if all nations support appropriate standards for corporate governance, shareholder rights and legal due process. Those countries with the increasing financial muscle to acquire foreign assets - China, Russia, Iran, Venezuela and others - do not exactly have a blemish-free record when it comes to the defence of property rights.
Mr Brown has strong convictions in favour of free trade but he knows that not all countries share his views. It is evident that in Washington the mood is clearly shifting towards a more aggressive stance against China, which has replaced Japan as Capitol Hill's economic bête noire.
On the international stage Britain's influence is reducing but it is not the only country in relative decline. The Germans, French, Italians and Spanish are in a similar situation. Even the Americans have to face this new reality. Why is this happening?
The answer lies with the economic emancipation of billions of people who were previously under the yoke of Communism or some form of totalitarian regime. Today, China, India, Vietnam and the many countries that make up central and eastern Europe are making extraordinary economic progress. Freed from the shackles of state control, they are making their own contribution to the global economic order. This should be a matter for rejoicing. Many people in the west, though, are rather more circumspect. For some, the success of these emerging markets is less about economic emancipation and much more a threat to their own individual livelihoods. This is, potentially, an unstable situation.
There is also fear of growing income inequality, which in turn creates a sense of alienation within individual nations. Globalisation brings many benefits - including a narrowing of income differentials across nations - but also seems to create widening income and wealth discrepancies within nations.
What should democratically-elected politicians make of this dilemma? The biggest danger of all is that the whole edifice of globalisation crumbles, as developed countries attempt to protect their voters' (i.e. workers') interests, and emerging markets compete for access to raw materials.
There are no straightforward answers. Nevertheless, there is undoubtedly a shift in the balance of global power affecting not just the UK but also the rest of Europe and, importantly, the US. The world is definitely changing.
• This report was compiled by Peter Calleya, manager corporate strategy and research, HSBC Bank Malta plc, on the basis of economic research and financial information produced by HSBC International Bank.