Sol Sanders Archive

Once again an uneasy world looks to England for hope

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With the Euro [and the EU] facing a life-and-death struggle, Britain again sits apart clinging to its own embattled pound sterling while France’s Nikolas Sarkozy flits from problem to problem and Germany’s Chancellor Angela Merkel faces a German electorate sorry for itself, now called upon to bail out the Continent with its beggar-your-neighbor subsidized export earnings.

Yet “the Greek disease” has jumped the Channel. London’s budget deficit is on a par with Athens’. The 2007 credit crisis recession lasted six quarters, longer than any other major industrial country. The economy shrank by 6.2%. Previous governments borrowed so heavily that Britain has the highest ration of government borrowing to GDP in the 20 largest economies. Sterling has lost around a quarter of its value since mid-2007.

But the U.K. is not Greece. Bankers, generally, trust in the U.K.’s ability to crawl out of this crisis. It has never defaulted. Unemployment looks better than elsewhere although it is not likely to ameliorate quickly. There is considerable labor unrest. But Britons pay their taxes. It remains the world’s sixth largest manufacturer. Its openness to trade, capital flows and migration will keep The City a strong competitor for a Wall St. facing Washington’s avenging controls. Even though Cameron, electioneering, shied from it, there is enough of the Thatcher Revolution left to permit flexibility that Continental societies don’t have.

Still Cameron has all the developed countries’ same conundrum – how to stimulate growth by trimming budgets that caused the crisis.

The outlook is not all black. Business groups expect growth of just over 1% this year and over 2% in 2011. Cameron has promised a strong role for the independent Bank of England’s Governor Mervyn King who kept “stimulus”, relatively, within bounds. King did set interest at 0.5% since March 2009 and threw £200 billion at the credit markets. Exports were helped by the falling pound, and domestic demand grew if temporarily with a reduction in VAT and subsidies to car buyers.

But just as important for the rest of the world is how Cameron handles the growing cultural crisis. Britain’s long and [sometimes too] intimate ties with the Arab and Islamic world — and relations with its own three million Muslims are crucial in the continuing battle between the West and Islamic terrorism.

As a member of that dying breed of communicants in the wobbly Church of England and as a skilled public relations practitioner, Cameron has bobbed all over the map in the continuing dilemma between security and Britain’s unique personal freedoms. Confusion reigns in the conflict between individual rights — the hallmark of British culture gifted to the rest of the world — and everything from sharia law to sex and porn. Commenting on one difficult decision, Cameron said: “Not for the first time, I found myself thinking that it is mainstream Britain which needs to integrate more with the British Asian way of life, not the other way around."

High priority is Cameron’s relations with Washington. President Barack Obama’s post-election enthusiastic endorsement, hopefully, represents a turnabout. Mr. Obama has gone out of his way to denigrate “the special relationship” and chivvy the Brits. [No one inside the Beltway has an explanation for sending back an Oval Office bust of Winston Churchill, gifting the Queen an electronic gadget, snubbing former Prime Minister Gordon Brown, etc., etc.]

Cameron, for his part, given stringent economic restraints, won’t be able to make military commitments former Prime Minister Tony Blair made for Iraq and Afghanistan. But the British have a role to play and Cameron, in Britain’s great tradition of noblesse oblige, might be the one to play it skillfully.