From The Business Times
THE contours of the 19th and early 20th century were defined in part by a series of consequential British foreign policy and economic decisions. As recently as 2007-2009, British policy affected global outcomes: whereas deregulation of the City of London contributed to the severity of the global financial crisis, British leadership at the London G-20 summit in April 2009 ultimately proved a stabilising influence. Today, however, despite all the political theatre and dramatic rhetoric, Britain’s impending exit from the European Union – Brexit – really does not matter for the world.
The global economy may have hit a patch of uncertainty, but this is more due to the mercurial actions of US President Donald Trump, self-proclaimed “Tariff Man”, who seems intent on undermining the credibility of the Federal Reserve, disrupting supply chains, and negotiating through random pronouncements. The eurozone is struggling to break out of its prolonged agonies, but the fundamental problem is still bad banking practices and potentially unsustainable public finances in some member countries. While Brexit may well prove an unfortunate idea for many inhabitants of the United Kingdom, the likely impact is lower British growth, not a significant disruption of regional – let alone global – trade.
It is hard to overstate British influence over global affairs after it became the cradle of the Industrial Revolution. From about 1750, British inventions created a wave of technological innovation that transformed how power was generated and how metal was worked. Railways and steam ships revolutionised transportation. Even when the centre of innovation shifted across the Atlantic, British capital and emigration supported industrialisation around the world.
Not all British contributions were positive, of course. Britain’s rise as a global power was accompanied by the horrors of the Atlantic slave trade and the many abuses of colonial rule.
But there is no question that British actions – good and bad – were consequential for many people, some of whom lived far away. British alliances and willingness to intervene militarily shaped European wars, from Napoleon till the German invasions of France in 1870, 1914 and 1940. Neville Chamberlain’s policy of appeasement – including his personal strategy and decisions at the 1938 Munich conference with Adolf Hitler – had a major impact on the timing, nature, and perhaps even the eventual outcome of World War II.
The UK’s peak global influence was probably in 1940-1941, when it stood essentially alone against the seemingly unstoppable might of Nazi Germany. Ironically, America’s entry into the war both tipped the balance decisively against Hitler and soon led to a complete makeover of the world economy.
The 1944 Bretton Woods conference made it clear that the era of European empire was over. Also gone was privileged trade within economic zones established by previous waves of imperial expansion. Post-World War II trading arrangements were determined by American preferences. With US business, labour and politicians unanimous in wanting access to all markets, successive rounds of trade liberalisation followed.
In 1945, the British Empire contained more than 600 million people, about one-quarter of everyone alive, making it (briefly) the most populous political entity ever on the planet.
Read the full post at The Business Times.
Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at the MIT Sloan School of Management, where he is also head of the Global Economics and Management group and chair of the Sloan Fellows MBA Program Committee.