THE OBSERVER – OPINION: Britain depends on the kindness of strangers to get by in the world. It doesn’t have to be like this
ritain has its back against the wall to an extent unparalleled in its peacetime history. In all the other financial struggles we have faced – the currency crises of 1931, 1949, 1976 and 1992 – we could fight our way out by belt-tightening and devaluing the pound within a structure of secure trading relationships, anchored first by empire and later the EU.
Our international assets exceeded our liabilities by a huge degree. Our national debt was well structured, built on long-term bonds whose servicing requirements were always manageable. We retained great industrial strengths. We were fundamentally creditworthy. Even when the financial crisis broke in 2007/8, the low national debt meant the country could put its balance sheet behind its banks and bail them out.
None of that is true today. The UK has been living beyond its means in every way. Internationally, we are no longer a creditor nation. We depend on the “kindness of strangers”, in the famous words of former Bank of England governor Mark Carney, to support our currency, as our liabilities to foreigners exceed our assets by 30% of GDP and growing. Our fading industrial base produces permanent current account deficits, which since 2000 cumulatively exceed £1.5tn: rather than belt tighten, we have chosen to run up debt and sell our assets to foreigners in vast quantities to maintain our living standards. Nor do we have empire or the EU anchoring our trade. We are alone. » | Will Hutton | Sunday, August 13, 2023
