In Anthony Trollope’s era-defining novel of the 1870s – The Way We Live Now – the hot ticket is an invite to a party hosted by Augustus Melmotte, a rogue financier and possibly the richest man in London. Melmotte’s origins are mysterious and the source of his wealth is unclear, but that does not slow the rush of those prepared to toady for an invite and a glimmer of reflected glory. The political parties woo him as a supporter and he stands for Parliament.
The hilarious picture painted of Victorian London is of a greedy madhouse in which many have taken leave of their senses. Questionable schemes for railways in foreign parts are all the rage on the stock market. The media spreads gossip. Almost everything – love, friendship, marriage, family, social advancement – is up for sale, calibrated according to monetary calculations or the desire for self-gratification. Thank goodness modern London is nothing like that…
At Melmotte’s grand party, before his ignominious and inevitable downfall, the guest of honour, the man the Establishment is so keen to impress, is the visiting Emperor of China.
I thought of The Way We Live Now watching the scenes of assorted staged events in the UK held to honour the visit of the modern day Chinese Emperor, the General Secretary of the Communist party of China, Xi Jinping. Members of the British government were not quite as craven and blatant in their behaviour as the characters in Trollope’s masterpiece, but at points they came close. The renting out of the Royal family to impress visiting leaders is a British tradition. I am not sure though what our ancestors would have made of suspect deals signed with the Chinese to build power stations.
On one level, that is unfair. Xi Jinping is an economic reformer and there are niceties to be observed on state visits. The Chinese are also on a rapid journey towards capitalism, and if their human rights record is deplorable, the records of Britain and America were far from perfect when they were advancing to economic dominance, the former in the 19th century and the latter in the 20th century.
The government’s wooing of China is – at root – about hard-headed commercial gain. One of the main prizes, that got too little attention this week, was the scope for Chinese involvement in the City of London. This is really what it is about for the UK.
Not only are the Chinese interested in buying up high-profile assets in Britain, which means deals in London, they also see it is a potential home for all manner of other transactions.
In the summer, the Chinese government was attempting to stem the flow of capital out of the country, as investors ran away from a slowdown and declining Chinese stock markets, looking to park their wealth in safer locations. Longer term, the future is not capital controls. The enormous new and accumulated wealth of Chinese companies and individuals will have to find its way more freely out of China in search of investments and trading profits. The Treasury and the Bank of England are anxious, within the rules, to facilitate potentially highly profitable Chinese involvement in the City of London.
This week, China’s central bank issued £3.06bn of yuan-denominated bonds in London, the first such exercise outside China or Hong Kong. The London Stock Exchange and the Shanghai Exchange are studying proposals for cooperation, which could mean shares from London being traded in Shanghai and vice versa.
As one City leader described it to me recently: the Chinese want to work closely with a non-Chinese financial capital. It cannot be New York – which they see as too closed and difficult, considering America’s tougher stance on China – and nothing elsewhere in the EU comes close to outward-looking London’s clout.
It is debatable whether they will still be quite so interested in London as a financial base in Europe if Brexit happens and the role of European financial capital is up for grabs. Perhaps, we’ll see.
So much for the purely financial side of the balance sheet. It is possible to see the advantages of a boost for the City, and a reciprocal Chinese openness to British exports, while still being deeply concerned about the security implications. If the world was only about trade and talk of harmony, to the exclusion of all other strategic calculations, then the last couple of hundred years would have been very different indeed.
As it is, Britain’s pivot to China reveals just how badly divided the West has become in a dangerous period, with Islamist terrorists rampaging, the Middle East suffering a refugee crisis and the borders of the EU being tested and found wanting. The US administration is reported to be deeply uneasy about the UK’s kowtowing in such an obviously needy fashion to China, a country that routinely hacks and spies on American business and wants to assert itself.
In part, the British move is President Obama’s fault though. His entire foreign policy from his election in 2008 was predicated on a scaling back, to emphasise that America’s role was changing. It would not be a world leader; it would lead, if at all, from behind. He surely cannot be surprised when even friendly governments such as the UK take this as a sign that once the nice trips and photo-ops are done, America really isn’t all that fussed about what its allies get up to with other powers.
Now Canada has elected its own foreign policy dove intent on stepping back (apart from on climate change). Justin Trudeau, son of the former Canadian Prime Minister Pierre Trudeau, kicked Stephen Harper’s Conservatives out of office on Monday. One of his first acts was to withdraw Canadian jets from combat operations against ISIS in Syria and Iraq (that’ll show ’em). He also wants to legalise marijuana, raise taxes and increase government spending. It is not hard to work out how this latest version of an old experiment ends. Clue: badly.
The fracturing of Western unity has been a long process over the course of a quarter of a century, since the final days of the Cold War. Before that magnificent victory over Communist tyranny, the Western alliance had a clear purpose and a robust structure, led by the US with Britain and the Nato structure firmly in position.
Ever since, the situation has become progressively more complex and the West has struggled to define its role. The wars in Afghanistan and Iraq were presented by the leaders of the time as extensions of those old pre-1989 battles, for freedom, and Tony Blair saw himself operating in the tradition of a Churchill or a Thatcher. But the results were so messy and costly on the ground that public trust evaporated and any talk of robust western alliances is now viewed with suspicion.
This gives the Chinese a great advantage, of course, in that they can advance without any serious impediment or concern about offending anyone.
But even if Britain is no longer interested in liberal intervention in the Middle East or in a robust, unified defence of the values of the West in other spheres of influence, the government would do well to remember that if we sell ourselves to the Chinese, like crazed speculators in Trollope’s The Way We Live Now, then the buyer will have rights. If they can buy their way into building nuclear power stations, what happens when they own far more of the UK’s leading companies and hoover up the best of the tech boom on its way in Cambridge and elsewhere? What happens to freedom when they start buying newspapers and other media outlets? What happens when they start employing British politicians, post-retirement, naturally? What happens when the mode of operation on display this week – shut up and be nice, they’re paying – becomes expected as the norm?
In the end, capitalism that works and delivers prosperity is about more than just selling goods. It requires innovation if progress is to be made. Innovation requires a battle of ideas and a noisy and disputatious civic society. Democracy, freedom and basic human rights are the essential components that underpin and protect that process. They are not a luxury, or a decadent Western add-on.
