Imagine a future 50th anniversary: April 2nd, 2032. A resurgent Argentina has just landed troops on the Falkland Islands. The UK Government scrambles to respond. But after eight years of Labour rule, Britain is divided and impoverished, its Armed Forces cut to the bone. There aren’t enough ships and there aren’t enough men. No help is coming from an isolationist America. The EU is more worried about Russian tanks on the Polish border. China is laughing.
Within 48 hours, responding to backbench pressure and recognising the reality of relative power in the South Atlantic, Prime Minister Starmer accepts the offer of UN mediation. The Government knows exactly what the outcome will be, but has to pretend otherwise. It is the biggest national humiliation since Suez in 1956, and as symbolic as the fall of Singapore in 1942.
Sick fantasy? Maybe. But on our current trajectory of Nimby-driven economic stagnation, actual economic decline and eventual military defeat are all too believable.
Given pressures on the public purse, it’s hard enough sustaining military spending at 2% of GDP – let alone increasing it to 3%. Reports this week suggest that next week’s Budget will not contain much in the way of additional spending for defence. Yet given how much more dangerous and geopolitically fragmented the world has become in just a few short years, this is what many are calling for.
They’re not wrong to do so. But unless they have a plan for to getting the economy growing and fixing the state, or can persuade the public to trade in spending on hospitals and nurses for frigates and drones, then they’re not going to make much progress towards their goal.
All too often, however, foreign and defence policy is divorced from domestic policy. We’ve seen this in the decision to shut down the last of Britain’s virgin steelmaking capacity at Scunthorpe and Port Talbot.
It’s all very well shifting from blast furnaces to electric arc furnaces in the name of Net Zero, but depriving ourselves of the ability to make military-grade steel in the name of cutting a tiny fraction of 1% of global CO2 emissions seems like a questionable choice, given the wider context of a ‘more contested and volatile world’.
Some advocates of this shift argue that it is about Britain setting a moral example. If we lead the way on decarbonisation, the rest of the world will follow. Why do we need hard power, when we have such a comparative advantage in soft power?
But this is the same line of reasoning that has given us such execrable takes as ‘Beyond Britannia: Reshaping UK Foreign Policy’ (written by a former Foreign Office mandarin, naturally).
Take Argentina again. Britain has historically had a lot of cultural sway in Argentine society, with gentlemen’s clubs, polo societies and football leagues modelled after the English example. But English culture was so prestigious because of our wealth: the economic development of Argentina in the 19th and early 20th centuries was driven by British capital and technical expertise. We built their rail network. But of course, that didn’t stop the Argentines in 1982.
As Duncan Weldon has pointed out, on the eve of the Great War, when Britain was at its imperial zenith, we were basically the Saudi Arabia of energy, the China of industrial capacity and the USA of financial might – all at once. The same could certainly not be said by 1982 (though in hindsight it is clear that Britain was on the road to recovery from the stagnation of the 1970s).
Soft power, as much as hard power, is largely a function of prosperity. We forget that at our peril. As Margaret Thatcher well knew, we can only be strong abroad if we are strong at home.
It might seem like I’ve been unduly picking on Argentina in making this point. But the Argentine scenario has more than just symbolic significance. It’s still early days, but under Javier Milei, there is a real chance that Argentina might get back on the path to growth. It was a prosperous, near-developed country once. Then socialism happened and the rest, as they say, is history.
But if Milei can get inflation under control, tame the unions and free the economy, as Thatcher did in the 1980s, then who is to say that Argentina might not have the strong economy needed to support a Falklands campaign in the 2030s? Milei’s ‘chainsaw libertarianism’ might have more rhetorical bite than Sir Keith Joseph’s ‘Monetarism is Not Enough’, but they’re not entirely dissimilar. Moreover, Argentina stands ready to reap the revenues of a shale gas and lithium boom (not unlike North Sea oil coming onstream at just the right time for Thatcher).
Britain, in contrast, is sliding into economic sclerosis once more. Since 2010, GDP per capita growth has averaged just 0.9%, less than half the long-run rate before that. Productivity growth, at an average of 0.7% per annum, is barely a third of what it previously was.
Much has been made of how Britain’s economy increasingly looks like that of a developing rather than developed nation, or how Polish GDP per capita is set to overtake Britain in a decade on current trends. (Incidentally, Poland now spends about 4% of GDP on defence, while we’re set to increase welfare spending by £100 billion – about 3% of GDP – over the next five years.)
Could we follow in the footsteps of Peronist Argentina and slide into structural degrowth? It’s more of a possibility than it should be.
Luckily, we know exactly what we need to turn things around: reform the planning system to build millions more houses and deliver infrastructure at a lower cost; reform the tax system to incentivise work, savings and investment; pursue energy abundance and cheap electricity; remove barriers to innovation and entrepreneurship; fix our broken state… the list goes on.
If we do all this, then we shall be able to afford the military we need. Of course, there are other problems with our Armed Forces – the thought of battalions of diversity coordinators yomping to Port Stanley, intersectional rainbow flag flying, doesn’t exactly inspire confidence.
But wokeism in the Armed Forces is almost by the by at this point. The more fundamental problem, from a foreign policy perspective, is getting economic growth. With a bigger economy, we can afford the bigger and better equipped military we need to deter aggression and defend the national interest.
Want to keep the Falklands? Build some bloody houses.
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