By Hubert Schmitz
For an Anglo-German (I have dual nationality – British and German) it is heartbreaking to see how the UK Government is de-coupling from Europe. There is nothing wrong in defending the national interest. But what is the national interest? Our Prime Minister equates it with the interests of the financial sector, clustered in the City of London. This is deeply worrying.
Continental European Governments have come round in favour of the financial transaction tax in order to slow down speculative financial flows. IDS research has shown that such a tax can be effective. But the UK government regards it as against the national interest. Continental European governments want to exert more control over the financial sector. This is never easy but at the time of the last election even the Tories proclaimed that this was needed. Now it is judged against the national interest.
An even greater tragedy unfolds if we look at the wider picture and reflect on the position of the UK and Europe in the world. I have just come back from research trips to China and Vietnam. The pace of change and transformation in East Asia is visible and breathtaking. It has been for some time and seems set to continue. The global power shift is clearest in industrial production but is beginning to extend to industrial innovation. And most interestingly, it is extending to the green economy. China is ramping up public and private investment in wind power, solar power and electric vehicles. Meanwhile the UK and most of Europe is scaling back investment in the industries of the future.
The UK decision over whether and how to collaborate with Europe needs to be seen against this bigger picture. A well-functioning European financial and industrial system can find a way of competing and cooperating with China. We have shown this in a recent study on the European and Chinese wind power industry. A mal-functioning European financial and industrial system means that European governments, including the UK governments, will be limited to administering decline. The national British interest would have been served by working with continental European government on ways of reforming the financial sector so that it supports rather than undermines the real economy. It is a hard thing to do and the Prime Minister turning his back on Europe makes it even harder.