If you think we’re wobbling in the face of debt woes, absorb this recent encounter with a downturn: “In early 1996, Bill Clinton warned that because the debt ceiling had not been raised, Social Security cheques might be late. This scared Congress into passing a small increase in the debt ceiling solely to meet Social Security payments.” Economist, January 13, 2011*. Clinton’s record appears a matter of hot debate. Congress it is suggested shackled his excesses. But the current government might pause for a moment and think about the US’s love affair with debt and our love affair with the US. There is an intriguing paradox in this ‘special relationship’.

America is what Niall Ferguson (is it Neil or Nihall?) calls a ‘debtor nation’ in his book Colossus. He paints the US as an Empire in practice, or what he terms, an hegemony (a more palatable term to an American), extending its influence more pervasively than the British Empire ever did. Either way the US lives on debt; its propensity to ‘take a flier’ unrivalled. Of course doom merchants have predicted the US eagle will descend like a brick for some time.

Doom merchants predicted Britain’s demise too; difference being they were right. France,  Germany and the US accelerated past the British at the turn of last century. They watched us, spied on us in fact (yes, industrial espionage secured our trade secrets), copied us and did it better. Same story. We were holding onto our market lead by our eyelids only to finally give up the ghost in the 1950s…. wait! So it was WWII that killed our economy? Yes and No.

We were bankrupt two years into WWII; but we still led in key markets by the end of the war. Order books were busting. Slight problem though. We had no cash. Our pounds sterling had crossed the Atlantic and were busily super-charging the US economy to its white heat of ‘1950s America’. America’s Dream Decade was built on our pennies; they were cash rich and we were cash destitute. Maynard Keynes literally killed himself begging for some of that cash back. Without it we couldn’t meet our customers’ needs. And… we didn’t. The orders for ships went to Sweden and elsewhere. But why you ask? The US gave us a huge pile of dough. They sort of did but…

Britain had an emotional problem; largely we didn’t wish to believe our Empire was dead. In fact few of us have. Even Blair transmogrified from CND’er to Freebooter as he breathed the fumes of No. 10’s oak and leather. And here is an uncomfortable notion: Britain’s debt is largely fuelled by our desire to be a Top Table nation over the past 60 years. But why?

When the factories of 1950s’ Britain were switched back to commercial production in 1945 we had capacity to meet our orders. With a loan from the new SuperPower across the water we were up for it. Germany and France had shrunk from Imperial aspirations and took the ‘let’s be a small European club’ approach. We on the other hand said ‘We must be Great again!’. And America quietly let it be known that the price for greatness was being the lead Euro nation in the NATO. Oh, what an honour! Well, the price for our exalted status involved a ‘small’ conflict with Communism that needs dealing with, with Round One in Korea.

In effect our desire to be great meant support of the Anglo-Saxon worldview; and the capital of Anglo-Saxony was now in Washington. To be funded above the Marshall Plan’s injection meant splitting our factory production in half and re-arming to protect an Empire that didn’t exist. Consequently we spent the 1950s with 300,000 troops overseas guarding sand. 80,000 protecting a non-vital asset called the Suez Canal. Only by the 1960s could we resist the US’s governance, but by then our manufacturing had been dealt a mortal blow. The working man and woman weren’t the mortal enemy constructed in the 1970s as they’d built the economy largely through self-directed leadership and then fought two World Wars only to be undone by a leadership that hankered after greatness.

Debt ‘became-us’ due to our vision of ourselves; we could not conceive of our nation as ‘small and European’. Our natural resources long exhausted (in fact we’ve never been able to feed ourselves alone) we needed high-value businesses but shot ourselves in the foot as the money for re-tooling went on tanks and guns for a phoney-Cold-War. Driven I say by self-engrandisement, and leaders whose vision of our nation is rooted more in the 19th century, let alone the 20th.

America has only been debt free for one year in its life time; its vast natural resources and internal market has caused it not to blink at eye-watering debt levels. For us, our key resource is intellectual. But our Achilles’ Heel remains our conception of ourselves. Our very peculiar brand of British Angst (desire to be significant) ensures we pile debt to continue to fund us as a world power (lead partner from Korea to Iraq and Afghanistan), with vast defence expenditure; when in reality we are a small European nation with a desperate need to humble ourselves and compete. As Germany and France built their post-war visions we look still into the rear view mirror of a great past, catching the cut of our jib, which still looks suitably Imperial, if not Royal. As Mrs Thatcher said in 1991: ‘Only good comes from the English-speaking world, nothing good comes from Europe’. I wonder what she was referring to?

* http://www.economist.com/blogs/freeexchange/2011/01/americas_debt

The theme of the Global Leadership and Change 2011 Autumn Lecture Series is: Renewal: Building A Sustainable Future