Grand Strategy for Britain

Until  very recently one of the great British events, The Last Night of the Proms on BBC television and radio, featured two  great patriotic tunes: Rule Britannia and Land of Hope and Glory. The first of those became popular in the period of Britain's naval ascendency in the eighteenth century and the latter caught the national mood in the first decade of the twentieth century. Last year, in line with the Grauniadista welcome for the delusion that concentrated national defence is no longer appropriate, the flag-waving component was reduced to an exiguous addendum to a dreary programme. It is unfashionable to discuss the defence of the realm: yet the determination of this ultimate national interest is the primary duty of any political system. It is a centuries-old truism that military planning is always geared to 'the last war', with the result that today's orders for upgrading military and naval supplies, and manuals for training personnel, will not be appropriate for the next demands that are made of them. So when the next - unexpected - campaign begins there is a rush programme as the generals rethink their tactics, and otherwise-preoccupied politicians try to get their heads around a new strategy.

Sometimes in a misconceived plan to get ahead of events, bureaucrats and desk-bound military advisers may decide to develop a procurement strategy that is 'flexible', so that the members of the forces and their equipment are reconfigured supposedly to deal with any contingency. Such flexible planning gives critics a field-day every time the march of events shows that purchasing decisions were erroneous. Constant battering from opposition politicians, and from disappointed supporters of the government and from the media drives the defence establishment into a small world of their own where they discount the criticism that is coming at them inconsistently from many - often conflicting - points-of-view. The over-riding pressure that the defence establishment cannot resist is that which comes onto the state budget from social parasitism: the growing cost of benefits, subsidies for fake jobs, stultified bureaucracy, failed schools, 'Micky-Mouse' university programmes [funded by the state through the Student Loans Company], tax credits, bail-outs of 'bad' banks, overseas aid, net European Union contributions, NHS administrators and all the other Aunt Sallies which, for all their familiarity, are genuinely eligible for reform. Each increase in social spending stimulates a call for retrenchment somewhere else in state spending: and the constantly-criticised defence budget is a prime target. Hence a backward-looking but intellectually flabby programme of procurement, maintenance and human resources management looks ripe for pruning; and is often chopped back. Such a programme of slash and burn is under way at present and only the sleaziest careerists make any pretence that there is a rational strategic concept to the absurdly misnamed Strategic Defence Review that covers a craven and inconsistent bundle of false economies.

The 'right' policy for procurement and training can only be formulated when a country is prepared to plan for the next war to a degree that implies being ready to define the terms on which the next war - if war becomes inevitable - will be fought. This way of thinking was defined by US Admiral Alfred Thayer Mahan [1840-1914] in his magisterial and hugely influential book The Influence of Sea Power Upon History, 1660 - 1783. If he had taken a longer period he would have reinforced his point by assembling an even greater mass of historical evidence. Rome built its empire on seapower and almost all its successful cities were sea or river ports: the empire was most vulnerable away from sea and river routes, and was finally destroyed by the combination of inner rottenness and the incursion of uncontrollable peoples from deep in the Eurasian landmass. Before the rise of Rome Europe had been 'saved' by Greek seapower that was brought to bear at Salamis as much as by the heroes of the battle of Marathon. In the sixteenth century Europe was 'saved' again by a massive combination of Christian fleets to defeat the Turks at Lepanto. The loss of the majority of the settled North American colonies to the USA made Britain more keen to develop a 'second empire' in India and a chain of new colonies spread around the globe. This commitment to seaborne trade and settlement could only be viable if it was protected by overwhelming naval power. Britain's navy was so well developed between the loss of the USA in 1783 and 1804 that Nelson had the resources with which to smash the combined French and Spanish fleets at Trafalgar. For a century thereafter it remained British policy to have a big enough navy to destroy any combination of potential enemy fleets in a 'decisive battle'. In the light of Mahan's book the USA adopted a blue seas policy that has been maintained in the huge fleets and nuclear submarines that can intervene significantly anywhere on the globe.

After 1870 newly-unified Germany decided that it could only be a global power if it could take on the British Royal Navy. This led to the 'naval race' in which both countries committed huge technological resources and a mounting proportion of national income to building ever more massive and powerful warships. So closely balanced were the British and German fleets that they evaded having any decisive battle between 1914 and 1918. In a reversal of the Nelson tradition the British admirals were in shock after the indecisive confrontation off Jutland in 1916, which had indicated that German ships and gunnery were superior to the Royal Navy. The  British Grand Fleet skulked in Scapa Flow while the German High Seas Fleet passed time in home bases and  the German U-boat campaign forced food rationing on the United Kingdom. The First World War was won on land by a Franco-British alliance with US support: which was not what naval grand strategists on either side had foreseen. Only the 'eccentric' old soldier Lord Kitchener saw how the war would shape up: on being asked to become War Minister as the German army marched through Belgium in August 1914 he declared that the war would last for four years and he would start building the necessary army of more than a million men.

The 'investment' by both sides in their Grand Fleets was so much waste. During the war vastly greater sums of money had to be spent on the army and the anti-submarine campaign, especially by the British. For the second round of the European conflict that began in 1939 [a few years earlier than Hitler had planned for] the cost of fielding largely mechanised armies was augmented by huge expenditure on aircraft. Surface naval forces were much less significant to Germany, which concentrated on U boats even more than in the first world war; but the Royal Navy was still necessary to maintain seaborne trade against the U boat threat and to deliver the army and their supplies to their battlefields.

Japan decided very soon after centuries of national isolation ended in the eighteen-seventies that Mahan's new book had a special message for their imperial archipelago. If Japan was to be a power it must be a naval power. By 1904 the Imperial Navy had the means to score a decisive victory over the Imperial Russian Navy at Tsushima and as they built a land empire in Korea and China they plotted to achieve a similar strike against the USA. They saw their opportunity when the US had committed significant resources to assist Britain to defy Hitler in the European war. The plan was to achieve a decisive victory in the Pacific by destroying the US fleet at Pearl Harbor. The raid [in December 1941] was a partial success, but it missed the aircraft carriers. Much more significantly the Japanese strategy stupidly discounted the ability of the US economy to generate enough ships, aircraft and other resources to smash the Japanese Empire within a very few years. The atom bomb cut short the time that the war needed to continue, and then began the Cold War era where Mahan's concept of 'decisive victory' was trumped by the horrific prospect of mutually assured destruction under which combatant countries equipped with hydrogen bombs could utterly destroy each other, with a potential incidentally to destroy civilisation all over the world.

Compared to these massively significant historical episodes, the present status of Britain and its armed forces seems a first glance to be irrelevant in world-historical terms; but that is far from the truth. Britain's forces are rated highly within the world's top ten for effectiveness and scope. Britain has nuclear weapons-carrying submarines, so can cause massive destruction in the territory of any enemy state: this is enough to ensure that Britain's sovereignty will not be challenged - as long as it is unequivocally believed that the British government would actually use the weapon in extremis. Britain in uniquely advantaged in the world - still - in the amount of ocean over which it claims [and can assert] sovereignty. A recent conference in London of the territories under British sovereignty reminded the few observers who bothered to take notice that The United Kingdom and its Dependencies comprises all the British Islands, South Georgia, The Falklands, Tristan da Cuhna, St Helena, Ascension, several Caribbean territories, Diego Garcia and other Indian Ocean outposts, and a sprinkling of points of land in the Pacific.

A strong fleet of nuclear-powered submarines equipped with nuclear weapons can ensure that this scope of sovereignty is maintained. A force of commando carriers can bring forces to support airborne troops on the ground in any threatened territory; and small ships - corvettes and sloops and patrol boats - can do the dogged detailed defensive work while advanced destroyers prepare to check potentially hostile forays.Alongside this mass of resources there is a need for an excellent army that can draw at need on large, well-trained Territorial soldiers. With the assurance of these resources, the United Kingdom can embark upon the essential project for this millennium: the conservation, farming and mining of the hundreds of thousands of square miles of sovereign territory and ocean This immense, mostly unexploited and largely unexplored environment can sustainably deliver up real resources for the indefinite future. No other country is richer in natural assets per capita of population: though Russia and Canada and Australia are comparably endowed.

The greatest issue in Britain today is not the parlous state of economic statistics, or the national debt, or the risk posed by the banks, or the potential impact of a collapse in the eurozone, or crime, or poverty, or unemployment, or the failure of schools, or the problem of funding and managing the NHS, or immigration, or racial tensions, or energy supplies, or pensions, or the failure of the political class, or inflation, or the ageing of the population or any combination of the well-known list of national woes. The greatest issue that underlies all the others is the lack of any national aspiration: the absence of anything for the broad mass of the people to believe in and to aim for. Britain has immense advantages over other countries, and these benefits have been retained by the sheer luck of the Queen's role as a coherent force which has held firm through the decades when the Empire was being thrown away and the painfully accumulated national stock of capital was being squandered through the elections auction game. The mood in the public has already changed, from disillusion with politicians to disgust at the vile egocentricity of the entire naive and ignorant political class [which includes  most of the specialist radio, TV and press commentators as well as the lifelong politicians]. The nation is looking for something new, and deserves something different. To grasp what we have, develop it and give thanks that we have not yet lost it, will be a good first step.

The Taxpayer Cheated - Again

The sale of the 'good' successor of Northern Rock to Virgin Money is just the latest in a long series of cases where the institutional incomprehension of the Treasury has played strongly against Britain's national interest, to the disadvantage of taxpayers. A 'price' of some £750 million has been set on the sale, of which roughly one third will be plundered from the company's balance sheet; and a comparable additional sum has been supplied by an American business venturer. So for a net £300 million - or rather less - an asset that cost the taxpayer well over a billion pounds [and over a thousand people their jobs] Virgin have gained a profitable business that will repay the investment in a couple of years. Bully for Branson! The Treasury excuses this outrage by asserting that the European Union requires the sale, according the a set timetable.

Eurorats are arrogant, but they are not idiots: they know how unpopular their vampire squid is to the British public, and they would surely have been willing to accept the deferment of a date that is anyway months in the future; especially in the knowledge that if the UK had simply told them to 'sod off' there is very little effectual that they could have done about it. The blame for the sale must fall on the Chancellor of the Exchequer, in whose name the decision was announced, and on the civil servants who advised him. Blame does not attach to the bankers who advised the Treasury, as such consultants normally deliver the advice that the customer wants. The incident may lodge in the mass memory, alongside Gordon Brown's idiotic sale of gold reserves at the bottom of the market. But there are other aspects of the situation that can be used to illustrate a long running saga of misreporting.

There is no gain to the economy from this sale. The country has 'lost' more than half a billion poundsworth of 'value' from the national balance sheet, because around £500 million has gone from the 'value' of the banking sector and a further £250 million has been taken over by a foreign investor. The national accounts should be adjusted to show these facts: which amount to negative economic 'growth' of around £750,000,000.

I have been a connoisseur of this sort of misrepresentation for many years. When Dr Beeching was axing thousand of miles railway, nobody was interested in the extent to which the value of national assets was being diminished. All attention was focussed on the running-costs of infrastructure that was abysmally ill-managed. To my best knowledge, nobody but me was pointing out that to construct a mile of railway - even of rural branch line -  even then cost many millions of pounds. So the opportunity-cost of every mile closed should be deducted from that year's GNP  [Gross National Product] figures and from future estimates of the 'value' of the nation's assets. Any cash returned by UK-based buyers to British Rail or to the government from the sale of rails, sleepers or land was an internal trasfer: it was turnover within the year but it was not an addition of value. Any structure built on the site, or with the use of former railway materials, was a subsequent addition to the nation's assets: but in very, very few cases was the 'value' of replacement land use the same as its occupation by a railway. Similar considerations can be applied to dockyards, airfields and other assets that have been sold at knock-down prices, often after large expenditure by the government on site clearance. Although such assets require large expenditure on routine maintenance, and intermittent upgrading, they are of permanent value to the state; especially when they are constructed to support the national defence. Military technology changes, so assets to support the current shape of the forces must constantly be adapted, but the gaderene rush that has taken place since the second world war to dispose of assets that would be useful in the event of war long ago passed the point where the competence of the state to defend its people was devastated.

Industrial plant such as a steelworks can be kept running for a century or more, if it is properly upgraded; but it is eventually in a position where newer technologies make it comparatively uncompetitive. At that point it should be decommissioned; and its 'value' as a national asset should be written down over the years so that its net worth is recorded as zero even while it is producing output. Then the real and the notional loss to the national asset register can both be recorded as zero. Most industrial plant lasts much less time, and is written-off accordingly; and IT equipment and software is normally depreciated over a very short term. In most routine situations in business and in the public sector accountancy is effective in recording and reducing asset 'values' in a sensible and comprehensible manner. But strategic assets, such as the whole defence estate and infrastructure such as railways, roads, IT networks, power grids, reservoirs and flood defences stand outside the easily-accountable business arena; even if they are administered for the public by business corporates. The fact that they are enabled to exist only by legislation [or by legislatively authorised decree] and are regulated in their pricing and operations by criteria quite separate from those that are applied to 'normal' business shows that the state is fully aware of the distinction, of the public interests that are involved, and of the political sensitivity that can arise from mismanagement.

The Northern Rock incident is relevant to this whole discussion because the crisis of 2007-8 [and its long prehistory] shows that banks are quintessentially strategic assets, albeit they are in the main appropriately run as business entities. The whole world community, led by the G20, is busily setting new rules for the banking sector: and is unnecessarily drawing insurance into the same regulatory framework. But this has not yet tackled the issue that is exemplified by the sale of Northern Rock. What is the 'value' of a bank to the country in which is is domiciled? How is that 'value' calculated, reported and adjusted? It is a key part of the wider question as to how strategic assets are recorded and revalued in the computation of national assets and net national income. These are vital matters and I will revert to them in the coming days.

I will also return to the reason why I put a single inverted comma around the word 'value' in this [as in some other] postings to this blog. The issue is vitally important to any right understanding of the economy and it is a major underlying theme in my Personal Political Economy; see the link from this site.