All eyes are focused on the struggling UK economy, and on each quarter’s GDP numbers. TIM recently completed a fascinating benchmarking program in Britain, and what we learned will be the subject of several future blogs. Meanwhile, let us put Britain into perspective — three centuries of perspective.

The 1800’s were the British century. We had Globalization 1.0. The British Empire, on which the sun literally never set, created a global trading system far more durable, far more global, than the present one. There were fewer government restrictions and impediments to trade. We had the Victorian Internet — the telegraph. The gold standard ensured no country could issue excess currency. Britain set up the system to profit, often at the expense of its colonies. And Britain grew wealthy.

But by 1900 the Empire was waning and America was replacing Britain as the world’s dominant power. The 20th Century was American. America learned to do industrial R&D from Germany and from Britain, and did it better. Two world wars ended Globalization 1.0. Bad politics, not bad economics. But at Bretton Woods, in July 1944, 65 years ago, Globalization 2.0 was born. It worked fantastically until 2007. But it was flawed. The world currency was the dollar. But America overspent, undersaved, flooded the world with dollars and ruined the system. In 2007 it crashed. The UK suffered even more than America, because its financial services caused, and profited from, the bubble as much or more than America’s. Bad economics ended Globalization 2.0. Bad American economics.

The UK chose to join the European Union but not to adopt the euro. It left the European Exchange Rate Mechanism on Sept. 16 1992, under PM John Major, and never rejoined. At first this appeared brilliant. The flexible pound gave Britain elbow room to stimulate its economy. But after the global recession this decision seems flawed. The Euro countries are recovering much faster than Britain — especially Germany.  

Britain clearly needs to reinvent its business model. So far it has focused on short-term survival, rather than long-term competitiveness. 

So which country will dominate in the 21st C.? Will Britain continue to wane or will it recover? With a likely shift from Labor to Conservative government in the works, Britain desperately needs transformative change. But will it happen?   And how will Britain’s global companies endure and prevail within this atmosphere of uncertainty?   

Perhaps the best way to understand the British is by listening to  this song A British Tar (a tar is a sailor) from Gilbert and Sullivan’s H.M.S. Pinafore, 1878. Here is a portion of it:

A British tar is a soaring soul,
As free as a mountain bird,
His energetic fist should be ready to resist
A dictatorial word.

His nose should pant
and his lip should curl,
His cheeks should flame
and his brow should furl,
His bosom should heave
and his heart should glow,
And his fist be ever ready
for a knock-down blow

His foot should stamp, and his throat should growl,
His hair should twirl, and his face should scowl;
His eyes should flash, and his breast protrude,
And this should be his customary attitude,
His attitude
His attitude

Are there still “British tars”? Where? Will Britain’s attitude, energy and innovation continue to sink, behind China (#1?), America (#2) and even Germany (#3)? Or will the British tar make a startling comeback?

Stay tuned, and keep your eye on the long run.