ODIN'S EYE: WORLD MARKETS ACHILLES HEEL
If defence experts were to look beyond their narrow horizon of defence capabilities and technology, the financial crisis that rocked the international markets has two important lessons for them. The first is about how commodity prices, not just oil, and the stability of banks, especially those labelled TBTF - or Too-Big-To-Fail - are at least as important to the security of what may still be called the West as it pursues its so-called War on Terror. If order in the world of commodities and banks does fail, the economic cost of failure and risk is greater, far greater, than the pain caused by the hatred of terrorists and bombs in (and under) our streets.
The September 11 strikes on the USA caused catastrophic economic damage, which was fortunately weathered. More recently there have been other economic shocks that show how vulnerable the West is. The cost to British taxpayers of a run on an English bank, the Northern Rock, is about twice the national defence budget. A single rogue trader in a French bank is alleged to have cost Societe Generale more than £3.7 billion. At a more domestic level, customer and staff theft from shops and offices - i.e. shoplifting - is also a cause for concern, as it saps the national wealth. In Britain, for example, shoplifting in all its forms damages the retail industry by more than £2bn each year. Furthermore the incidence of shoplifting has nearly doubled since security measures were redirected towards combating the perceived threat of terrorism. Financial stability, which in this case includes policing the banking sector as well as the prevention of shoplifting, is at least as important to the defence of the West’s way of life as the efforts of armed forces. And security measures must not be directed exclusively, or even disproportionately, against terrorism. There are also lessons to be drawn from how the different nations dealt with the recent financial crisis. The USA reacted swiftly and with overwhelming force to the drop in share prices, though in this case overwhelming force took the form of a massive cut in interest rates. The French, who some accuse of causing the financial crisis of ‘Black Monday’, on January 20, acted in secret and entirely in the national self-interest, while the British government dithered. Several months after the disturbing scenes of people queuing to take their money out of Northern Rock, the British government still appeared not to have a solid answer to the crisis. Dithering seems to be a characteristic of Prime Minister Gordon Brown’s administration, which is strong on rhetoric and weak in practical matters and the execution of policy. This also translates to Defence, where, faced with a critical need to invest in ensuring the Royal Navy keeps pace with the navies of other leading economic nations, the signs are that yet again the contract to actually get on with constructing two new super-carriers (CVFs) will be delayed by a further two years. It is interesting to compare the confidence of other nations in the traditional hard power of maritime power - and the security and influence it buys - with that of the UK, where the socialist government instinctively finds the proper use of naval forces distasteful.
VIVE LA FRANCE?
Take the French, who are members of the EU - indeed they see themselves as its leader - but are determined to maintain a pursuit of what is in the national interest, shackled neither by the desires of their European neighbours nor the United States.
Just a few weeks ago, they announced the setting up of a new base in the United Arab Emirates, a former British protectorate. The base will make France only the second country, after the USA, to have a permanent base in the Gulf. Observers who see this as France aligning her policy with the USA are, of course, wrong: This is France looking to the main chance, in order to secure influence, oil supplies and arms sales. France already has nuclear accords with Libya and Algeria and now hopes to help the United Arab Emirates construct a nuclear power station. Such confidence in national purpose is, in some ways, admirable. It is also interesting to note that the French late last month (Jan) conducted naval exercises with a Russian naval task group in the Bay of Biscay. From 1991, until Russia and Britain fell out over the assassination of former KGB spy Alexander Litvinenko, the Royal Navy and Russian Navy enjoyed strong bilateral ties. As it emerged from the Cold War, the Russian Navy even adopted some of the ceremonial and operational practices of the RN. Now it appears the French Navy has supplanted the RN in the former Red Navy’s affections and respect, so mirroring the deep freeze in relations between London and the Kremlin. The French deal in Realpolitik, rather than ethical foreign policies.
Meanwhile, back in the UK, Gordon Brown continues to dither and on the London stock exchange, BAE Systems and Vosper Thornycroft shares were dropping at news there is still no date for their joint carrier project to begin. It appears that Brown’s navy policy is a fleet-in-being, but where the ships do not even exist, and he is determined to keep the Royal Navy in suspense for as long as possible. Odin is placing a bet at the bookies that the first of the new carriers for the Royal Navy will not be in service before 2018. Perhaps the fact that the French Navy wants its own version of the same CVF design will finally provide the impetus needed to get the project underway? One cannot imagine Paris putting its ambitions for a second big carrier on hold much longer, so expect a phone call from Sarkozy to Brown telling him to pull his finger out.