Is Britain’s growing national debt a matter of national security? In a speech this morning, Liam Fox said so. Sure, he said, you can protest at the defence cuts — but strength comes from having a strong economy and strong national accounts.
“Those who are arguing for a fundamental reassessment of the Defence Review are really arguing for increased defence pending. But they fail to spell out the inevitable result — more borrowing, more tax rises, or more cuts elsewhere. The bottom line is that a strong economy is a national security requirement and an affordable Defence programme is the only responsible way to support our Armed Forces in the long term.”
In a unusually economics-orientated speech, Fox laid out his theory about deficits and military power:
“As a result of the First World War in the 1920s and 30s, Britain’s national debt was regularly over 150% of GDP. After World War Two, it peaked at around 250% of GDP. As examples of the effect, economic considerations underpinned both the British withdrawal from Palestine in 1948, and the abandonment of the Suez campaign in 1956. It wasn’t until the 1970s that the
debt position recovered to under 50% of GDP — a quarter of a century after the end of the War. Britain’s so-called ‘East of Suez’ moment in 1967 when the Wilson Government announced a major withdrawal of UK forces from South East Asia, was a response to the decline in the country’s relative economic strength. Equally, the Cold War was won because the Soviet
Union collapsed under the weight of an economic system that could not sustain the myth of communism’s superiority — nor sustain the military forces required to hold it together.
During the early 1980s for instance, the Soviet Union was spending around 20% of GDP on Defence — roughly four times the level of the US and wholly unsustainable in the long-term. The lessons of history are clear. Relative economic power is the wellspring of strategic strength. And, conversely, economic weakness debilitates every arm of government.”
Fox has a point here. He quotes Niall Ferguson, whose book Civilization argues the West’s accumulating debt mountain is more than just an economic problem. It has profound implications, threatening to pass power from an indebted West to a savings-rich East.
As Fox has said before, Britain is already spending more in debt interest than we are defending our country. The implications of debt are, in my opinion, still under-discussed in Britain. Gordon Brown, for example, talks about how he “intervened” to save the banks — but never spoke about the price tag attached to that intervention. Or who will pick up the bill. Fox makes a very good point: that an indebted Britain is a weakened Britain. Our national debt is set to keep rising for another seven years. We are, alas, not nearly out of the woods yet.