Shrink Britannia

The week of the pre- Budget report is as good a time as any to review the state of the UK’s morale. Judging from comment on two big news topics, bankers’ bonuses and the Iraq inquiry, it could be better. Despite globalisation and climate change, history still influences actions as much as ever. The City is not exactly the most popular set of institutions just now. But when the second diminutive Frenchman in two centuries casts aspersions on a prime source of British wealth, there’s a rush to defend it. Even so, the City may be one of two legacies of the past too big for the modern nation to cope with, the other being the trailing glories of Empire, with Britain, according to one historian of Empire, acting as “Boy Wonder to America’s Batman.” But how to downsize without throwing the baby out with the bathwater? From Will Hutton. John Redwood’s saying: “

Britain is now a large bank with a medium-sized government attached to it,” is sadly apposite. The national debate should be how to shrink it. Worse, as banks necessarily reduce their size and the riskiness of their lending, they are in no position to finance economic recovery.”

And from Bagehot in the Economist

The empire is the Indian elephant in the living room, the tiger under the dinner table. Britain is still living in its own shadow.