For two generations Britain has been in the grip of an identity crisis. Are we Europeans or not? Are we closer to the US and the rest of the English speaking world, the “Anglosphere,” or to our continental neighbours? This rift underpins most of the contradictions in our politics. We seek European levels of public provision, with US levels of tax. We aspire to US-style flexible labour markets, but our attitudes to risk and mobility are far closer to European practice. We talk of Britain as a multicultural society like the US, but we are still attached to European notions of identity and nationality.

Successive British governments have sought to present such schizophrenia as a strength, none more so than the present one, with its mid-Atlantic “third way.” But, notwithstanding our sympathy and solidarity with America after the recent terror attacks, this is a terrible weakness. It makes strategy impossible. We are like a business which does not know what business it is in. Britain has been getting the worst of both worlds. Our economy has neither America’s commercial creativity through low taxation, small government and the fostering of an individualistic ethic, nor France or Germany’s strategic stability based on high government spending, a protective regulatory environment and the fostering of a nationalistic ethic. Britain is split down the middle between sectors and companies which are dollar or euro oriented and is thus increasingly incapable of being run coherently.

We have allowed our manufacturing sector to decline too far. (Marconi is just the latest disaster.) Even in those services, notably international finance, where we have ridden the tiger of globalisation more effectively than our continental competitors, it has been at the price of losing control to overseas interests. In a boom, that does not matter. But in a bust? A big reduction in city employment by US and continental investment banks would devastate the economy of the southeast, the main engine of national wealth creation.

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