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The Guardian: The west’s great new threat is right at home in the City

Britain’s indulgence of Russian and Chinese business models is undermining what is left of liberal democracy

John Kampfner
Thursday July 26, 2007

From terrorism to floods and back to terrorism again; even in the infancy of his premiership, Gordon Brown has demonstrated a sure touch in coping with crises. His statement to MPs yesterday on bolstering security, following the failed bombings in London and Glasgow, managed to please authoritarians while just about reassuring enough civil libertarians – for the time being.

Ever since the events of 9/11, the government has seen radical Islamism, of the home- or foreign-grown varieties, as the greatest threat facing the country. Tony Blair did it his way, joined at the hip with George Bush in their messianic clash of civilisations. Brown has adopted a more cautious approach, signalling a reluctance to take to arms to spread “liberal democracy”.

And yet, as Brown and his new foreign secretary, David Miliband, have found, a new threat is emerging which neither Britain nor other western states have prepared for – the spread of Chinese and Russian power and influence. The theatre of battle is the City of London.

Over the past decade, the UK has allowed its capital city to become the home for many of the world’s most cut-throat and dodgy global financiers. Just as we turned a blind eye to Muslim fundamentalists setting up shop here in the 1990s, in the vain hope that they would treat us gently as they sought to undermine governments elsewhere, so we are doing the same now, all in the name of global capitalism.

The danger takes two forms, one quasi-respectable, the other not. The first is the takeover of some of the world’s most prestigious, and often London-based companies. China is raising capital for Barclays Bank in its attempted purchase of the Dutch giant, ABN Amro. The deal is entirely new, giving the Chinese and Singaporean governments a stake in Barclays even if the takeover fails. This is just the latest, but perhaps one of the most vivid, manifestations of the Chinese corporate global takeover, from a 10% stake in the US private equity company Blackstone, to the ownership of MG Rover by Nanjing Automotive, to the Chinese stranglehold on Wal-Mart and its enormous reserves of US dollars.

The second involves a somewhat different form of expansion. Unlike China’s more diversified economy, Russia’s wealth is dependent on oil and gas, whose market price has remained high for several years now. While Gazprom ponders a takeover of Centrica in the UK, it pressurised BP and Shell to sell it controlling stakes in two vast projects back in Russia. There are many further examples of sharp corporate practice.

A natural response to such concerns might be to dismiss them as a bigoted lament. After all, why should global wealth be confined to what was known as the west, to the countries of the old G7? Indeed, surely the whole point of globalisation was to provide for unrestricted capital flows between borders?

The question is not which countries are acquiring wealth and power, but which value systems. China’s emergence as the world’s next superpower has so far been seamless. Not only does it have international corporations queuing up for its capital, but it is now transferring that power into influence, from Africa to Latin America, without making enemies along the way.

Russia is an altogether different story, where criminality, capitalism and the Kremlin have all merged into one noxious entity. British officials are convinced that the murder of Alexander Litvinenko was just the start. Nobody will ever find out who gave the order – did it go up to President Putin himself? People familiar with Russia know that such questions are pointless. They also realise that attempts at extradition are fruitless. If the UK and Russia did have an extradition treaty, what would happen to Boris Berezovsky, a one-time top Kremlin figure-turned-dissident whom Putin regards as his public enemy No 1? Berezovsky and other oligarchs now live here in opulence, thanks to our absurdly generous tax laws.

During a brief visit to Moscow last week, I was intrigued, but not surprised, to hear the view of a number of prominent Russian figures that the assassination of Litvinenko was justified and that Berezovsky and Akhmed Zakayev, a Chechen activist exiled in London, have it coming to them. And yet some of those old friends of mine are also flabbergasted that the British authorities have been so indulgent towards the Russian corporate invasion. If the price of making the City a haven for low-tax oligarchs and other assorted spivs is to turn London into a mobsters’ paradise, then that is our lookout, they say.

And that is the problem in a nutshell. In an essay in the New Statesman last week, Miliband set out his early thinking on foreign policy. He talked about a new distribution of power, which required a new diplomacy. Citing China, India and Russia, he predicted that within two decades political, economic and military power will be more dispersed than at any point for more than a century. In other words, US hegemony is coming to a close; prepare for a new world order.

What if the real challenge is posed not by failing states but increasingly successful ones? What if China and Russia are now setting the terms of engagement? What if, as is already the case in parts of the developing world, the Chinese message of rapid development, unencumbered by lectures about human rights and democracy, is proving more attractive? Meanwhile, leaders in the so-called developed countries scurry round the world ingratiating themselves with the chancelleries of Beijing and Moscow. The countries that complain the least secure the most lucrative contracts. The free market has been well and truly decoupled from the free society.

The terrible consequence of the Bush-Blair global misadventure is to have undermined what remaining support there was for western notions of liberal democracy. Countries that lecture about universal values do not deserve to be listened to if they indulge in rendition flights and torture. Brown and Miliband are right to distance themselves from past policies. They have correctly identified the immediate danger, but – apart from kicking out a few diplomats and trying to talk tough – they have not even begun to think about how to cope with states that have seized on the capitalist free-for-all with alarming success.

· John Kampfner is editor of the New Statesman newstatesman.com

http://business.guardian.co.uk/story/0,,2134874,00.html

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