Favoured Nation

Britain goes to the polls on 4 July, but one issue not on any politician’s lips is the country’s relations with the Land of the Free. Angus Hanton’s Vassal State: How America Runs Britain is the latest book to break this Westminster taboo, doing for business studies what Tom Stevenson’s Someone Else’s Empire recently did for foreign affairs. The book is a statistical barrage documenting the very high proportion of UK corporate assets owned by US multinationals, private equity and big tech. Parliamentarians who fulminate about China’s TikTok and Huawei may be barking up the wrong tree, it seems. Hanton considers why Britain has been singled out by American capital and urges action to tackle the country’s ‘abject’ economic dependency.

On Hanton’s figures, the UK accounts for 30 per cent of American overseas investment and over half of US corporate assets held in Europe, making New York–London the ‘biggest route of cross-border takeovers in the world’. American investors hold $2 trillion of British assets while UK investors own nearly $700 billion of US assets – actually a favourable contraflow for Britain, given relative GDP and population, but affording US capital a bigger stake in a smaller foreign economy. The Americans employ more people in Britain than in France, Germany, Italy and Spain combined. Vassal State calculates that the larger US-based multinationals earned $88 billion in Britain at the time of the last general election, equivalent to £2,500 per UK household and largely tax-free (of course, most tax havens are located in British jurisdictions). It stresses the overtopping size of the larger American companies, the valuations of Apple and Microsoft (each over $3 trillion) individually greater than the combined value of the British FTSE-350.

Dig into any economic sector and you will likely strike American ownership, the book shows, compiling a shopping basket of goods dominated by the likes of Kellog’s, Mondelez, General Mills, Mars, Kimberley-Clark and Colgate-Palmolive. On the ailing high street, an outsize American presence includes Boots the chemist (Walgreens) and bookstore chain Waterstones, as of 2018 owned by Eliott Investment Management of West Palm Beach, FL. Amazon, meanwhile, has captured 30 per cent of all online commerce, partly as a marketplace for third-party sellers – one of many US ‘toll bridges’, as Hanton puts it, within the digital economy. Domestic consumers and companies must negotiate American tech platforms to access their home market, whether it is advertising via Facebook or Google, buying services on Deliveroo or Uber, networking through LinkedIn or Bumble, or paying for things using PayPal or Visa. These digital fiefdoms don’t just apply to the UK, but Vassal State pointedly contrasts the country’s sluggish economic growth since 2008 with the skyrocketing UK earnings of US tech firms over this period.

In the City, the number of firms trading on the Stock Exchange has fallen by 40 per cent since 2008: firms have been taken private or relisted in New York. US shareholders control a quarter of the remainder. Hanton identifies only three British entries in the Forbes list of the hundred largest publicly traded companies – GSK, HSBC and Unilever, each dating back to the nineteenth century. In the West End, Hanton takes in the branch offices of private-equity behemoths Blackstone, KKR and Apollo, leading buyers of British industry. ‘The true financial capital of the UK’, he argues, ‘is located on Manhattan Island’.

And on it goes. We learn that Jones Lang LaSalle of Illinois and Coldwell Banker Richard Ellis of Texas are the UK’s largest commercial property managers. In agriculture, CF Industries of Illinois dominates fertiliser production, commodity giants Archer-Daniels-Midland and Cargill the buying and processing of farm output. American agribusiness spearheaded by Pilgrim’s Pride of Colorado controls 50 per cent of chicken production for the British market despite a ban on chlorine-washed US poultry. ‘The full extent of US ownership has left most of British society in the dark or, in some quarters, in denial’, Hanton argues. There is a chapter devoted to US commercial inroads into the NHS following Blair’s outsourcing of elective procedures in 2002, and another on government procurement and the recent US takeovers of aerospace firms Cobham, Meggitt and Ultra, acquisitions which Hanton says the French would never have allowed.

What explains corporate America’s Anglophilia and vice versa? Vassal State dismisses a common language and UK law as explanations. Sterling’s weakness since the 2016 Brexit vote and low LSE valuations are clearly factors, but Hanton instead emphasises policy choices – ‘pandering to foreign buyers’ – beginning with Thatcher’s liberalisation and privatisation measures four decades ago. In 1981, less than 4 per cent of UK shares were owned overseas; today the figure is more than 56 per cent. The book recalls Tory grandee Harold Macmillan’s criticism of Thatcher for selling the family silver through her privatisations. In an interview with the Spectator Hanton goes further, warning that the end result of depleting one’s assets is ‘beggary’.

Both governing parties have propounded what Vassal States calls the ‘big lie’ of conflating corporate takeovers with genuinely useful foreign direct investment. Vassal State links this ideological disposition toward FDI to the intimacy of senior politicians with US firms, noting their revolving-door job appointments. On leaving office Blair and Brown were hired as advisers to JP Morgan and Pimco respectively, Cameron worked for payments processor First Data of Atlanta and biotech firm Illumnia of San Diego, and George Osborne was taken on by BlackRock. Rishi Sunak, alum of Stanford Business School, ex of Goldman Sachs, was only reluctantly parted from his Green Card. Britain’s leaders ‘have been coopted into the American machinery of influence and have rarely, if ever, questioned its growing dominance’.

Blame for weak corporate governance ultimately lies with a supine, and self-interested, political class. A chapter titled ‘Puppet Masters’ describes the Trump Administration’s brusque insistence that the Johnson government reverse its decision not to strip Huawei from the country’s 5G network, Pompeo issuing barely veiled threats of repercussions for Five Eyes intelligence sharing. ‘Mostly Washington is happy for the British to have their own conversations and make their own decisions, and there is no need for the US to show its teeth,’ comments Hanton. ‘But if the Brits act against perceived US interests, American diplomats go to work, even threatening “the special relationship”.’ The Huawei episode, he adds, ‘demonstrated the language of partnership coupled with the actions of control.’

What motivates such stinging judgements? Hanton is an Oxford-educated real-estate broker from Dulwich, a picturesque neighbourhood of south London. Now in his sixties, he entered public-policy discourse a decade ago when he cofounded a think tank to promote intergenerational fairness. His father Alastair was a public-spirited Methodist banker who set up the Post Office Girobank for the first Wilson Labour government and devised the Direct Debit payment method. Vassal State is at pains to stress that the logic of its analysis is not anti-American, just pro-British, pleading that a weakened UK poses a problem for the US and Europe in the fight against climate change and authoritarianism (read: Russia and China). It urges a reset and the binning of false prospectuses. Concretely, the introduction of legislative protections like France’s 2006 Danone law, a Gaullist rebuff to reported hostile-takeover interest from PepsiCo.

Anxiety about US commercial penetration isn’t new, but sporadic. In the Edwardian period, amid debate over tariff reform, Canadian journalist Frederick Arthur Mackenzie anticipated in The American Invaders (1902) that British capital faced a ‘Waterloo of Trade’, especially in advanced sectors such as electrical engineering. After the Second World War, as David Edgerton notes in The Rise and Fall of the British Nation, the US was already by far the largest foreign investor in Britain. It’s worth noting that it also called the shots in monetary policy: foisting sterling convertibility on Attlee in 1946 after Truman abruptly terminated Lend Lease (a ‘financial Dunkirk’, according to Keynes), forcing Eden into an immediate troop withdrawal from Suez in 1956 in return for emergency funding to maintain sterling parity, blocking devaluation by Wilson in 1965 and leading Callaghan into IMF austerity in 1976. The institutional nexus of US financial influence, continued into the twenty-first century with the dollar swap lines of 2008 and 2020–21, is missing from Hanton’s account.

Nevertheless, Vassal State seems a textbook illustration of the consequences of what Tom Nairn described as the British political economy of eversion, the country’s non-industrial metropolitan heartland waxing rich as a service-zone to international capital while regional manufacturing plant is either shut down or sold off. The book has had mixed reviews in the British press. The Tory Telegraph responded that ‘we have willingly and happily prostrated ourselves – in some ways for good, but clearly also for ill’. The centrist Times was defensive of Hanton’s impugning of the economic value of the transatlantic link. ‘Polyvalent dominance’, Nairn argued in his 2003 Postscript to The Break-Up of Britain, ‘is most effective when the suborned have chosen their prostration. And normally, such elective subjection is founded on apparently sensible (if short-range) economic or career reasons: myopia re-attired as the national interest.’ There will be plenty of that in evidence on the campaign trail over the next six weeks.

Read on: Perry Anderson, ‘Edgerton’s Britain’, NLR 132.