Abstract
‘Covid, Brexit and the Anglosphere’ by Richard Simmons and Nigel Culkin examines the social, economic and political impacts of the COVID-19 pandemic and the Brexit process on the Anglosphere – the United Kingdom, the United States, Canada, Australia and New Zealand. The Anglosphere proponents argue that it is feasible to become economically integrated without losing political sovereignty due to the common heritage of language, law and culture. The book delves into how these events have shaped and influenced the Anglosphere’s relationship with globalization, nationalism and international trade. The authors address the following question: ‘How do we use international trade deals to realise a Brexit Dividend?’ (p. 13). In doing so, they discuss the potential for shifts in trade policies, tariffs and regulations in the Anglosphere countries and the implications for global supply chains and economic integration. They also explore the challenges and opportunities for global governance in the face of rising nationalism and changing dynamics in the Anglosphere.
The table of contents playfully starts with the Menu (trade theories), offers an Aperitif (400 years of causation) and goes through Sorbet (economic background), Soup (throwing nationalism, popularism, trade and development into the mix), Seasoning (Anglosphere), Specials (innovation, trade growth and entrepreneur, perhaps the most relevant sections for ISBJ audience), Main Course (shocks, trade and growth) and ending with Desserts (resources for innovation).
Political economists have long been preoccupied with finding the optimal trade pattern to create value and protect the economy. Trade theory, the authors advance, seeks this optimal combination of resources (people, entrepreneurship, intellectual property, capital, land, natural endowments) that maximises the value for both the nation (the United Kingdom, in our case) and the international community it trades with. Free trade (i.e. no tariffs or common rules) allows the market to optimally allocate resources to the benefit of all within the free trade area and producers to provide goods or services where they have an absolute advantage, as its biggest proponent, Adam Smith, suggested. David Ricardo provides a more nuanced argument, where nations learn to specialise in products or services where they have a comparative advantage. Brexit, the authors claim, was positioned as the ‘free trade divine providence’ (pp. 31–32), although it ultimately restricted the movement of labour with the aim to raise real wages.
Mercantilism (as seen through Trump’s ‘America First’) sees trade policy as an extension of state policy, where ‘one party’s gain is another’s loss’ and trade is seen as a means to raise national wealth (pp. 36–37). There are also market imperfections that benefit one interest group or another, or the exceptions to the rule of free market trade, such as regulatory support of selective industries, the market power of larger companies via their global operations and economies of scale, proximity of customers (trade gravity), currency manipulations or sovereignty considerations. The authors question whether the creation of a unified Anglosphere could create a new US-led hegemon drawing upon the legacy of British culture (p. 41).
As an Aperitif (selective reading), the authors introduce another theoretical concept – cumulative causation and complexity, which is elegantly illustrated through a comparative case study of two boroughs of London – Southwark and Bermondsey. The former developed a thriving hat industry between the 17th and 19th centuries, supported by a combination of factors (Flemish and Huguenot immigrant labour force, exports to Canada, London market trade protection and clustering benefits of proximity to London’s major market and similar firms); while the latter grew tanning, leather and port industries. By the mid-19th century, the economic situation in the boroughs has declined, in the face of changes in industrial activities and market trends. Over the next years, the area experienced capital withdrawal, relocation of the upper class, social unrest and a cholera pandemic. The UK government in the 1980s invested in the regeneration of the borough and funded infrastructure improvements, which brought back a new flow of skilled workers and affluent residents. Through this study, the authors illustrated that trade policy alone is not enough, rather it needs to be combined with other factors to create a ‘virtuous cycle of cumulative change’ (p. 53).
The ‘Soup’ chapter is served by the authors with the ingredients of nationalism, populism and trade and development, but the elaborations on interactions between the three are rather sketchy. The authors establish connections between the rise of Nazism, Trumpism and Brexit, suggesting the disillusion of the middle classes and rising socio-economic uncertainty as common factors to all three. The authors also argue that in some instances, nationalism can drive economic growth, but can also develop a dark side as seen with Nazi Germany. Simmons and Culkin also delve into the complex relationship between Brexit and the Anglosphere, mostly drawing on similarities and differences between the United Kingdom and the United States (the ‘Seasoning’ chapter). Both countries, the authors claim, have been subject to a rise in exceptionalism, which connects to both individualism (or retreat of the state) and ‘the sovereign individual’ (independent from the state and not subject to the sovereign state). They suggest the Anglosphere is moving away from what Schumpeter defined as ‘innovative entrepreneurs’, that is, individuals who create and work to raise societal welfare within the democratic state.
Innovation, Simmons and Culkin argue, is often spurred by state support, whether in the shape of trade protection or research contracts and funding to boost specific activities or industries, as was the case with the Silicon Valley in the 60s or fast-track government approval for Personal Protective Equipment (PPE) and vaccines during the COVID-19 pandemic. The authors claim that the ‘entrepreneurial state’ was working with entrepreneurs and innovators to drive innovation and come out of the crisis. I agree with the authors that the state had the resources to bear the economic and social risks, but it did selectively support certain sectors, organisations or individuals more than others, depending on their proximity to the government, as research around COVID-19 bailouts suggests (Wood et al., 2023). In relation to that, Simmons and Culkin rightly suggest that the state is never a benign player, and that its role needs to be focused to ensure it is enabling innovation (although the book fails short of explaining how). The COVID-19 pandemic also highlighted the efficiency of the state as related to the trust or distrust of the state by the society, as Britain has seen with the limited success of the contact tracing apps, perceived (probably rightly so) as invading individuals’ privacy (Grosman et al., 2022).
Next (in the ‘Main Course’ chapter), Simmons and Culkin examine the implications of these events for international trade and growth. Much of the success of the US model is attached to the internal market, and even though trade protection existed throughout most of the 20th ccentury, the authors caution not to attach much weight to it, given other moving parts that may have contributed to growth during this period.
The chapter on Regulations and Monopolies (‘Two Twists’) discusses the gradual removal of tariff barriers and import quotas over 40 years through the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO), yet highlights persisting complexities in international trade due to three tools: product homologation (the granting of approvals for products to be imported and sold into markets), administrative procedures like health certificates and origin proofs and the use of security-based prohibited lists. The authors highlight that during the pandemic, vaccine approval discrepancies emerged, exemplified by differences in authorisation routes for Moderna, Pfizer and AstraZeneca vaccines. The US Secure Equipment Act of 2021 was also employed to block imports of products from Chinese firms like Huawei and Zhongxing Telecommunication Equipment Corporation (ZTE) for national security reasons. When it comes to monopolies, the authors discuss the role of ‘Robber Barons’ in railroads, steel and oil as pivotal to America’s industrialisation, where entrepreneurs exploited financial markets and government favours. The railroad industry’s monopoly tendency spurred land grabs and political influence for a first-mover edge, while later innovations like steel rails boosted efficiency. Carnegie Steel’s investments drove concentration in steel by vertically integrating its supply chain. These corporations leveraged their size to achieve economies of scale, lowering production costs compared to rivals. Simultaneously, they replaced the market’s natural price allocation (invisible hand) with centralised planning and business integration by the management (visible hand).
The authors pause for reflection with a short break from current affairs to discuss Britain in 1910. By 1910, Britain found itself in a state of economic decline, overshadowed by Germany and the United States in steel exports and global trade growth. The country’s focus on Free Trade and neglect of domestic innovation allowed foreign competitors to surpass its industries. Factors contributing to this decline included a decline in entrepreneurial risk finance due to banking crises, foreign manufacturers copying and improving British products, rapid technological changes rendering investments obsolete and an inward focus on colonial relationships rather than domestic renewal. The British Empire’s dominance concealed the urgency for innovation, similar to how present-day proposals for an Anglosphere might overlook underlying risks. The critical assessment suggests that a return to entrepreneurial capitalism and investment in innovation are essential for Britain’s renewal.
Now moving on to an especially interesting part of the book for the ISBJ audience, the authors discuss what is needed to support innovation (‘Dessert Menu’ chapter). Innovation-driven entrepreneurs play a transformative role within the context of societal rules and policies, driving change while being influenced by the dynamics of relationships and regulations. ‘Productive’ entrepreneurship contributes by innovating and investing to enhance a firm’s value and society as a whole, while ‘unproductive’ entrepreneurship focuses on extracting value for specific groups. Examples like Russian privatisations and violent entrepreneurship highlight unproductive practices. Similarly, in nations of the Organization for Economic Cooperation and Development (OECD), sectors like finance, insurance, real estate and private equity have displayed varying degrees of extractive tendencies, focusing on operational efficiency rather than forward-looking innovation. The authors claim that operational efficiency does not guarantee long-term adaptability, as illustrated by cases like the demise of ‘Toys R’US’. The evolution of entrepreneurial processes from acquiring risk capital to protecting ideas and reaping rewards mirrors the changing dynamics as businesses progress through different growth phases. Early-stage concerns include accessing markets and customers, while later stages emphasise safeguarding market positions against emerging disruptors. The acquisition of sufficient risk capital is a critical factor for early-stage firms, shaping their trajectories and opportunities. In the contemporary landscape, small start-ups still heavily rely on personal and family injections of cash, alongside sources like banks, angel investors and trade credit. However, this approach might fall short for potential global blockbusters, particularly those aiming to dominate sectors as platform companies. While venture capital has supported patent-intensive firms historically, its cyclical nature and selectivity pose challenges, magnified by factors like the pandemic’s impact on funding opportunities.
The authors then discuss various strategies for addressing capital challenges and nurturing entrepreneurship but present a somewhat idealistic view that overlooks certain complexities. While emphasising the importance of patient capital for sustainable growth, the proposed solutions like ‘open-ended’ venture funds and stable funding models seem limited in their applicability and availability, particularly outside certain industries. The notion of serial entrepreneurs leveraging previous successes to fund new ventures is presented as a solution, yet it tends to overlook the privileged starting point and access that individuals like Elon Musk had, potentially disregarding the broader systemic barriers to capital for less established entrepreneurs. The historical comparison with specialist local banks in the industrial revolution era oversimplifies the complexities of modern finance and regulatory environments. Lastly, while identifying customer acquisition as a top concern, the book does not delve deeply into the intricacies and challenges involved in scaling a business beyond local markets. The book’s arguments could benefit from a more nuanced understanding of the complex and diverse landscape of entrepreneurship.
The authors conclude the book by reflecting on the potential future scenarios for the Anglosphere in the aftermath of Brexit and the COVID-19 pandemic. They discuss the possibilities of greater regional integration among Anglosphere countries, the potential for increased trade diversification and the challenges of navigating the complexities of nationalism, globalisation and international governance in a post-pandemic world.
In summary, ‘Covid, Brexit and the Anglosphere’ provides a comprehensive analysis of the social, economic and political impacts of the COVID-19 pandemic and the Brexit process on the Anglosphere countries. The book delves into the challenges and opportunities presented by these events, including their implications for globalisation, nationalism, international trade and global governance. Simmons and Culkin provide valuable insights for policymakers, scholars and anyone interested in understanding the complex dynamics shaping the Anglosphere. The book can be used for teaching trade theory to undergraduate students and explaining complex issues through historical examples.