The Special Relationship is a phrase used to describe the exceptionally-close relation between the USA and Great Britain. Winston Churchill first coined it in a speech in 1946, and the Special Relationship covers the political, economic, diplomatic, cultural, military, and cultural spheres. The Special Relationship came into being at the same time as the Bretton Woods agreement, which, many believe (including me), is no longer relevant in the 21st century economy. Whilst we continue to hear that the USA and Great Britain still enjoy exceptionally close ties, much closer than with any other country, the evidence is mounting to suggest that the Special Relationship is, in fact, not so “special” anymore.
The latest episode in the not-so-Special Relationship is the attack on British banks by the Americans. The USA is accusing Britain’s Standard Chartered Bank of laundering some 250 billion dollars of transactions over 10 years for the Iranian régime, hiding some 60,000 transactions from American regulators. They did it with the help of American consultancies and accounting firms, but the most striking thing is that, throughout this 10-year period, the Special Relationship was continually held up as the basis for everything that’s gone on between the USA and Great Britain.
The Standard Chartered Bank affair comes hot on the heels of another British bank under immense pressure from the United States, HSBC. HSBC stands accused of laundering drug cartel money, specifically in Mexico. Rumours have long been abounded about banks laundering drug money, especially American banks. However, yet again, another British bank is getting all the limelight in the USA for all the wrong reasons, with no sign of the Special Relationship coming to the rescue!
Of course, another big British bank recently coming under the glare of publicity was Barclays; they blew the whistle on themselves over the Libor scandal. This time, Barclay’s American CEO Bob Diamond fell on the British Sword when it came time for heads to roll in the Libor scandal. Federal Reserve Chairman Ben Bernanke came out and said that he believed that Libor is structurally floored, which is true, yet, despite the Special Relationship, he was unable to voice his concerns prior to the scandal erupting or to work together to create a better system.
If we go back to the invasion of Iraq in 2003, Tony Blair used the Special Relationship to justify why he was so economical with the truth to the British cabinet about the legality of going to war. In fact, many would say that he simply lied under the cover of the Special Relationship. His premiership never recovered from this, nor it would seem has the Special Relationship.
In 2010, BP suffered a horrendous oil spill in the Gulf of Mexico on their Deep Water Horizon platform, which resulted in nearly 5 million barrels of oil flowing into the ocean. BP had partners on the platform, one of which was the American oil services company Halliburton, which had connections to former-Vice President Dick Cheney. Far from stepping in to offer support to BP and taking some of the responsibility, the USA and Halliburton did the opposite, ensuring that BP took the blame publicly. One of the results of the Gulf oil spill was that the CEO of BP changed. It went from being headed by a British national to being led by a US national. Far from the Special Relationship offering economic support, in fact, it did the opposite, and a prize British asset remains under the leadership of an American.
The latest rumour is that New York is trying to edge London out as a global financial capital. This could explain why British banks are coming under attack from the United States. This is despite the fact that in 2008 the American banking system gave us Bernie Madoff, AIG, “too big to fail”, subprime lending, a frozen derivatives market, and a nation full of underwater mortgages. A defaulting European Union would be a disaster for the American banks that have underwritten all the credit default swaps on European debt, of course. It’d be like a biblical moment, insofar as credit default swaps are like insuring against a flood in the desert, and, right now, the clouds over the desert are very, very dark.
Whatever the truth is, the shape of the financial system is changing, and the Special Relationship really isn’t so special anymore. Instead of all capital flows going via either London or New York, the 21st century market model will see capital flows going directly between trading partners, on a peer-to-peer basis, and the USA and Great Britain will have to compete with each other for a piece of these flows, whether they are with Russia/Eurasian Union, China, the Middle East, Africa, or South Asia.
It seems that the US/Anglo banking cabal already understands the changing world, and whatever the rules of the Special Relationship were in the past, they no longer hold in a world of not-so-Special Relationships.
16 August 2012