How to be a middle power in a superpower world. With Jenny Bates

Episode Summary

Executive Summary: The episode argues the UK faces a more hostile global economy where major powers weaponize trade, finance, and supply chains. Guest Jenny Bates says the UK should stop assuming benign globalization, build leverage and resilience, coordinate with middle powers, and use targeted state-business tools to diversify and protect strategic sectors.

Main Topics: Global economic coercion and rising geopolitical risk (Priority: 5/5): The conversation frames the world as more dangerous for medium-sized economies because the US, China, and others increasingly use tariffs, sanctions, and supply-chain dominance as foreign-policy tools. The UK’s position as a middle power (Priority: 5/5): Bates argues the UK cannot match big powers, but it can still be materially effective by identifying leverage, coordinating with partners, and preparing for coercion. Middle-power cooperation and club-based alliances (Priority: 4/5): Examples such as Eurenco, Airbus, and CPTPP are used to show how smaller countries can create alternatives, diversify supply, and preserve open trade without becoming a rival superpower bloc. Industrial policy, resilience, and strategic sectors (Priority: 4/5): The discussion shifts to whether the UK should move beyond a pure market model toward more intervention in technology, manufacturing, energy, and critical minerals to reduce vulnerability. State-business alignment and national resilience (Priority: 4/5): Bates proposes that large firms should report on national resilience contributions, and that public investments should come with strategic conditions such as IP location and foreign-sale restrictions. Public trade-offs: resilience versus cheap goods (Priority: 3/5): The episode explores whether voters will accept higher prices for a more secure economy; Bates cites a deliberative exercise suggesting people may prioritize resilience and jobs over low prices.

Key Arguments: The UK is not at panic levels, but geopolitical risk is high enough that policy must shift from complacency to preparedness. China may be less of a direct competitive threat to UK strengths today, but it is already reshaping partners and the trade system, and could become more directly competitive over time. The US remains deeply integrated with the UK, so any weaponization of US economic dominance would have severe consequences even if it has not happened at scale yet. Middle powers do not need to equal the US or China to be successful; they can still shape outcomes through cooperation, diversification, and collective defense of openness. Historical collaborations like Eurenco and Airbus show that smaller countries can jointly develop strategic capabilities that no single one could build alone. CPTPP matters less as a defensive shield than as a platform for preserving open trade and coordinating on future trade and digital rules. A future response to coercion may require interoperability with the EU and other partners so defensive tools can be used together. Critical-mineral buyer coordination could raise costs in the short run, but may improve long-run resilience by reducing dependence on a single supplier. The UK should create stronger expectations for large businesses to consider national resilience, not just shareholder value, through reporting and strategic incentives. Public funding of strategic firms should include conditions on IP and foreign ownership when national security or strategic advantage is at stake. Britain cannot fully nationalize its economic strategy without risking investment, but it can be more deliberate than it is now; other countries are already intervening more heavily. People may be more willing than polling suggests to trade some price increases for jobs, resilience, and a stronger economic future.

Data Points: UK scary-world rating: 7/10 - Jenny Bates’s assessment of how dangerous the world is for the UK right now Middle power cooperation example date: 1960s - Eurenco was founded in the 1960s to share nuclear technology Planning horizon: 15 years - Bates says her project considered how China and geopolitics might evolve over a 15-year period Public deliberation result: 25 to 1 - Participants favored a more secure and resilient economy over keeping prices low Tariff level: historically low - Bates notes the current global starting point for tariffs remains very low Scope of UK strategic investment fund: narrowly focused on defense-relevant technologies - The National Security Strategic Investment Fund is cited as a model for conditional public investment UK government role in business: annual reporting / conditions - Proposal for large firms to report on their contribution to national resilience and, in some cases, accept strategic conditions Current market structure: single supplier for some critical minerals - Used to justify a buyers’ club or diversification strategy

Pivotal Quotes: "I would say about a seven." — Jenny Bates: Her answer to how scary the world is for the UK on a 1-10 scale "The UK needs to work out where it's got leverage and know how to use it." — Jenny Bates: Her core policy prescription for dealing with coercion and geopolitical competition "We cannot dictate the behavior of the big powers, but if enough of the other guys get together, it could still be materially significant for those partners." — Jenny Bates: Her explanation of why middle-power cooperation can still matter

Implications: The UK should prepare for a world of coercive economics by building resilience, coordinating with allies, and asking business to share strategic responsibility. Expect more industrial policy, supply-chain diversification, and tougher state-capital ties.