Can We Compete In The Global Game Of Snakes And Ladders?

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Derek Park
07/26/2011

The west finds itself in a tough race with the increasingly influential economies from the east. Nowhere is this more apparent than in the supply and consumption of energy, particularly oil and gas. Are there things we can do to at least partially redress the balance, particularly in the UK?

No one doubts that the global oil supply is getting tighter. This effects the west in several ways. Not only is it becoming more difficult to guarantee our own oil supplies for the future, but commercially western energy companies face increasing competition from powerful new players, particularly China. Africa is becoming increasingly important in the search for dwindling reserves and doesn’t owe us a living, so are we in the best possible shape to compete? Unless we get ready for the fight we may find we are seriously left behind.

It is a common misconception that China’s success is largely due to its exploitation of developing countries. Could it not just be that China is more realistic about the true nature of globalisation and acts accordingly? China has adopted a flexible and evolving approach to oilfield development such as offering cash for oil, developing infrastructure or more recently offering a premium for production acreage, including buying out western interests in Africa, South America and the Middle East. True, there have been some difficulties in host countries realising some of the benefits but in cases such as Nigeria this has been due to local mismanagement rather than Chinese exploitation.

China is continually improving its education system, gearing development to the demands of its growing economy. This system consistently turns out technicians, engineers and managers who are as good if not better than their western counterparts. It could be argued that in the UK in particular, we see the primary role of education being a tool for social engineering, focussed on offering a fair chance to all rather than to consistently giving us the skills we need to survive in an increasingly complex and competitive world. This is a pragmatic not a political argument.

China increasingly sees itself as a home for centres of technical excellence. A good example of this is the railway industry. Earlier this month it was reported that, due to European competition laws, the UK’s last manufacturer of rolling stock was facing closure having failed to win a government order. It is hard to understand why, in the country that gave railways to the world, this is allowed to happen. Competition is one thing but if we lose our last manufacturer we delete something from our national skills pool that can never be replaced, and all this at the same time governments wish to encourage railway development. Whatever the rules and regulations, it simply doesn’t have to be this way; given the political will to change.

Contrast this with China where a railway ‘centre of excellence’ has been created. A ‘maglev’ railway now connects Shanghai to its airport. 19 miles in eight minutes at 143 mph; Heathrow Express eat your heart out! This week it is reported that a Chinese consortium is likely to win the job to design and build a high speed railway in California, ironically over a route originally built using cheap Chinese labour. Again, how have we in the west allowed this to happen? It can only be down to a failure of long term national leadership.

Of course we must address the sensitive issue of ‘human rights’. There is no doubt that China provides ‘no questions asked’ support to some dubious regimes denied to western business by sanctions. The details of the various arrangements are well documented but what is perhaps not so well understood is what China hopes to get back. Securing its energy supply whilst developing its own business and technology is only part of the answer. China increasingly looks to influence the political outlook of the hosting countries, building support for its positions on for example, Taiwan and Tibet. Again they look at a wider and longer term situation whilst the west looks to the short term and loses sight of the bigger picture. We do business with China whilst acknowledging its own human rights abuses, but deny ourselves access to other regimes where perhaps we could have some real and strategic influence. At the end of the day China is looking for a long term future for its own people; is that so bad? China along with a significant chunk rest of the world doesn’t share our view on western style democracy but it seems very willing and able to supply the Chinese with sustainable ‘western’ living standards. Can we guarantee the same to our people over the next few decades?

It really comes down to priorities. We should think longer term and reassess our priorities in a changing world. Please forgive the metaphors but we have to be careful about shooting ourselves in the foot or fighting with one hand tied behind our back. When the Macondo well blew out it was a bad day for our industry and quite rightly there was outrage and indignation. But was it really necessary for the US President to be so visceral in his condemnation of a British (sic) company? Playing to a local gallery, for short term effect, he confirmed in the eyes of the cynics and the developing world that the west was not to be trusted with oilfield development or probably with development of any kind. In the global game of snakes and ladders the west took a long slide down one very big snake.

As I write the Murdoch ‘News of the World’ phone hacking scandal is completing its third week of total dominance of the UK media. Again it is a terrible story with much justifiable public indignation, but two other bigger stories, African famine and the European currency problems have been totally eclipsed. The media likes nothing better than a story about the media but that said our politicians are no better. In reality all three stories pale into insignificance against concerns about our sustainable future but in the current frenzy there is little chance of any coverage or debate on that.

So can we reverse the trends that threaten to overwhelm us? Not if we carry on believing that the world owes us a living and that the moral high ground will provide us with everything we need to sustain us in the future. It might just be that in the long term the Chinese leadership is simply doing a better job for its citizens than Western leaders are doing for theirs.

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