Goodbye to Hong Kong, hello to a new prosperity

Building a new prosperity on the ties of empire The end of empire, the beginning of a new prosperity

This year is going - with utter certainty - to be the end of an era in British history. No, that is not a comment about the result of the forthcoming general election. Something much more important is drawing to a close: this year sees the end of colonialism. The process of decolonisation, which began in earnest with India half a century ago, ends with the handover of Hong Kong.

If the period of history is finished, a legacy lingers on, and it is a legacy which will become increasingly important as we move into the next century. For the past 50 years the economic impact of empire has probably on balance been negative. In the early part of the period there was an enormous and continuing defence burden. The illusion of grandeur encouraged sloppy thinking among politicians, while the existence of still-captive markets encouraged an even more destructive sloppiness among our exporters. In any case, with a couple of exceptions of which Hong Kong is a prime example, the former colonies were not particularly fast- growing markets: even if we did retain some sort of inside track, it was of little economic advantage.

For the next 50 years, this will all change. For a number of unrelated reasons the legacy seems likely to become positive.

Most obviously the hand-over of Hong Kong clears the way for a more relaxed relationship with what will, within the next 15 years, become the world's largest economy. Two centuries ago, before the engine of industrialisation began in Europe and then North America, China was by far the world's largest economy. Since the market reforms of 1979 (much more important than the modest changes we made here), China's economic take-off seems certain to push it back to that earlier dominance. Establishing a mature and comfortable relationship with China has been impossible up to now - a point indirectly acknowledged by Chris Patten in his interview in this newspaper today. Once the handover is complete, and the land has been handed back in rather better nick than it was taken over, the basis for an adult relationship will again exist.

The second reason to be positive about the legacy of empire is that the relative growth performance of several former colonies seems likely to improve over the next 50 years. The most obvious example is that other giant, India. Two centuries ago, India was second to China in the size of its economy - that is why we wanted to get our paws on it - but the economic performance through the post-war period has been disappointing. But India too is now starting to recover. Its take-off will not have the astonishing vigour of China's, and in any case it is still the best part of a generation away. Nevertheless, given its size, even a modest change in performance will have a dramatic impact not just on the subcontinent, but on the rest of the world. Given the genuine affection between Britain and India, this country will on balance tend to benefit.

A third reason for expecting the legacy of empire to benefit this country comes from its associated tradition of looking outwards as an international investor. During the past 10 years there has been explosive growth in investing in what are called "emerging markets". These include not just many former colonies but other countries with which Britain has had a long economic association dating back to the last century: much of Latin America, Russia and some African countries too. For most of the post-war period, having expertise in portfolio investment in developing countries was not a skill that brought great economic benefits, but now the focus of growth has shifted. As a result, Britain has become the largest centre in the world for such international portfolio investment. A new and benign commercial empire is being quietly assembled.

Finally, there is the English language. One of the great abiding legacies of colonialism is the anchoring of English as the world's first global language. English will, in the next 20 years, become the first language in the history of the world to be spoken by more people as a second language than as a first. According to The Cambridge Encyclopaedia of the English Language, there are between 320 million and 380 million people who speak English as a first language. But there are a further 100 million who use it as a second language (frequently speaking it better than most of us do), and another 200 million who have some command of it.

It may not be English English which will come to dominate. A few years ago most people would have expected American English to become the world standard. There is an irony here, that it is partly thanks to the loss of the American colonies - and the subsequent development by Americans of the world's first global popular culture - that our language has become so dominant. But actually it may not even be American English that becomes the world standard, but World English, which will be different from both. Nevertheless, in a world where trade is increasingly in intangibles - half of Britain's foreign earnings are in service or investment income - being an Anglophone country becomes more and more of an economic advantage. Britain is the second-largest exporter (after the US) of intellectual property in the world, and this is in large measure a function of language.

In fact, if we didn't speak English I think we would be in quite a lot of economic trouble. And now that we have dumped the final vestige of empire, we can get on with exploiting it.