Index of Power

The following chart gives a snapshot of the top 20 countries, ranked by their index of power in the world economy. Readers of this blog or my book, The City, will have seen this concept before,[1] but here the information is updated to 2016-17.

Index of Power, 2016-17

Notes: The height of each bar is given by the country’s total index value, which is then broken down into the respective components. Countries are identified by their two-letter ISO code. Take care, because CH is Switzerland, not China (which is CN), and DE is Germany.

The overall picture shows a small number of countries, led by the US, towering over the rest. Only 33 countries out of 180 have an index that is more than 1% of the US index number! In a chart, most of the columns would look like the x-axis, so here I have shown just the top 20 countries. Of those, only five are close to or above 20% of the US number: the UK, China, Japan, France and Germany.

The UK remains number 2 on these updated figures. But its index value has slipped back in the past few years on most measures, and likely will slip further in future with the impact of Brexit. China stays number 3, but has come in closer, helped by its GDP growth, a greater use of its currency in world markets and by the size of its foreign direct investment assets (FDI).[2] France has edged a little above Germany in the latest ranking, helped by the better relative position of banks in France.

I have excluded from the chart several countries whose ranking is boosted artificially, namely in ways that do not reflect its power. For example, in the latest data the Cayman Islands stood out as an international banking centre and a home of foreign direct investment. But the banks and the assets have little to do with citizens of the Caymans. Ireland and the British Virgin Islands are excluded for similar reasons relating to FDI.

Statistical details

Roughly 180 countries have been taken into account for this ranking. Depending on the statistical measure used, data are available only for 40 to 150 or so.

My five measures are:

- Nominal GDP (2017 estimates, IMF)

- Foreign Direct Investment stock outstanding (at end-2016, UNCTAD)

- Outstanding cross-border lending and borrowing by banks (September 2017, BIS)

- The use of a country’s currency in international markets (April 2016, BIS)

- A country’s military expenditure (2016, SIPRI)

If a country is top in all categories, eg it has the biggest GDP, the biggest military spending, and so forth, then it would have an index number of 100.0. If another country had a GDP half the size of the biggest one, then its number on this measure would be 50; if its FDI were only one-quarter of the biggest country (not necessarily the same country), then its number would be 25; if it had the biggest international bank lending and borrowing, then its number would be 100. Taking each of its five individual measures and dividing by 5 would give the final index number for that country’s power rank. The measures have equal weights.

So what?

The idea behind this chart is to present key features of the world economy in a summary way. At the very least, it gives the lie to the absurd notion that there is an ‘international community’ and instead makes one focus on global power relationships. Each of the measures has limitations, discussed elsewhere, as is true for any set of data. But the evolution of the chart is also useful for tracking how the relative strengths of the major powers change over time.

Tony Norfield, 12 February 2018

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[1] See here for one of the early versions, and Chapter 5, ‘The World Hierarchy’, of The City: London and the Global Power of Finance, Verso 2016 and 2017, for a fuller explanation.

[2] Data for Hong Kong and China should be combined, since they are one country. However, there are difficulties. For example, this can easily be done for GDP, but in the case of FDI, most of Hong Kong’s is in China. So I have included only China’s FDI (most of which I believe is outside Hong Kong). In the China data shown, I have added Hong Kong only for GDP and FX. Banking is taken as the average of the two; FDI and military spending is China only. The resulting index number will probably slightly understate China’s importance.

The Long Arm of the Law No More

By Susil Gupta

The recent appeal case of Mr Thomas O’Connor highlights some of the pitfalls of the British strategy – one has to call it something – of having its cake and eating it in its future relations with the European Union. The case concerns the European Arrest Warrant (EAW) regime and nicely illustrates how law binds European nations together and why British cherry-picking isn’t possible.

Since its introduction in 2002, EAWs have has made a major contribution to law enforcement. Under the scheme, about 5000 people are extradited every year in relation to often serious charges.

Much confusion about the European Arrest Warrant regime arises from the fact that it is often considered an extradition procedure when it is actually designed not to be an extradition procedure.

In international law an extradition procedure is a request from one sovereign State to another sovereign State, both having different jurisdictions. Such a request normally has two stages. A judicial stage where a court considers the legal merit of the received request. If all is in order, and the court approves the request, it is passed on to the executive for final approval. This is always a cumbersome and expensive procedure and may result in frustrating the aims of justice in a requesting country as trials can be held up for years and witnesses and evidence go astray.

The EAW scheme is designed to do away with all this. Courts have only limited powers to review a request, and there is no executive phase. The key element of the scheme is the concept of a ‘common jurisdiction’, that is, all courts within the scheme have sufficiently similar legal regimes to allow the EU to create, by law, a common jurisdiction. The request to ‘extradite’ is simply a request from one court to another.

As is obvious, an assumed ‘common jurisdiction’ can only operate within European Law and has the European Court of Justice (Luxembourg) as its appellate court. A state that leaves the jurisdiction of the European Court, leaves the ‘common jurisdiction’ that is the basis of the EAW scheme.

The facts of the case

Thomas O’Connor, 51, a building company director, was convicted of tax fraud in 2007 in the UK. While on bail, he absconded to Ireland. The UK courts issued an EAW and O’Connor was duly arrested by the Irish police. At first instance, a Dublin court granted the EAW request. O’Connor appealed against the court order and eventually his case came before Ireland’s Supreme Court. The Supreme Court allowed the appeal, arguing that, were the extradition granted, O’Connor would still be serving his sentence while the UK would have withdrawn from the jurisdiction of the European Court of Justice, in effect delivering O’Connor to a country outside the EAW jurisdiction and possibly robbing him of recourse to the European Court.

The Irish Court also referred the case to Luxemburg since the issues raised have wider implications and it will have the final say on the mater. However, given the clear-cut nature of the main issue, it is likely that other EU nations will follow the reasoning of the Irish court.

Whitehall cock-up

Britain is very keen to retain the EAW regime and declared its intention to stay with the scheme within weeks of the Brexit referendum in 2016.

Many of its criminals have a tendency to flee its jurisdiction, often for sunnier climes on the south coast of Spain. It is also a cheap and efficient way to get rid of criminal foreign nationals. Brexiters tend also to be hard on crime so no political price to be paid for “remaining in Europe” on this issue.

Didn’t anyone in government realise that withdrawing from European law and its judicial structures might pose a serious problem and strike at the legal foundations of European cross-border law enforcement? Apparently not, amazing as it may seem for a country that prides itself on the rule of law and judicial oversight!

In March last year, Home Secretary Amber Rudd told Parliament that she ruled out any possibility of Britain leaving the EAW mechanism describing it as “an effective tool and that is absolutely essential to delivering effective judgment to the murderers, rapists and paedophiles.” But Lord Paddick, once a high-ranking officer in the Metropolitan Police, was quick to point out the obvious “The Government has to explain how this can be done without European Court of Justice oversight and common data standards.”

As late as September 2017 the UK issued a policy paper – Security, law enforcement and criminal justice: a future partnership paper – that made a strong commitment to remaining within the structures of European law enforcement including, Europol’s 2017 Serious and Organised Crime Threat Assessment, Passenger Name Records (PNR) data collection, the Schengen Information System Alert system, Europol´s Internet Referral Unit (IRU), Serious and Organised Crime Threat Assessment, the Joint Cybercrime Action Taskforce, Prüm (a system for rapid law enforcement information exchange on fingerprints, DNA and Vehicle Registration Data), Eurodac (a mechanism for sharing fingerprint data for asylum and law enforcement purposes), etc. The 20-page paper firmly asserts that law enforcement after Brexit it will be “business as usual” – but fails to consider any legal issue. Within two months of the paper’s publication, the Irish Times was reporting that EAW cases at the Irish Courts might face problems.

As a consequence, the Irish Court’s ruling has serious implications for crime in the UK. The internet and cross-border economic activities allow criminals to commit offences in the UK from the safety of a number of European countries beyond the reach of the British police. Likewise, any British criminal who does not fancy facing serving a hefty sentence is now only a plane or train ticket away from freedom. Why should any European police force spend valuable resources monitoring and tracking British criminals abroad if they cannot be extradited? Many other law enforcement facilities and activities are likely to be affected because all of them are subject to the legal oversight of European law and its judicial institutions.

So, soon it will no longer be true that Scotland Yard always gets its man.

4 February 2018