The UK is setting itself on fire
While jumping off a cliff. Into a volcano.
So. What do you do when you suddenly find yourself the Prime Minister of a nation on the brink of the worst catastrophe in decades?
Luckily, Liz Truss, the unelected leader of the Greatest Nation on Earth™ is here to offer the perfect lesson in how a leader who was never popular can become more unpopular. But first, the background.
What happened?
Boris Johnson, the eternal buffoon turned accidental prime minister delivered Brexit, partied hard throughout the lockdown, lied to everyone and their grandma and the promptly set off on a Greek holiday as the country slowly sank into poverty. As he signed off with a speech that was filled with remorse, Boris advised his successor to cut taxes and deregulate, the buzzwords of the clueless far right.
Lizzie, having served the past governments starting from the shitshow that was David Cameron’s disastrous reign, promptly won the race to the bottom with Rishi Sunak and was hand picked by less than 0.3% of the British electorate — all of them conservative — to continue the royal screw up.
In all fairness, Boris is a hard act to follow. His unique ability to screw up is hard to match. But so is his unique ability to apologise and move on™. Liz has none of the charisma and charm, nor the infuriating ability to appear harmless while taking a cleaver to common sense.
But this isn’t about Liz or Johnson. This is about a Cambridge and Harvard educated PhD in economic history — Kwasi Kwarteng.
Kwasi Who?
Kwasi Kwarteng, Chancellor of Exchequer of the Greatest Nation on Earth™. Handpicked to cabinet by Unelected Truss, Kwarteng’s grasp of economic history is astonishingly strong in his ability to conveniently ignore parts that don’t conform to his views and those of Queen Liz.
Simply speaking, Kwarteng’s plan is to fight fire with fire. As I am reliably told by every firefighter and 10-year old I’ve met, this doesn’t really work.
Where’s the Fire?
Unless you’re living under a rock, you know by now that Russia’s war against Ukraine brutally exposed European dependence on Russian gas and annihilated energy markets. A poorly designed system with no consideration of resilience ensured prices skied beyond reason and the people received energy bills they could barely afford to pay, especially in the UK, where the Conservative Government feebly capped energy bills while acquiescing to energy companies, investment banks and bankers making ungodly profits.
Europe and the US did the sensible thing by first raising interest rates to combat rampant inflation(arguably too late and perhaps too much) and then passing policy measures such as the Inflation Reduction Act and the EU president, Urusla von der Leyen’s pledge to cap energy companies’ revenues.
“In these times it is wrong to receive extraordinary record revenues benefiting from war and on the back of our consumers”
“Profits must be shared and channelled to those who need it most.”
What of the UK?
The UK chose, 6 years ago to split itself the European Union and more importantly, the European Free Market in order to “level up” its economy, conveniently forgetting that there is no level higher than the EU today. A small set of problems that the Brexit camp conveniently ignored have begun to sting as the shadow and excuse of the pandemic disappears. You see, UK imports everything. You know what importers love? Free trade. It works, there are competitive markets established and there is little doubt that it benefits everyone from consumers to industries.
The hammer blow to the UK economy of Brexit was a surge in import and export costs leading to empty shelves, steep cost of living rises, labour shortages, and dramatic falls in real wages. Sound fun, doesn’t it?
Add to this the astoundingly stupid decision to unilaterally arbitrate on the Irish border solution. The argument — negotiated in good faith by the EU, Boris and Northern Ireland — where the EU provided concessions to it’s strict bureaucratic rules to aid the preservation of the Good Friday agreement, led to Joe Biden, the US President of Irish descent to significantly cool on trade deal talks with the UK.
As expected, the net result is a significantly weaker UK economy in a global crisis of inflation coupled with stagnating growth and cost of living crises.
UK’s Answer
The UK is a strange place these days. The previous government was voted in on the promise to deliver Brexit, akin to a group of people voting to set themselves on fire. Then, the government collapsed and Czar Truss was appointed. Finally, Kwasi Kwarteng took the keys to the Treasury.
The best analogy I can think of now is an 8 year old kid with $500 in a candy shop with no supervision. Kwarteng decided that decades of proven economics weren’t his cup of tea and fancied a revisitation to the trusted intervention of trickle-down economics. Hardly any sort of economic, political, rhetorical or even conspiratorial reasoning makes sense of the esteemed Chancellor’s economic policies. Cutting taxes is admittedly a useful tool in the government’s policy shed to encourage investment in the economy. But even the most sceptical among us would admit that firms are hardly clamouring for easier access to capital given the more-than-a-decade long era of absurdly low interest rates. So what does he want? Is this a clever ruse to continue Tory tradition and benefit his friends who shorted the sterling?
While that seems absurd, equally stunning is the absolute disregard for the situation prevalent in the country. Liz Truss has admitted that her policies will benefit the rich “initially”. What? This tears up the playbook completely. Economic growth is a complicated issue and rarely do shock and awe tactics like the one proposed by the current Chancellor have immediate impacts. However, this one seems calculated to crater the Sterling, annihilate confidence and stoke further inflation. All by an unelected government.
To add icing to the cake, Jacob Rees-Mogg, the contemporary archetype of failing upwards has boldly decided to set UK on the path to self-reliance by using up every drop of oil and gas in the country. He forgets that fracking projects take time and investment to build. Maybe Kwarteng can find a few more billions to add to his ￡400 billion+ borrowing plans.
The government says they will balance the budget and cut deficit… eventually. So not their problem. As usual, future generations will pick up the tab for this generation’s excess.
A fair counter argument would be to ask if energy bills must be allowed to rise incessantly. A fair counterexample would be France’s move to cap energy prices while spending just €12 billion compared to nearly €60 billion that the UK will spend. The difference? The EU is taxing energy companies and their ill-deserved gains. The UK being pro-business(and anti-everyone else) is not.
In the best of circumstances, such a ballooning of debt to reward the highest earners would be a highly contested move. These are awful times for such a policy and Kwarteng’s foremost allies, the free market forces are laying siege to his own plans.
As I write this, the so-called “mini-budget” has been universally condemned including by such distinguished figures as Larry Summers, the IMF and Christian Linder. French news outlets are whooping with a mixture of glee and amusement at the self-destruction wrought by KamiKwasi Kwarteng.
Meanwhile the Chancellor hopes to explain his tomfoolery only in late November. Until then this is probably all he has to say;
“Hasta La Vista, baby”
For the rest of us, while we will deal with the fallout of this disastrous non-policy, it is also a fascinating experiment in the failure of democracy and resultant effects on economics and people. Did the people choose this government? Probably not. Will it work for them? Unlikely.
