On the last day of September 2022, a thinking Englishman wrote thus: “It is impossible to regain our sense of pragmatism?”
The Englishman is Ed Luce, the Financial Times US-based associate editor. In the lament lay a key element of self-awareness. Mr Luce wrote that British politics had been “plagued for years by magical thinking — promises that bear no relation to ability to deliver; extravagant lies that cater to some deep need for self-delusion; gullibility dressed up as taking back control’.”
This is true.
As former vice-president of the European Central Bank Vítor Constâncio said: “Since Brexit, the UK has shown a lot of hubris and denying reality, as if it was going back to greatness and the days of the empire.”
Almost no one could argue that Britain’s economy doesn’t need to be re-charged in some way. Since the 2008 financial crash, its mean growth rate has been just 1 per cent. In the 60 years, since 1948, its growth rate was 2.7 per cent.
But the supply-side economics shock therapy being pushed through by Prime Minister Liz Truss and her chancellor Kwasi Kwarteng may be too much for Britain. It’s better done in America, if at all. As commentators say, Ronald Reagan believed in “starving the beast” or cutting back state funding very deeply by diminishing government income. But at least he had the world’s strongest economy and the world’s preeminent currency. There was a safety blanket of sorts if the experiment went disastrously wrong.
Economic experimentation can be costly and traumatic and ultimately self-defeating. To shrink the British state by starving the beast may mean a French Revolution-style uprising. Think of what’s just happened in southeast London for instance. There’s rising criticism of a rail company’s decision to end direct links to the West End of London for many communities in the southeast. But funding cuts by the Conservative government mean that services are being reduced overall.
In this context, Columbia University economist Adam Tooze was spot on when he noted in ‘The Guardian’ that reduced income and funding cuts could reduce services. “Cut taxes and, as public revenues contract, this will create irresistible pressure for spending cuts,” he wrote. “The argument is all the more urgent if you can invoke pressure from the financial markets.”
Indeed, as FT columnist Janan Ganesh says “so much of what Britain has done and thought in recent years makes sense if you assume it is a country” of 330 million people with $20 trillion annual output.
But the markets know what British politics hasn’t quite faced up to – that Britain is not America. So the markets didn’t buy Kamikwasi’s disastrous budget and his boss, Librium Liz’s robotic defence of it.