Who would have thought a change of leadership in Britain could bring so many problems. Wait a little and PM Liz Truss will be blamed for an outbreak of bubonic plague.
Still it’s natural that the people responsible for the problems accumulated over the last decade – and accelerated during Covid time – are seizing the opportunity to pin the blame elsewhere.
Indeed, if you’re hoping it’s just a British thing you should be very worried by the growing number of prominent international centrists using this opportunity to burnish their own defences (see Larry Summers here and Jason Furman there) at the same time as putting in the boot.
The latest niggle is over the policies of Britain’s (boring, long-term, stable, highly-regulated) pension funds and their (boring etc) investments in government bonds. Those most eager to see the government’s incompetence in everything might ask themselves why an industry which deals in lifetimes is apparently having difficulty dealing with not-entirely unexpected short-term market fluctuations.
They might even get the depressing vibe that all this is only the beginning of a torrent of problems, all demanding government attention – which really means money. (Yesterday’s announcement that Britain’s health service is bleeding out – even before the Truss government does – can be seen as the latest instalment in a never-ending saga.)
And which will all need to be paid for – as the markets reminded Truss.
The irony of Truss trying to get ahead of the problems but instead being sandbagged by them is well covered by Allister Heath in Britain’s Daily Telegraph. But amusing visibility hasn’t made them easier to deal with.
So, like just about everyone else, Britain’s government is spending too much; it’s also taxing too much but still not enough to stop debt growing. Interest rates going up will make the problem worse, while hammering the living standards of mortgagors; but the lure of more directed credit will eventually hammer growth.
Meanwhile, low levels of growth in output and living standards look like getting worse. But governments have spent years encouraging distortions which are now revealing their destructive potential – substantial decreases in the productive labour force post-Covid; a growth in union militancy; business investment driven by cosy regulatory partnerships rather than market opportunities. It has reached the stage that when the market delivers a rare positive shock, as with some energy producers, the first and loudest cries are for a windfall tax.
Any challenge to this status quo was bound to generate howls from the many craving protection or other privileges. But it was less predictable that it would generate civil war in Truss’s own Conservative party.
Because surely the milk can’t be unspilt. If the government limps back to the current orthodoxy, they risk becoming a less-convincing version of the Labour party.
But the task of imagining – let alone creating – a growth coalition has been shown to be daunting.
Working people need to be brought to the realisation that otherwise the future looks like more taxes and worse services. Right now many cling to the hope that a few more rules and a few more taxes on a richer neighbour might do the job.
Business will only come on board when it makes more reliable long-term profits by taking risk, than from closing it down by regulatory collusion.
Beneficiaries ranking low in the priority of the orthodox woke will need to understand that their votes are more valuable elsewhere.
And realistically these changes of outlook will probably only come as the wreckage of existing policy drifts ashore.
The recent dramatic changes in the cost and difficulty of securing carbon-based energy have, for example, served to bring into clear focus the even greater costs of marching to a bureaucrat’s carbon-free specification. Some are even starting to understand that on current trends such a policy means a real decline in the quality of life (it’s one thing to imagine living car-free; another to have it imposed by London’s current mayor).
Perhaps the Truss government needs a string of global economic disasters to start making its points for it.
We can be confident that Vladimir Putin and a few other folks will be looking to help out on that one.
Point of Order 