Britain’s Liz Truss chooses a hard road

Is the new approach to economic policy of the Truss government important. Well, just look at the overreaction.

“It has been extreme” says the mild-mannered Tyler Cowen, who goes on to add:

I certainly can see reasons why one might oppose the plan, but the skies are not going to fall.”

Criticism from many of the government’s opponents can be dealt with relatively briskly – it’s usually easy enough to pick out contradictions in their own recent testimony.  Cowen again, with admirable restraint:

Continue reading “Britain’s Liz Truss chooses a hard road”

Losing isn’t fun. But it can be easier than winning

As the contest between Liz Truss and Rishi Sunak for the leadership of Britain’s Conservative party draws to a close, the last hustings meeting was held in London.

If you were looking for uplift, this was not the place to be.

Frontrunner Truss played it solid, safe and not terribly inspiring.  Sure there were clear signals towards better policy – a preference for tax cutting over directed expenditure, a desire to bring more market signals into energy policy, better post-Brexit regulatory policy, and so forth – but then Boris wavered when the heat was on.

So her supporters need a dose of hope or trust to see her as a PM for tough times.  Although as Lord Frost, one of Boris’s disappointed backers, says, hopefully:

“… as we have discovered, it’s hard to know who is really up to the job of prime minister until they actually do it”.

Slick Rishi – with his miniscule chance of taking the job – took the opportunity to steal the show.  Who else could make a dozen thank yous during opening applause sound humble – and then kick off with “I want to start by saying – thank you”.

He spoke with sincerity of public service and fiscal responsibility.  The changes he will bring to government will be competence, seriousness, decency and integrity (did you get that Boris?).  

There could be no doubt about his confidence in his evident talents: “I can steer us through”.

As one of Keith Holyoake’s political opponents was said to have said “Christ, I could almost vote for the old bastard”.

But it seems they won’t.  

When the policy of letting Conservative party members choose the leader was introduced, few would have imagined a situation where they would be choosing a fourth PM in less than six years. Fewer still would have foreseen the extent that it would bring party principles and policy into the process.

But it doesn’t seem to made it easier for the parliamentary party to unite.  Even before the Truss coronation, former heavy-hitter and Sunak promotor Michael Gove declined the opportunity to confirm he would support her first budget, while Boris showed his old form with a rousing demand to build, build and build nuclear power stations, while warning Truss not to expand UK natural gas production.

(As an aside to this, it was impressive to see Liberal Democrat leader Ed Davey piously adding that “energy bills are a lot higher now than they ought to have been because of the Conservative’s failure” when he knowingly baked high prices into policy as climate change minister in an earlier coalition government).

But brutal personal differences in unhappy political conditions hardly make for unity.  Rishi made it sound possible by not addressing the most pressing issues.

Lord Frost put it better than most when he focused on the need to recognise policy trade-offs and then make the right (i.e., the hard and unpopular) choices, on Covid, energy security, health system capacity and housebuilding: 

“The best way to deal with these dilemmas is not to pretend they don’t exist or there is some magic way out, but set them out and explain why the government has chosen as it has. Be open with people. Explain we can’t have everything. If even the Conservative Party seems to suggest that magic solutions work, the risk is the electorate turns to the authentic purveyor of illusions, the Labour Party.”

That task brought down Boris.  Rishi would say trust my brilliance.  Perhaps Liz’s lack of magic will leave her no alternative.

Can we call you Liz?

Unpolished, not that intellectual, sometimes gawky, occasionally gaffe-prone and at times needing protection. Not many saw her as the next PM.

No, not Jacinda.  Liz Truss is the firm favourite to succeed Boris Johnson as Britain’s next PM in early September. And perhaps not someone who needs that much protection.

At first the smart money was on Rishi Sunak, the even smarter former finance minister.  He showed his political acumen with nuanced discontent for Boris’s increasingly wayward policies, before implementing them with gusto.  His political conscience emerged as Johnson’s administration hit the skids.

But while Rishi might be the choice of Conservative party MPs, they only get to choose the final candidates. The party membership makes the call.  And it seems Boris has exhausted the members’ tolerance for talented opportunism.

Hence the opening for a candidate who resembles a Thatcherite believer.

This ought to please everyone (except perhaps Mr Sunak).

Believers in twenty-first-century orthodoxy, the media and opposition parties get someone less elusive than Boris to hate.  Conservatives get a leader sympathetic to Lampedusa’s dictum ‘If we want things to stay as they are, things will really have to change.’

Because, in her simplicity, Liz might have an inkling of the nature of the political economy problem Britain faces.

For twenty years, political success has gone to those who say that government can solve any number of problems for a winning coalition of interest groups, whilst ensuring that no-one suffers pain from their own actions.

The result, at least in the UK, is a finance sector leaking productivity while conforming to American and European regulatory schemes; an energy sector working on a cost-plus basis for Whitehall’s central planners; state spending growth without delivering services customers want; and workers bamboozled into believing that reward doesn’t have to be linked to the financial value of one’s contribution.

It’s true that the British variant of Western orthodoxy has had impeccable cross party support:  starting with the Blair-Brown Labour party; carried on by David Cameron and Boris Johnson’s Conservatives; and even including the responsibility-shy Liberal Democrats under Nicholas Clegg for five years of coalition government.  (Clegg now earns a very handsome wedge from Facebook for unsuccessfully beseeching his European chums not to impose growth-destroying regulation on the tech sector).

Even so, it won’t be easy for the next Tory leader to proclaim that we all got that one wrong, and now things have to change.  She (or perhaps even he) shouldn’t expect credit for honesty. Even if contemporary thinking regards it as an act of kindness.

Particularly when the change is to let markets go to work encouraging productive activity, while destroying less-productive jobs in ways we can’t quite imagine, and at the same time cutting back the government’s responsibilities to a less ambitious (and properly costed) range of interventions.

Then things really could change for Britain.  Ditching wasteful infrastructure projects like high-speed rail; explosive growth in fossil fuel output to provide short-term energy security; more highly-paid tech and perhaps even finance jobs; a wrenching shrinkage of the tertiary education sector; bracingly high interest rates to squeeze out inflation and crush over-valued asset markets. These are just some of the possibilities.

Two difficulties supervene.

First, it would be quite a shock after all the years of soothing promises, and Liz doesn’t have a mandate for shock.

Secondly, markets will respond powerfully (they always do), but only after a lag and, crucially, when they believe policy is here to stay.

Which would give Liz three choices.

She can crack on with neo-Thatcherism and hope that developments in the world economy and politics (like a Republican party triumph in the November congressional election) prove her right before her government’s term runs out at the beginning of 2025.

Or she could follow the approach of Andy Farrell, the Irish rugby coach, and kick the ball back to the opposition.  While she would be unlikely to win an early election on a platform of pain, there is no obvious alternative government with credible policies. So she might hope to regain possession relatively quickly and with a much better field position.

But she will need a great deal of determination to avoid the third option. The rugby board’s dithering over All Black coach Ian Foster reminds us of the enduring attraction of least-change mediocrity, of reluctance to admit error, and unwillingness to do the right thing – until all the wrong options have first been thoroughly explored.

Boris on the brink

The enemies of British PM, Boris Johnson, smell blood in the water.  They should be careful what they wish for.

A report on partying (social not political) in No. 10 Downing St has been delayed while the police consider the case for prosecution for breach of lockdown regulations; there have been five resignations from his inner circle of staff; and he is being roundly pilloried by the great and good for his diversionary attack on the leader of the opposition Keir Starmer.

According to the bookmakers, it’s odds-on that he will be gone by year end.

Continue reading “Boris on the brink”

Covid divide in 2022: you ain’t seen nothing yet

As the Omicron wave washes through, it’s hard, even with the seasonal perspective, to reckon what things might be like in say a year’s time.

But perhaps necessary.

Because the day-to-day measures seem less and less meaningful – except where they provide a pointer to the direction of long-term policy.

Continue reading “Covid divide in 2022: you ain’t seen nothing yet”

Late Frost in Brexit Britain

Another sharp take on the resignation of Lord Frost – Boris Johnson’s chief European sherpa – from the folk at Eurointelligence.

Wonk-in-chief Wolfgang Munchau argues Lord Frost was one of the few (perhaps the only one?) of Boris’s close advisers that really understood the needs of a post-Brexit strategy:

“What Brexit requires, first and foremost, is a post-Brexit economic model.”

What model?

Continue reading “Late Frost in Brexit Britain”

In Britain, Christmas locks itself down

Experience suggests one should only call a turning point after it has actually – well – turned.

That said, it might be wise to keep an eye on developments in the UK over the Christmas and New Year period.

While Europe is fast locking down for fear of Omicron, Britain’s cabinet is the fulcrum of a political battle over whether any policy response would be meaningful.

Continue reading “In Britain, Christmas locks itself down”

Boris: holding out till Christmas

We said a few days ago that British PM, Boris Johnson, still looked to be the indispensable man.

It’s hard to tell if subsequent events are qualifying or confirming that.

Two examples.

First, Lord Frost, Minister of State and the government’s EU strategist resigned citing the general drift of policy, most recently towards Covid authoritarianism.

Continue reading “Boris: holding out till Christmas”