How Britain fell from grace

 

British Prime Minister Liz Truss enjoyed only seven days of full power before global economic forces effectively destroyed her government. PHOTO: REUTERS

 

 

Whatever you may think of them, the British used to enjoy the reputation of a solid, well-run and responsible nation.

A centuries-old history of peaceful political change, with none of the coups, revolutions or civil wars that seem to have afflicted most other countries worldwide. A robust parliamentary system of government in which just two political parties take their turns in holding power based on electoral procedures that produce clear-cut results and solid governments with none of the unpredictable and often unstable coalition-making that afflicts most of the rest of Europe.

To be sure, the country’s politicians have always been of variable quality. But the United Kingdom’s civil service was highly rated for its professionalism and integrity, and so was its legal system, still considered an advantage and often touted as a national asset by many countries around the world.

That’s why Britain’s sudden descent into crisis looks so surprising. In just a few weeks, the credibility of some of the most critical institutions in British national life, including the prime minister, the Treasury, the Bank of England, the ruling Conservative Party, and the nation’s asset management industry, were all torn to shreds.

The country’s currency has sunk to its lowest levels in half a century, and the risk premium international investors demand to lend money to Britain is among the highest in the industrialised world.

For the first time in modern history, the British government was forced to bow to the pressure of global financial markets and withdraw a budget it had introduced only two weeks beforehand. And in another highly unusual move, the International Monetary Fund issued a rebuke to Britain using language otherwise reserved for those who manage the economies of poor and vulnerable developing nations.

Truss versus lettuce

Consequently, British Prime Minister Liz Truss, who assumed office only last month, had to ditch her policies before these were even tried, and the speculation in London is that her days are numbered.

The influential Economist newspaper had pointed out that, if one ignores the extended period of official mourning for Queen Elizabeth II – a period during which all politics were suspended – Ms Truss enjoyed only seven days of full power before the forces of the global economy effectively destroyed her government. That, The Economist suggested, is more or less the supermarket “shelf-life of the lettuce”.

Liz Truss may never recover from this cruel jibe: a British tabloid newspaper is currently offering its readers a live video stream of a lettuce head and a photograph of the Prime Minister, accompanied by the question, “which wet lettuce will last longer?”

Britain as a whole is now the butt of international jokes. Politicians in Italy – a country that will soon get its 70th government in almost as many years – have suggested that one of their retired prime ministers may be sent to London to try his hand at managing the British because he can’t do any worse than Britain’s politicians.

Mr Kyriakos Mitsotakis, the Prime Minister of Greece, a country that a decade ago had to be bailed out from national bankruptcy by global financial institutions, told Ms Truss’ government tongue-in-cheek that if they “need experience in dealing with the International Monetary Fund, we’re here to help”.

While the attention is on the UK experience, other economies and major currencies are also currently experiencing global pressure. The British pound may be down around 18 per cent to 20 per cent, but the euro is about 15 per cent weaker, and the Chinese renminbi dropped by an average of 11 per cent against the US dollar. The Bank of Japan recently spent an estimated US$21 billion (S$30 billion) trying to prop up the yen, to no avail.

However, credibility is everything in politics, finance and economics, and the UK government finally managed to lose all of these. Britain’s previously admired institutional framework and its hard-won reputation of certainty in financial policy went down the pan over the past two weeks.

And financial volatility is accompanied by political volatility. Between 1990 and 2010 – two decades – Britain was ruled by only three prime ministers. But from 2010 to now - just over one decade - the country has already known four additional prime ministers and may yet be ready for a fifth. Furthermore, no less than four politicians have served as finance ministers since January this year. These are chaotic politics Italian-style, minus the sun-drenched beaches or the delicious pasta.

More On This Topic 

Britain in crisis: How not to run a country

UK PM Truss ‘sorry’ for economic ‘mistakes’ but vows to stay on

‘Cakeism’ and Brexit

How did Britain get to this sorry state? A mixture of immediate failures by the Truss administration, magnified by a much more entrenched malaise.

Ms Truss won power by resorting to the oldest trick in politics: a promise that voters can have their cake and eat it. She vowed to cut taxes and increase spending, all based on borrowing from financial markets. And she dismissed the arguments of armies of economists who pointed out that hers was not an economic policy but a fantasy.

The more she faced criticism, the more she doubled down on her promises; her pledge to cut taxes became a test of wills, which she was determined to win. So, her ill-fated budget slashed taxes much further than anyone expected and sidelined Britain’s financial regulator and the country’s civil servants.

Ms Truss quickly discovered that one should not attempt to offer a spending bonanza against the backdrop of sharply rising inflation and interest rates, a punishing global energy crisis, as well as a British current account deficit which ballooned to an unprecedented 8 per cent of gross domestic product, and all without providing any indication of how Britain intends to deal with its public finances. The Prime Minister not only ran into a flat rejection by the financial markets, she unleashed a financial rout that could only be addressed by withdrawing her entire budget.

The problem of Ms Truss was not necessarily just the financial figures she peddled but the fact that her ill-conceived budget became totemic for a more comprehensive loss of British political and economic credibility, which has been cumulative over several years. 

 

The chief culprit is Brexit, as the British withdrawal from the European Union is popularly known. The damage that Brexit inflicted on the British economy - in terms of lower growth rates, lower exports and slashed inward investment – is by now well-documented.

But a much more severe impact on British credibility has been the conduct of the country’s political elite during this divorce process from the rest of Europe. The campaign to withdraw from the EU was conducted with lies; those who supported Brexit produced made-up figures about how Britain’s trade with the rest of the world would, supposedly, more than compensate for the loss of duty-free access to European markets.

And anyone who dared contradict the Brexiters by providing actual economic facts and figures was dismissed as part of so-called “project fear”, an alleged plot by the “establishment” to keep Britain shackled to Europe.

The tactic worked not only in pulling Britain out of the EU; it also spawned an entirely new class of British politicians who believe that all they need to do is to ram their policies through regardless of what the economic realities may be and if the facts don’t accord with their views, present “alternative facts”.

During the campaign that propelled her to power, Ms Truss refused to engage in any serious discussion with the critics of her economic policy, just as Mr Boris Johnson, her predecessor as prime minister, declined to explain how Britain would thrive outside the EU. Both politicians operated on the assumption that make-believe economics can become real economics.

And the reason people like them can come to power is to be found in another negative development of British politics.

More On This Topic

If Truss goes, who is most likely to replace her as Britain's prime minister?

New UK finance minister vows to show markets he can fix budget

Who chooses the party leader?

For many decades, the Conservatives and Labour – the country’s two major historic parties – were mass movements, counting millions of members. But the election of the party leaders who could then become prime ministers was left in the hands of the few, usually just the MPs in either party.

Over the past 15 years, however, mass party membership disappeared: Britain’s Royal Society for the Protection of Birds, for instance, has far more paid-up members than all the political parties combined.

Yet, curiously, the choice of who gets elected as party leader was taken from MPs and given to the parties’ entire membership. The result is that an unrepresentative group of party members – in the case of the ruling Conservatives, only around 160,000 people out of a total population of 68 million – decides who would rule Britain.

If it were left to the MPs alone, Ms Truss would have got nowhere near the Downing Street residence of British prime ministers. But she won on a platform of economic fantasies sold to people who wanted to believe in the enduring myth of having something for nothing.

Ultimately, it was left to the global financial markets to confront Britain with the rude awakening it deserves by presenting the country and its daydreaming politicians with the invoice for their mismanagement.

It’s improbable that Ms Truss will ever recover from its current debacle; the only question is whether the humiliation the UK has just experienced at the hands of global financial markets will bring to an end the age of untruthful politics that has so devalued the country’s administration.

But it won’t be easy to get out of this rut. King Charles III best summed up the national mood when he recently welcomed Prime Minister Truss to an audience with “dear, oh dear!

More On This Topic

Doubt cast on British PM Liz Truss' chances of survival

UK Labour keeps big lead over PM Truss' Conservatives, poll shows

  https://omny.fm/shows/in-your-opinion/is-the-nominated-member-of-parliament-scheme-losin

 Source link

 

Related posts:

 

Liz Truss takes over a Britain in decline and in severe crisis: Martin Jacques

 

 

UK PM candidate's reported 'China threat' label plan 'an irresponsible vote-puller', no good for solving its own problems: analysts...

 

China striving in unity will benefit the world more

  Students at Zhejiang Guangsha Vocational and Technical University of Construction celebrate the upcoming 20th National Congress of the C...

 

New march begins – How will CPC lead China to next centenary goal ?

Strong leadership core to provide ‘certainty, cohesion and strength’ in new journey   A huge artificial flower basket decorates Tian'anm...

How Britain fell from grace

 

British Prime Minister Liz Truss enjoyed only seven days of full power before global economic forces effectively destroyed her government. PHOTO: REUTERS

 

 

Whatever you may think of them, the British used to enjoy the reputation of a solid, well-run and responsible nation.

A centuries-old history of peaceful political change, with none of the coups, revolutions or civil wars that seem to have afflicted most other countries worldwide. A robust parliamentary system of government in which just two political parties take their turns in holding power based on electoral procedures that produce clear-cut results and solid governments with none of the unpredictable and often unstable coalition-making that afflicts most of the rest of Europe.

To be sure, the country’s politicians have always been of variable quality. But the United Kingdom’s civil service was highly rated for its professionalism and integrity, and so was its legal system, still considered an advantage and often touted as a national asset by many countries around the world.

That’s why Britain’s sudden descent into crisis looks so surprising. In just a few weeks, the credibility of some of the most critical institutions in British national life, including the prime minister, the Treasury, the Bank of England, the ruling Conservative Party, and the nation’s asset management industry, were all torn to shreds.

The country’s currency has sunk to its lowest levels in half a century, and the risk premium international investors demand to lend money to Britain is among the highest in the industrialised world.

For the first time in modern history, the British government was forced to bow to the pressure of global financial markets and withdraw a budget it had introduced only two weeks beforehand. And in another highly unusual move, the International Monetary Fund issued a rebuke to Britain using language otherwise reserved for those who manage the economies of poor and vulnerable developing nations.

Truss versus lettuce

Consequently, British Prime Minister Liz Truss, who assumed office only last month, had to ditch her policies before these were even tried, and the speculation in London is that her days are numbered.

The influential Economist newspaper had pointed out that, if one ignores the extended period of official mourning for Queen Elizabeth II – a period during which all politics were suspended – Ms Truss enjoyed only seven days of full power before the forces of the global economy effectively destroyed her government. That, The Economist suggested, is more or less the supermarket “shelf-life of the lettuce”.

Liz Truss may never recover from this cruel jibe: a British tabloid newspaper is currently offering its readers a live video stream of a lettuce head and a photograph of the Prime Minister, accompanied by the question, “which wet lettuce will last longer?”

Britain as a whole is now the butt of international jokes. Politicians in Italy – a country that will soon get its 70th government in almost as many years – have suggested that one of their retired prime ministers may be sent to London to try his hand at managing the British because he can’t do any worse than Britain’s politicians.

Mr Kyriakos Mitsotakis, the Prime Minister of Greece, a country that a decade ago had to be bailed out from national bankruptcy by global financial institutions, told Ms Truss’ government tongue-in-cheek that if they “need experience in dealing with the International Monetary Fund, we’re here to help”.

While the attention is on the UK experience, other economies and major currencies are also currently experiencing global pressure. The British pound may be down around 18 per cent to 20 per cent, but the euro is about 15 per cent weaker, and the Chinese renminbi dropped by an average of 11 per cent against the US dollar. The Bank of Japan recently spent an estimated US$21 billion (S$30 billion) trying to prop up the yen, to no avail.

However, credibility is everything in politics, finance and economics, and the UK government finally managed to lose all of these. Britain’s previously admired institutional framework and its hard-won reputation of certainty in financial policy went down the pan over the past two weeks.

And financial volatility is accompanied by political volatility. Between 1990 and 2010 – two decades – Britain was ruled by only three prime ministers. But from 2010 to now - just over one decade - the country has already known four additional prime ministers and may yet be ready for a fifth. Furthermore, no less than four politicians have served as finance ministers since January this year. These are chaotic politics Italian-style, minus the sun-drenched beaches or the delicious pasta.

More On This Topic 

Britain in crisis: How not to run a country

UK PM Truss ‘sorry’ for economic ‘mistakes’ but vows to stay on

‘Cakeism’ and Brexit

How did Britain get to this sorry state? A mixture of immediate failures by the Truss administration, magnified by a much more entrenched malaise.

Ms Truss won power by resorting to the oldest trick in politics: a promise that voters can have their cake and eat it. She vowed to cut taxes and increase spending, all based on borrowing from financial markets. And she dismissed the arguments of armies of economists who pointed out that hers was not an economic policy but a fantasy.

The more she faced criticism, the more she doubled down on her promises; her pledge to cut taxes became a test of wills, which she was determined to win. So, her ill-fated budget slashed taxes much further than anyone expected and sidelined Britain’s financial regulator and the country’s civil servants.

Ms Truss quickly discovered that one should not attempt to offer a spending bonanza against the backdrop of sharply rising inflation and interest rates, a punishing global energy crisis, as well as a British current account deficit which ballooned to an unprecedented 8 per cent of gross domestic product, and all without providing any indication of how Britain intends to deal with its public finances. The Prime Minister not only ran into a flat rejection by the financial markets, she unleashed a financial rout that could only be addressed by withdrawing her entire budget.

The problem of Ms Truss was not necessarily just the financial figures she peddled but the fact that her ill-conceived budget became totemic for a more comprehensive loss of British political and economic credibility, which has been cumulative over several years. 

 

The chief culprit is Brexit, as the British withdrawal from the European Union is popularly known. The damage that Brexit inflicted on the British economy - in terms of lower growth rates, lower exports and slashed inward investment – is by now well-documented.

But a much more severe impact on British credibility has been the conduct of the country’s political elite during this divorce process from the rest of Europe. The campaign to withdraw from the EU was conducted with lies; those who supported Brexit produced made-up figures about how Britain’s trade with the rest of the world would, supposedly, more than compensate for the loss of duty-free access to European markets.

And anyone who dared contradict the Brexiters by providing actual economic facts and figures was dismissed as part of so-called “project fear”, an alleged plot by the “establishment” to keep Britain shackled to Europe.

The tactic worked not only in pulling Britain out of the EU; it also spawned an entirely new class of British politicians who believe that all they need to do is to ram their policies through regardless of what the economic realities may be and if the facts don’t accord with their views, present “alternative facts”.

During the campaign that propelled her to power, Ms Truss refused to engage in any serious discussion with the critics of her economic policy, just as Mr Boris Johnson, her predecessor as prime minister, declined to explain how Britain would thrive outside the EU. Both politicians operated on the assumption that make-believe economics can become real economics.

And the reason people like them can come to power is to be found in another negative development of British politics.

More On This Topic

If Truss goes, who is most likely to replace her as Britain's prime minister?

New UK finance minister vows to show markets he can fix budget

Who chooses the party leader?

For many decades, the Conservatives and Labour – the country’s two major historic parties – were mass movements, counting millions of members. But the election of the party leaders who could then become prime ministers was left in the hands of the few, usually just the MPs in either party.

Over the past 15 years, however, mass party membership disappeared: Britain’s Royal Society for the Protection of Birds, for instance, has far more paid-up members than all the political parties combined.

Yet, curiously, the choice of who gets elected as party leader was taken from MPs and given to the parties’ entire membership. The result is that an unrepresentative group of party members – in the case of the ruling Conservatives, only around 160,000 people out of a total population of 68 million – decides who would rule Britain.

If it were left to the MPs alone, Ms Truss would have got nowhere near the Downing Street residence of British prime ministers. But she won on a platform of economic fantasies sold to people who wanted to believe in the enduring myth of having something for nothing.

Ultimately, it was left to the global financial markets to confront Britain with the rude awakening it deserves by presenting the country and its daydreaming politicians with the invoice for their mismanagement.

It’s improbable that Ms Truss will ever recover from its current debacle; the only question is whether the humiliation the UK has just experienced at the hands of global financial markets will bring to an end the age of untruthful politics that has so devalued the country’s administration.

But it won’t be easy to get out of this rut. King Charles III best summed up the national mood when he recently welcomed Prime Minister Truss to an audience with “dear, oh dear!

More On This Topic

Doubt cast on British PM Liz Truss' chances of survival

UK Labour keeps big lead over PM Truss' Conservatives, poll shows

  https://omny.fm/shows/in-your-opinion/is-the-nominated-member-of-parliament-scheme-losin

 Source link

 

Related posts:

 

Liz Truss takes over a Britain in decline and in severe crisis: Martin Jacques

 

 

UK PM candidate's reported 'China threat' label plan 'an irresponsible vote-puller', no good for solving its own problems: analysts...

 

China striving in unity will benefit the world more

  Students at Zhejiang Guangsha Vocational and Technical University of Construction celebrate the upcoming 20th National Congress of the C...

 

New march begins – How will CPC lead China to next centenary goal ?

Strong leadership core to provide ‘certainty, cohesion and strength’ in new journey   A huge artificial flower basket decorates Tian'anm...

Liz Truss takes over a Britain in decline and in severe crisis: Martin Jacques

 

Liz Truss delivers a speech at an event to announce the winner of the Conservative Party leadership contest in central London on September 5,2022. Photo: AFP

Liz Truss is the new British Prime Minister. She beat her Conservative rival Rishi Sunak by tacking strongly to the right. No doubt the fact that she is white, and Sunak is brown, was also a major factor for the 170,000 overwhelmingly white Conservative Party members who voted. If Truss is to be taken at her word, she will be the most right-wing prime minister since Margaret Thatcher in the 1980s.

Each of the last four Conservative prime ministers has been more right-wing than their predecessor: in chronological order, David Cameron, Theresa May, Boris Johnson, and Liz Truss. Truss wants to cut taxes, doesn't like the state, is hostile to redistribution, believes in trickle-down economics (that feathering the nests of the rich will ultimately help the poor), and is an anti-China hawk.

In being true to her beliefs, however, she faces a gargantuan problem. She is confronted with the worst economic crisis of any British prime minister since 1945. It is impossible to find any good news on the economic front. As a result of the war in Ukraine, the price of natural gas, which is the main source of domestic heating, is five times what it was a year ago and is predicted to carry on rising steeply. Without state intervention to hold down energy prices, around half the population will this winter be impoverished.

Inflation, which for most of this century has been at around 2 percent, is already at 11 percent, and is predicted to rise to 20 percent. Interest rates, which have similarly been very low, are rising rapidly, meaning much higher mortgage payments for homeowners. The Bank of England forecasts that the country will go into recession towards the end of this year, and some believe that it will continue until 2024.

With inflation now in double figures, workers are finding they are facing wage increases that are less than half the increase in prices: as a result, they are confronted with the prospect of sharply declining real wages over the next several years. There is growing industrial unrest which is likely to become increasingly widespread over the next year.

This is not just a short-term problem. Real wages are now just below the level they were in 2007, on the eve of the Western financial crisis. In other words, the British economy has been stagnating for the last 15 years and in the process has been falling behind its near neighbours Germany and France. One major think-tank is predicting that over the next two years Britain will experience the largest fall in average real incomes for over one hundred years.

It is inconceivable that Truss can tackle this nightmare scenario by cutting taxes, rolling back the state, and turning a blind eye to the poorest sections of the community. This will require state intervention and redistribution on the scale of the COVID-19 crisis in 2020, otherwise the Conservative Party will surely lose the next general election in 2024. Truss faces a major dilemma: take the right-wing ideological route and court electoral disaster or follow a pragmatic road and swallow her ideological principles.

Even before the coming economic tsunami, there was a mood of frustration and dislocation, a feeling that the country no longer worked properly. Far from ushering in a new era of prosperity and efficiency, Brexit has become synonymous with labour shortages in many parts of the economy. This has been accentuated by the impact of COVID-19 which continues to disrupt the economy, most obviously in the form of chronic labour shortages in many sectors. Britain's most-loved institution, the National Health Service, is now on life-support, a result of being starved of money for many years and an increasingly chronic shortage of staff.

It is important to emphasise that Britain is now in a much inferior position than it was in 1979 when Thatcher first came to power. This is a weakness it shares more generally with the West and especially Western Europe. The Soviet bloc aside, the West for the most part dominated the world during the 1980s. Its influence and hinterland, however, are now much reduced because of the rise of China together with that of the developing world. A topical example will suffice to illustrate the point. Is the present spike in oil and gas prices, which are costing Western Europe dearly, a permanent or temporary phenomenon? It looks very likely that it will be the former, that Western Europe will be permanently disadvantaged, because Russia has found new markets, notably India and China, for its oil. Western Europe enjoys less economic power in the world and its room for manoeuvre has contracted. This is what being part of the declining part of the world means.

Finally, what will Truss mean for Britain's relations with China? There is no reason for optimism. Truss thinks of herself as a cold war warrior. She has strongly hinted that China will be designated a "threat" to national security and treated in the same way as Russia. The golden age in the relationship between Britain and China came to an end around five years ago and there is precious little chance of it returning for a long time to come. 

By Martin Jacques

Born	1945 (age 73–74) Coventry, England, Great Britain, U.K
Nationality	British
Education	King Henry VIII School, Coventry
Alma mater	University of Manchester (B.A.) University of Cambridge (PhD)
Occupation	Editor, academic, author
Website	MartinJacques.com

By Martin Jacques@martjacques

The author was until recently a senior fellow at the Department of Politics and International Studies at Cambridge University. He is a visiting professor at the Institute of Modern International Relations at Tsinghua University and a senior fellow at the China Institute, Fudan University. Follow him on twitter @martjacques. opinion@globaltimes.com.cn 

Source link

RELATED ARTICLES

 

Liz Truss elected UK's new PM, faces tough job amid huge mess; 'pragmatic China ties crucial to overcome challenge'

Liz Truss will move in 10 Downing Street as she beat Rishi Sunak in the election on Monday to become the new leader of the Conservative Party and the new UK Prime Minister. Analysts believed that this would ...

 

 

Liz Truss should put her brain into gear before engaging her mouth

She could be a nightmare for China, because now she has to put up or shut up – ...

Liz Truss elected UK's new PM, faces tough job amid huge mess; 'pragmatic China ties crucial to overcome challenge'

Liz Truss will move in 10 Downing Street as she beat Rishi Sunak in the election on Monday ...

Liz Truss as PM will be disastrous for Britain

Liz Truss is a disaster waiting to happen. 

 

UK to welcome new PM, urged to be ‘pragmatic’ on China-UK ties

 

As the tight race for new UK prime minister comes to an end, Chinese observers predicted that there ...

UK descends into being 'colony of US' as Truss summons Chinese ambassador over Taiwan

UK Foreign Secretary Liz Truss, due to need of her campaign to become the next prime minister and .

.

War-addicted West must stop dreaming of global domination by force

Mahathir's statement reflects the mainstream public opinion in regional countries. 

 

UK PM candidate's reported 'China threat' label plan 'an irresponsible vote-puller', no good for solving its own problems: analysts...

British Secretary for Foreign Affairs Liz Truss is pictured during a meeting with her Czech counterpart on May 27, 2022 in Prague. Photo: AFP

 

.Related posts:

Why does the West fail to understand China? The West misreads, China is rising, said Cambridge Prof 

 

US can't accept painful fact that China is now its equal: Martin Jacques

 Why Europe gravitates away from US to Eastern power center: Martin Jacques

 

 

Moral vacuum at the heart of modernity, now embodied in US laws!

Western concept of democracy lacks historical contexts, disrespect cultural difference, conquest by force, colonisation, slavery, genocide, human rights, doctrine of discovery embodied in their laws ! 

 

Vigorous Chinese democracy vs aging Western one; Democracy not 'patent' of the West

 

While sowing discord around China, the US is heading to be a 'failing state' OTHER

Global Times@globaltimesnews

China state-affiliated media 

#Taiwan island is a province of #China. What does the #US mean by “defense” ? : China will firmly strike back against acts undermining China's sovereignty and security: Chinese FM commented after US claimed the arms sale to Taiwan was for defensive purposes.