I want to preface this by saying that I think Liz Truss is an idiot whose programme for government would have been very harmful, at the very least socially and in terms of public services, had it actually been implemented in any coherent sense, and is in basic opposition to almost everything I believe in. I say this because I have a feeling what I’m about to say is going to have people accusing me of defending her, when in reality I just want to sound a bit of a note of caution.
Truss came to power (such as it is) in September 2022 and was gone in a little over a month. In that time, she (or rather Kwasi Kwarteng) announced a “mini budget” that would, essentially, have deficit spent on a huge scale by making large unfunded tax cuts – essentially a kind of turbo-Thatcherite, Randian play at economic stimulus. The markets categorically shat the bed in response to this, leading to a spiking of interest rates and widespread economic chaos, in addition to the already exciting inflationary environment that the UK (and indeed, much of the rest of the world) was in, and remains in today.
It is, undoubtedly, extremely funny that Truss, who is charitably a very unserious person and less charitably a total imbecile, had her premiership very swiftly ended before being replaced by the person she’d beaten in a leadership contest not long prior. However, as time goes on, and in the cold light of day, long after the hilarious* lettuce was consigned to some young journo’s food waste bin, I’m getting a bit uncomfortable with the descriptions of her programme itself having “crashed the economy” – not because I am any fan of it, but because of what it means for any politics I do want enacted.
On a point of fact, Truss’ policies were never implemented, bar the energy subsidies that would quite credibly have screwed the country four ways from Sunday had they not been, much in the same way that COVID-era subsidies were a non-negotiable. Everything else she promised was junked. The policies did nothing, or at least nothing bad. What was deemed to have “crashed the economy” was market reaction to the announcement of these policies, which is a very different thing entirely. The economy itself didn’t do much – the UK’s GDP has continued on its merrily stagnant trajectory ever since.
As a big fan of the idea of deficit spending for investment and economic stimulus, and someone with a very steadfast opinion that December 2019 was a horrible missed opportunity for a vastly better social and economic settlement for the UK, I have to be exceptionally uncomfortable with the idea that the markets must be the – or even a – barometer of whether government policy is good or not, because anything I want would inevitably end the same way.
Had my preferred government been elected in 2019 (or 2017), with a promise to enact the sort of policies I would like to see, it too would have likely been greeted with a similar “crash” in the economy, and one that would have likely ended far worse for all concerned given that it would not have even the prospect of a friendly press or business community. Surely, there are even true blue balls-to-the-wall neoliberals who might balk at the idea that pension funds and the FTSE 100 might have more of a say in the fate of a government than voters do?
Unfortunately, many on the left and within Labour have adopted the “Truss crashed the economy” idea wholesale – partially because it’s obviously, as I say, very funny, and partially because it is a useful stick to beat the Tories with, and appears to be the one line that finally has some cut-through after thirteen years of the Conservatives being able to get away with – almost literal – murder.
But as someone with no particular short-term interest in helping the current awful iteration of the Labour party attain power, and certainly not helping them with dumb soundbites (which they can supply more than enough of themselves) I have to sound a note of caution for the longer term. You do not have to be that far to the left to be concerned that the opinions of businesses and markets might be seen to be able to effectively veto government policies, or even entire Prime Ministers. Not just that, it is beyond concerning and into simply idiotic that changes in share prices as reactions to the mere announcement of policies could be considered consequences of the policies themselves.
In reality, it is entirely possible that Truss’ supply-side policies would have actually led to some form of limited economic growth. It would also have been possible – and in my view more likely – that a Corbyn-style government pursuing demand-side stimulus would have also led to a vast improvement in the economy overall. But we never found out. We never will. I can guarantee that part of the calculus in Starmer’s lizard brain right now is that much as he doesn’t want to spook Tory voters by offering, well, anything, he definitely doesn’t want to spook the markets.
As I say, it is all very funny – Truss didn’t deserve to be Prime Minister and it is objectively hilarious that she was defenestrated. But anyone who wants any kind of politics that might, reasonably, upset the FTSE 100 slightly should probably be a bit careful as to what they wish for when they make light of that defenestration.