The shortest prime ministership in British history – with Liz Truss resigning after 44 days – is not just a political disaster for the Conservative Party in the United Kingdom. It has powerful lessons on economic policy for Americans and others.
The central message is that contemporary right wing economic policies which favour the corporate sector and the rich are doomed to failure.
It is important to remember Truss and her Chancellor of the Exchequer [quaint British title for finance minister] Kwasi Kwarteng were not just stop gap seat warmers hoping to nurse the Tories to the next election after Boris Johnson resigned in disgrace.
Truss and Kwarteng are economic ideologues who have pursued a conservative platform for many years. In 2012 they published the book Britannia Unchained: Global Lessons for Growth and Prosperity, with three other Thatcherite Tories, in which they advocated lower taxes on profits, fewer business regulations, easier sackings and less protection for the environment.
Indicators of economic collapse
All five authors eventually found themselves in Boris Johnson’s Tory cabinet where they gradually implemented their policies. The results have been disastrous. Virtually all key economic indicators have deteriorated since the Tories won office in 2010. Some were exacerbated by the ill-advised decision to leave the European Union, but were not caused by that.
Since 2018 OECD member countries have enjoyed an average ten per cent increase in export volumes. Exports from the UK, in contrast, have declined by 8.1 per cent over that period. See blue chart, below.
Britain’s economic growth has been among the OECD’s laggards, with GDP in the last two quarters rising by only 0.7 and 0.2 per cent. Inflation has increased steadily since early 2021 and is now above ten per cent.
Other indicators to have collapsed recently include productivity, wages growth, jobs, retail sales, industrial production, tourist arrivals, stock market values and the value of the pound.
The critical disastrous decisions
The Tories in 2011 cut the corporate tax rate from 28 per cent – arguably the optimum level – to 26 per cent. It was then slashed further to just 19 per cent in 2017. The top rate of income tax was cut from 50 to 45 per cent.
As these took effect, wealth flowed out of the British economy at an accelerating rate, government revenue declined and budgets remained in deep deficit. The national debt worsened from 75.7 per cent of GDP in 2012, just after the global financial crisis, to 82.8 per cent in 2019, pre-pandemic. Meanwhile, well-managed economies generated healthy budget surpluses and reduced their debt over that period.
Britain’s national debt was 95.9 per cent of GDP last year and will be much higher this year.
Experiences abroad
Economists watched in dismay the collapse of the US economy after Donald Trump slashed taxes on the rich in 2017. Since then, US deficits have blown out, the debt has deepened and interest payable on the debt has become a burden which will bedevil Americans for at least a generation.
This is why when Truss and Kwarteng announced further tax cuts, the markets said, ‘Okay. That will wreck the British economy even further. We are out of here!’ – the response which triggered, first, Kwarteng’s sacking and then Truss’s resignation.
Media mendacity
If the consistent experience worldwide proves that right wing economic policies always fail, why on earth do voters keep voting conservatives back in?
Mediacloud.org tracks topics covered by the UK national media going back to the early 1990s. The grey chart at the top here shows the attention given to national debt since 1995.
Clearly, there is no relation whatsoever between the actual level of the debt and media coverage thereof. The two striking features of blue line in this graph are the surge in 1997 and then the sudden drop in interest in May 2010. Those were the dates when Labour won office and then left office, respectively.
We can make similar graphs for other economic indicators. We can make these graphs also for Australia and the USA.
In all three countries, the craven mainstream economic media operate primarily to deceive readers and viewers into believing conservatives manage the economy better than progressive parties.
The hard, cold facts show overwhelmingly that the opposite is true.
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This is an edited version of an article published today in Independent Australia. The original article is available here in full for free:
https://independentaustralia.net/politics/politics-display/brits-facing-ever-worsening-poverty-can-be-mightily-thankful-liz-truss-is-going,16894
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