Liz Truss’s Britain Is a Morbid Symptom of the World’s New Era - Adam Tooze (Foreign Policy)

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Liz Truss’s Britain Is a Morbid Symptom of the World’s New Era

The new British government is an economic disaster—and a symbol of a global political crisis.

By Adam Tooze, a columnist at Foreign Policy and director of the European Institute at Columbia University. 

Foreign Policy, October 12, 2022

 

In the last few weeks, we have witnessed the remarkable spectacle of a Conservative government in Britain deliberately taking on the financial markets. With a surprise mini-budget promising 45 billion pounds (about $48 billion) in tax cuts targeted at high-earners, Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng unleashed a currency and bond market crisis the likes of which Britain has not experienced since sterling was driven out of the European Exchange Rate Mechanism in 1992. At that time, Europe as a whole was convulsing. This time, the crisis was Britain’s alone. The last time a Tory government was subject to such near-total condemnation by global expert opinion was in 1956 amid the Anglo-French invasion of Egypt over the Suez Canal.

Of course, Brexit in 2016 was condemned by most reasonable international commentators as well. But that was not the policy of David Cameron’s government. It was an insurgent campaign led by Boris Johnson and the UK Independence Party. It was Johnson’s boast that he had defied “Project Fear”—the mobilization of establishment opinion against the Brexit campaign. Faced with a phalanx of mainstream opinion that included U.S. President Barack Obama and Jamie Dimon of JPMorgan Chase, Johnson dismissed concern for the future of British business with an expletive. He thus marked the moment at which the leading group within the Conservative Party separated itself from any conventional commitment to the “U.K. economy,” in favor of a more nebulous idea of national destiny and the more specific interests of Tory cronies.

Ever since, the political economy of Britain increasingly has resembled the annual showcase of Wimbledon—in cultural terms, a very British affair, celebrated around the world as such, but rarely a stage on which British players actually shine and certainly not an event to which the majority of the population is actually invited.

Preoccupied with Brexit and COVID-19, Johnson did not have time to develop an extensive program of government. Like the Cameron and May administrations, Johnson’s most important constituency appears to have been a rentier class of hedge funds and public-private contractors. But, as his electoral triumph in 2019 attested, Johnson also managed a broad-based political coalition ranging from patriotic working-class voters in the north of England to upper-class London types.

It is no secret that the Tory party has long included a more radical fringe. This includes figures such as Jacob Rees-Mogg, affectionately known as the member of Parliament for the 18th century. Johnson made sure to keep this wing of the party within his tent but balanced them with centrists like Rishi Sunak. Elected to Parliament in 2010, Truss and Kwarteng belong to a cohort of Tory politicians who have never known opposition. Neither has deep roots in the Tory’s traditional social milieu. Truss’s parents were Labour voters. She and Kwarteng were incubated by a coterie of free market, right-wing think tanks that first came to the fore during Margaret Thatcher’s rise to power in the 1970s and now thrive on obscure funding by dark money—some British, some not. When Johnson lost his grip, it was Truss and Kwarteng’s moment. Whom they represent apart from the 80,000 or so Tories who voted for Truss to replace Johnson is not obvious.

In style, their program was a quintessential post-Brexit manifesto, high on ideology and blustering self-confidence, promising a dramatic new vision of Britain’s future but lacking details. In substance, it was caricature of the rentier program, promising to slash taxes, roll back environmental and labor regulation, and cut already impoverished welfare benefits.

It stretches credulity to suggest that they actually believe this is a formula for national economic growth. It is certainly an agenda for greater inequality. They even appear to support an end to easy credit and low interest rates, despite the damage this will likely do to heavily mortgaged homeowners, once a core constituency of Thatcher, whom they claim as their hero. Trying to make sense of this seemingly perverse policy, some speculate that Truss and Kwarteng are so deeply beholden to rentier interests that they are exponents of disaster capitalism, provoking a housing crisis that would allow property companies to snap up large portfolios of distressed properties. The fact that analysts are driven to such far-fetched speculations points to quite how implausible the Truss-Kwarteng vision for Britain’s economic future seems.

It certainly didn’t make sense to the financial markets. The pound plunged. Bonds sold off. As yields surged, that triggered obscure derivative hedging strategies in the portfolios of private pension funds and threatened to unleash a fire sale of gilts, or U.K. government debt. That, in turn, forced the Bank of England to react. To stop the slide, it stepped in as the market-maker of last resort, warehousing debt that pension funds needed to sell for cash. The result is conflicting policies. On the one hand, like other central banks around the world, the Bank of England is promising to raise interest rates. At the same time, to prevent the financial system from imploding, it has to engage in another emergency burst of quantitative easing, buying bonds in exchange for cash.

In the short term, this has provided relief. The pension funds have been saved. The pound rebounded. Yields fell back. But it was not enough to save Truss and Kwarteng’s embarrassment. On the weekend of the party conference, they reversed the controversial tax cut.

The Tory party’s reputation both with the population at large and its own supporters is in tatters. Labour, under the uninspiring but reliable leadership of Keir Starmer, rides high in polls. Unless Labour finds a way to shoot itself in the foot, the party will, come the next election, inherit Britain’s ailing economy and threadbare welfare state. If the current opinion polls hold, it will have a giant majority. But given how parlous the state of the British economy is, no one governing in the U.K. faces good options. If there is a shred of reality in the Truss and Kwarteng program, it is a realization, after more than a decade of low growth and stagnating productivity, of quite how serious Britain’s economic impasse is.

 

The new prime minister is making Britain look like Argentina—in more ways than one.

One could dismiss the U.K. crisis as an idiosyncratic storm in a teacup. But that was not the view taken by global bond markets, which all experienced a moment of panic in reaction to the turmoil in London—and with good reason.

The British crisis highlights the huge stress that economic policy is under, worldwide, but particularly in Europe. The recovery from the COVID-19 shock was rapid but uneven. Inflation has tested the credibility of central banks. Now the energy crisis unleashed by Russia’s attack on Ukraine is convulsing the European economies. For lack of natural gas, it is not sure that any of them will get through the coming winter without drastic rationing measures and a severe recession.

The 45 billion pounds in tax cuts announced by Kwarteng made the splash that they did because they followed the unveiling of a far larger program, with cost estimates of up to 150 billion pounds, to stabilize energy prices. At the time, the program, valued at around 5 percent of Britain’s GDP, was the largest in Europe. This week, it was matched by a 200 billion euro ($195 billion) commitment from Berlin.

Chancellor Olaf Scholz’s announcement ruffled feathers in the rest of Europe, but German bond prices barely budged. Unlike British debt, German bunds are anchored as the benchmark assets of the eurozone. The real question for the financial stability of Europe will arise when Italy is forced to announce an energy subsidy package of similar dimensions. Italy’s public debt is already far too high for markets to easily absorb a program of German or British dimensions. The only country with a worse track record of growth in Europe than the U.K. is Italy.

But the lessons of the U.K. debacle are political as well as economic. The disintegration of the Tory party points to basic questions haunting modern conservatism. We may not be in the 19th century, when defenders of the status quo struggled to contain the threat of revolution. But the pace of social, cultural, technological, economic, geopolitical, and environmental change in the 21st century is frenetic. How should conservatives respond? If you run to the center as Angela Merkel did with the Christian Democratic Union in Germany, you risk being outflanked by more credible liberal and environmental parties and challenged on the right by openly nationalist and xenophobic parties. If you move to the right, you can win success as Giorgia Meloni has done in Italy and Jair Bolsonaro and Donald Trump did in Brazil and the United States, respectively. All three demonstrate the appeal of an authoritarian, nationalist agenda. But as much as they grab the headlines, none of them is resoundingly majoritarian. Their positions are too extreme for large segments of the modern electorate. And it is altogether unclear how their promises and their vote-winning populism translate into a constructive agenda for government.

Of course, centrist and progressive governments fail, too. The COVID-19 crisis offers a veritable how-to guide of governmental failure. But tantrums like the one we have just witnessed in the U.K. are not accidents. They are part of a piece with the meltdown of the Trump administration in 2020 over COVID-19 and the Black Lives Matter movement; the Brexit shock; the dogmatism of Germany’s stand in the eurozone crisis; and the recalcitrance of Republicans in the United States during the 2008 financial crisis. Conservatism in the 21st century has a reality problem, and sometimes it bites.

Adam Tooze is a columnist at Foreign Policy and a history professor and director of the European Institute at Columbia University. His latest book is Crashed: How a Decade of Financial Crises Changed the World, and he is currently working on a history of the climate crisis. Twitter: @adam_tooze

 

A politica externa e a diplomacia da Gra-Bretanha - book review

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Turner on Baxter and Dockrill and Hamilton, 'Britain in Global Politics Volume I: From Gladstone to Churchill'

Christopher Baxter, Michael L. Dockrill, Keith Hamilton, eds. Britain in Global Politics Volume I: From Gladstone to Churchill. Security, Conflict, and Cooperation in the Contemporary World Series. Houndmills: Palgrave Macmillan, 2014. 312 pp. $100.00 (cloth), ISBN 978-0-230-36044-0.

Reviewed by Michael J. Turner (Appalachian State University)
Published on H-Diplo (August, 2014)
Commissioned by Seth Offenbach

This fine collection of essays was put together by the colleagues, pupils, and friends of Saki Dockrill, whose premature death in 2009 robbed the fields of international relations, Cold War history, and conflict and security studies of a notably gifted scholar. Most of the essays deal directly with some of the issues that Dockrill addressed in her own work. So many contributions were offered, in fact, that it was decided to publish two volumes, an eloquent testament to her as a person and an academic.

This first volume opens with an introduction by Brian Holden Reid, who was for a time head of the Department of War Studies at King’s College, London, where Dockrill was a student and later a professor. Sympathetic and touching, with a fair-minded assessment of her publications, the introduction makes it clear that she was at the height of her intellectual powers when she died, making her loss all the more poignant. She contributed so much, not only with books and essays but also as editor of book series, opening the way for other scholars to publish their research. Even those who did not know her personally (this reviewer included) would agree that her work—and especially her ideas about West German rearmament in the early 1950s, the national security policy of the U.S. government in the Dwight Eisenhower years, and British withdrawal from East of Suez—will stand the test of time.[1]

The first of the essays in this collection, by T. G. Otte, focuses on Anglo-Russian relations. Otte contends that the phrase “Cold War” can reasonably be used about periods before (as well as after) the Second World War, if taken to mean a sustained enmity that falls short of armed conflict, as with British efforts to contain Russian expansionism. “Concerns about Russia,” Otte writes, “ran like a golden thread through the texture of British policy in the nineteenth and twentieth centuries” (p. 19). The British tried to exploit Russia’s problems (especially financial), encouraged proxies to assist in deterring Russia, and made alliances. Policy was “underpinned by occasional flashes of belligerence” (p. 40). It is useful to think of “Cold War” in this way, and to take the longer view of conflict and competition. But does this apply only to bilateral relations? In light of Otte’s remarks we might revise our perspectives on other historical “Cold Wars,” and at least try to determine the extent to which his approach helps us to understand multilateral relations.

John Fisher’s essay concerns Curzon’s tenure as Britain’s foreign secretary, 1919-24, and his goal of boosting the security of the empire (unsurprising for a former viceroy of India). Curzon believed assertion, preemption, and expansion to be appropriate if they served this end. He was suspicious of Wilsonian peacemaking, though used Woodrow Wilson’s rhetoric when it suited British interests; and he was dubious about the strength and reliability of France. Although he was not without talent and vision, Curzon proved to be a failure. He could not find a way to cooperate effectively with Britain’s allies, and he offended colleagues in the government with his egomania and volatility. He did not adapt quickly enough to changing international circumstances and was also undone by shifts in government thinking, particularly when “retrenchment” trumped “security” (p. 62). Fisher provides telling insights into the choices and complications facing British leaders after the First World War, and fills out our picture of one of the key figures of the time. His opinion of Curzon accords in some respects with that of David Gilmour, who has offered a generally positive view of Curzon’s performance as foreign secretary in Curzon: Imperial Statesman, 1859-1925 (2003). Curzon understood the geopolitical ramifications of the First World War and knew that it was in large part a clash of empires. After the war—no less than before it—Britain had to operate a global system and deal with interconnected problems in a global context, and perhaps other historians (notably G. H. Bennett in British Foreign Policy during the Curzon Period, 1919-1924 [1995]) have underestimated Curzon’s role.

Martin Thomas, examining British colonial governance after the First World War, points to the belief that control could be enhanced through new technology. Aircraft were to provide intelligence and assist with policing. Judging by events in Mesopotamia, however, these expectations were not fulfilled. Subjects did not respond as their colonial rulers desired; British air power was used to inflict wanton death and destruction; and there were huge difficulties beyond the practical need to keep order and promote obedience—not least because of the raising of moral and legal questions about air attacks. Of course, the propriety of certain weapons and tactics is an issue with which the international community is still grappling. This essay offers a valuable historical perspective. It is an interesting study of some problems Britain had to cope with in maintaining prestige and power after the First World War. Many of the colonies were restive in these years, and there were grave concerns about the Middle East in particular, a British sphere of influence that loomed large in wartime and postwar strategy. This was not simply because of the route to India. As Elizabeth Monroe (Britain’s Moment in the Middle East, 1914-1971 [1981]), among others, suggested some years ago, the idea was to benefit and serve selected regional peoples while also protecting British interests. Thomas reminds us of how badly this was carried out, whatever the intentions of imperial decision makers in London and the Middle East.

Keith Hamilton’s essay on the vetting of diplomatic and ministerial memoirs in the interwar period highlights the Foreign Office position that it would be dangerous to permit discordant versions of history to be disseminated, especially if they undermined the post-1918 peace settlement. Ways were found to threaten and penalize the writers, citing the national interest, which dictated that Britain’s relations with foreign powers ought not to be complicated by troublesome scribblers. But there was no consistency. No clear rules were observed; much depended on the rank and influence of the writer; and defending or sustaining reputations counted for more than serving the national interest. Hamilton offers a fascinating and informative contribution to a somewhat understudied topic.

Christopher Baxter discusses the case of Hilaire Noulens, a Soviet agent arrested in China in 1931. Revelations resulted about Soviet espionage and Baxter relates these to a wider theme—paranoia—with British intelligence chiefs making anxious assumptions about Soviet strength and intentions. The Noulens affair heightened British fears about the Soviet Union but also made communist conspiracy in China seem more of a threat than Japan’s capacity for military aggression. Success against the Comintern became “a double-edged sword” (p. 147). Baxter’s account will prompt further thinking about intelligence gathering and evaluation, the management of perceptions, and in particular the durability —or vulnerability—of Britain’s position in the Far East between the wars.

Whatever such concepts as “balance of power” and “appeasement” might have meant later, B. J. C. McKercher’s essay demonstrates that British leaders in the interwar years understood them to be robust, sensible, and realistic. During the 1920s there was a toughness and resilience to British policy. Strategic compromises were avoided and force was used when necessary to maintain a balance of power, and this lasted into the 1930s. Appeasement was well established: “just one of a number of tactical alternatives in the planning and execution of British foreign policy” (p. 153). Neville Chamberlain took control in 1937 and there was a change of emphasis because the fixation with balance of power brought too many risks. The new plan was neither weak nor confused. More risk averse, and not inflexible, it probably brought a clarity that the usual opportunistic, wait-and-see approach could not deliver. McKercher’s essay is another convincing addition to appeasement scholarship. Activity that was long regarded as foolish and irrational has for many years been seen as anything but; and one might profitably supplement McKercher’s analysis with others—the study of Chamberlain as a tragic victim of bad luck as well as his own poor judgment, for instance, or the appreciation of domestic and international constraints on the deterrence as well as the concession side of British diplomacy.[2]

Philip Bell’s essay focuses on Winston Churchill’s belief that Britain could work wholeheartedly with France to contain Germany. To Churchill, the French army in the 1930s was strong enough to deter. As Bell shows, however, there were large flies in this ointment: lack of respect and affection for France, the growing sense that Germany had a strong case against the Treaty of Versailles, and Churchill’s own inconsistencies. Churchill’s policy was less a viable alternative to appeasement than a basis for post-appeasement decision making. This essay offers further information about the options available (or thought to be available) in the 1930s, and makes plain the shortcomings as well as strong points in Churchill’s assessment of the international situation.

Britain’s dealings with Spain during the 1930s and 1940s provide the subject of Glyn Stone’s essay. During the Spanish civil war the British adhered to nonintervention, hoping to prevent escalation and reluctant to recognize the legitimacy of either side (essentially, the war was taken as a struggle between two forms of totalitarianism). After the establishment of the oppressive Franco regime, British leaders veered between efforts to restore democracy and a willingness to let matters lie, which is what the United States preferred to do in the aftermath of the Second World War. Following the enunciation of the Truman Doctrine in 1947, and in view of the need to put together an anti-communist front in Europe, the British were content to abide by the policy of noninterference in Spain’s domestic affairs. Stone’s essay demonstrates once again how shifting priorities and conditions can work against or allow statesmen to pursue a line that seems to be indicated by consistency and principle.

Joe Maiolo’s essay concerns Chamberlain’s policy in the Phoney War. Chamberlain wanted to try nonmilitary means to remove Adolf Hitler from power, and decided that economic pressure might lead to the fall of the Nazi government or push Hitler into a drastic maneuver that would fail and prompt regime change. This was an attractive prospect for Chamberlain: he was determined to minimize casualties, limit the financial cost of the war, and end the war as soon as possible. It all came to nothing. Chamberlain was mistaken, force was necessary, the war went on. Again, though, a verdict that cites bad luck rather than weakness or self-delusion might be in order, for it was not inevitable that Germany would get through the Phoney War. Maiolo cites Carl von Clausewitz’s emphasis on chance: “That Hitler’s gamble against the odds in the Battle for France paid off in the short run is evidence that Clausewitz was correct about the ungovernable role played by chance in war and not that Chamberlain’s Phoney War strategy was wrong” (p. 221). Opinions might differ about this, but there is more to Maiolo’s contribution than speculation about the role of chance in history. This essay adds greatly to our understanding of the course of the Second World War and raises questions about the likelihood of regime change in Germany (might the military chiefs have ditched Hitler?) and of course about Chamberlain’s judgment.

American opinion about the British Empire during the Second World War is Andrew Stewart’s topic. Stewart investigates the work of a committee, set up late in 1942, that was designed to assist in mitigating American hostility toward the empire and convincing the U.S. government that it would need the help of Britain and its empire in the creation and running of an amenable postwar world order. Fear had grown after the fall of Singapore, lest that disaster be taken as sign that the British Empire was heading for collapse, not recovery, and could not be the asset it might once have been. Stewart highlights the Canadian input, especially through a journalist, Graham Spry, and the inconveniences arising from American ambivalence toward Britain and lack of knowledge of Britain and its empire. The British sought to guide U.S. policy and “play Greece to their Rome,” but the likelihood of this seemed small as the war came to an end (p. 257). One point of tension between British and American leaders is explored in the essay by Saul Kelly, which deals with disagreement about the fate of Italy’s colonies. The British favored wide consultation involving all interested parties, to be followed by partition of territories and the drawing of new frontiers. The Americans pushed instead for international trusteeships, to lead to the creation of independent states that would enter into economic and security relationships with the United States. The British were alarmed because the Americans seemed unconcerned about Britain’s own security interests and were even willing to offer a role in the trusteeships to the Soviet Union (as a lever to obtain Soviet agreement on other issues). Stewart and Kelly demonstrate yet again that the “special relationship” was really a friendship full of reserves, in line with the skeptical strand in the relevant historiography. The British had to figure out just how trustworthy, reliable, and collaborative the Americans were prepared to be. No clear pattern would emerge, since conduct on both sides depended on time, issue, and circumstance. Debate about the “special relationship” will go on—as with the interesting but problematic thesis recently advanced by Simon Tate in A Special Relationship? British Foreign Policy in the Era of American Hegemony (2012), that the “special relationship” consisted of a division of labor between two partners (unequal, but still partners in a hegemonic framework). The findings of Stewart and Kelly encourage another look at familiar themes in this debate, not least Britain’s awareness of its limited reach and relative weakness, the lack of options other than reliance on America, and the tendency of British governments to exaggerate the success of their efforts to shape U.S. policy.

Essay collections are often patchy in quality and usefulness, but not this one. All the contributions are strong. They represent well-written, detailed, intelligent, and expertly researched contributions to the topic areas they cover. The essays are not subdivided into thematic categories but arranged in roughly chronological order; and though they do touch on interests shared with Saki Dockrill, mostly they reflect the current scholarly concentrations of the individual authors. The essays are pitched at a high level and do not confine themselves to familiar milestones and problems or the conventional markers and discussion points in Britain’s changing international status and influence in the era of the two world wars—meaning that students will probably benefit less from this collection than specialists, unless they have done plenty of supplemental reading. There is no volume bibliography, but each chapter has endnotes. The book includes an adequate if brief index.

Notes

[1]. I for one am indebted to Saki Dockrill for sections of my British Power and International Relations during the 1950s: A Tenable Position? (Lanham: Lexington Books, 2009) and An International History of British Power, 1957-1970(Youngstown: Teneo Press, 2010).

[2]. John Charmley, Chamberlain and the Lost Peace (London: Hodder and Stoughton, 1989); and James P. Levy, Appeasement and Rearmament: Britain, 1936-1939 (Lanham: Rowman and Littlefield, 2006).

Printable Version: http://www.h-net.org/reviews/showpdf.php?id=42121

Citation: Michael J. Turner. Review of Baxter, Christopher; Dockrill, Michael L.; Hamilton, Keith, eds., Britain in Global Politics Volume I: From Gladstone to Churchill. H-Diplo, H-Net Reviews. August, 2014.
URL: http://www.h-net.org/reviews/showrev.php?id=42121

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.

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