There must be some politically aware, people who have not seen or heard of Liz Truss' 4,000-word article in the Sunday Telegraph today, in which she seeks to justify her period in office as prime minister, and seeks to blame absolutely anyone but herself for the failure of her administration.
I read and reflected on the article so that I could be interviewed on it by Ben Kentish on LBC this morning (just after 9am). And, to be fair, I have tried to be as balanced, as I can be about what Liz Truss had to say.
So, let me put it on record that there are some things that she Truss said which I believe to be true.
First, the UK does suffer, as she said, from an economic hegemony. It emanates from the Treasury and says that the status quo must be reinforced on all occasions, whether that is appropriate or not, and whether it delivers the policy objectives that the government and the country require, or not. Welcome to neoliberalism Liz Truss! Some of us have known about it for a long time.
Second, I believe that she was not warned about the risk to her plans from liability-driven investment programs within the UK's pension funds. I entirely believe her about this because I have little doubt that this particular crisis was not created by the mini-budget issued by Kwasi Kwarteng on 23 September 2022. It was instead almost entirely created by the announcement by Bank of England, Governor, Andrew Bailey on 22 September 2022, that he was about to launch an £80 billion quantitative tightening programme. That would require persistent long-term high real interest rates which markets knew would be unsustainable within the UK economy and which would, as a result, undermine the whole of the liability-driven investment program that had been pursued by many UK pension funds, which was entirely dependent upon stable interest rates. They can be no doubt that Liz Truss compounded this problem, but she did not create it.
Thirdly, she did not appreciate just how averse the Conservative party were to tax cuts and cuts in regulation. Staggeringly, I believe that to be true, although it does not, of course, say much about her ability as party leader, or her power of observation after years within the Cabinet.
Thereafter, this whole essay is delusional. She believes that corporation tax cut to pay for themselves, even when the corporation tax rate in question was 19%. This is Laffer curve thinking gone mad.
She believed that the country needed to pay lower state pensions, and state benefits, deliberately leaving the most vulnerable in society economically worse off whilst simultaneously providing tax cuts for the rich.
Worse, she believed that this would stimulate growth, which anyone with the slightest comprehension of the multiplier effect would know to be completely bizarrely incorrect.
And she believed that cutting regulation would stimulate growth when it is very apparent that cuts in regulation have already harmed this country enormously as we have broken away from the European Union and when it is clear that further deregulation can only give rise to trade wars with that bloc, and maybe others.
What is more, she believes that for the IMF to undertake a distributional analysis of what she was proposing was a political act and not an economic one as if, somehow how resources are allocated between those with differing wealth within society is not an issue for economics, but is one purely for the political domain. She really is detached from reality.
Her final suggestion, that her government was brought down by a left-wing coalition made up of the Treasury, the Office for Budget Responsibility, the International Monetary Fund, the financial markets, the City of London, the Bank of England and bond traders can only have been created by a fevered far-right-wing mind, so removed from the reality of the country that she proves by making the claim how unsuited for office she was.
That is an impression compounded by the fact that no time does she offer any recognition that the brevity of the announcements made by Kwasi Kwarteng, which provided no analysis of the funding implications of the decisions they made was a major factor in fueling the uncertainty that gripped financial markets after their delivery.
The simple fact is Liz Truss really did not know what she was doing when prime minister. She did not understand politics. She did not understand economics. She did not understand her own party. She did not understand the political economy of power within Westminster despite at the time being the longest-serving Cabinet minister in office. And, most critically, she did not know how to communicate her supposedly radical message to any of the deeply sceptical communities that she wishED to persuade of its merits. She was, in other words, a failure at the job she took on.
Let me reiterate though the fact that there are some issues about which she was right in her essay. The first of these is that the Bank of England is out of control. It is, as a matter of fact.
The second is that there is an economic hegemony within the UK which is deeply prejudicial to its well-being. The neoclassical/neoliberal viewpoint (and I see them as the same) that exists to support the existing hierarchies of power within our society is deeply embedded within the power structures of this country, precisely because those hierarchies of power that it supports do not wish to be challenged by any other thinking. She was always going to fail in any attack that she might mount on this hierarchy of power from the right, most, especially when her challenge was so ill-informed, but, as importantly, any challenge to this hierarchy of power from the left will also be poorly received. We know that from the Corbyn era. So, whilst the challenges are necessary, the lesson to be learned is that when it is made it has to be incredibly well thought through, and be carefully scripted so that those to whom it has delivered understand precisely what it is trying to achieve.
Truss was then, right about one other thing, which is this country faces, an enormous economic threat, which the status quo is entirely unwilling to address. What she got wrong was that her fantasy right-wing world offered any such alternative.
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I wondered when she would pop up again. Hard to flush down that one, the Torygraph providing the toilet bowl for her to reside in (sorry to everyone who’s just had their breakfast).
An interesting blog and well done for reading the Telegraph.
The Treasury and the BoE ‘left wing’! Dearie me! Unbelievable. Typically neo lib – she’s spent too much time with the US Republicans!!
The Treasury has previous – just look at the Geddes Axe! Has anything changed since then? Clara Mattei sets it all out. The 1920’s culture has to go.
But the BoE seem to have a more strict definition of their ‘independence’ ‘ than what is written in the law that created it. ‘Out of control’? You bet, agreed.
So, Keir Stymied, what are you and Laboured going to do about this?
I hope that you have a list of sackings drawn up for the Treasury and the BoE.
The government must act as sovereign in my view on these issues with these institutions. I know that this does not sound pragmatic and it will need to be handled skilfully but also resolutely but it goes back to asking what they are here for.
What they are here for has been perverted by vested interests. They are no longer considering the interests of the country as a whole in my view. The Treasury needs a spring clean and modernising; the BoE needs to be put in its place as the servant it should be: it’s the monkey and not the organ grinder. Print the money we need please and shut up.
The OBR – abolish it and lets have a parliamentary committee not a neo-lib squawk box.
The City of London – tax it and regulate it effectively for once.
But also, what does it tell you about policy formation in government? It’s not very reassuring is it? God…………………..
Truss wanting to reduce pensions and regulations is the sign of someone who has no compassion, and puts money before people. I have no doubt that with reduced regulations, that we’d have more Grenfell Tower disasters, and more retired people having to work until they die. The worst part about this approach is that it is preventable.
The Financial Times described Truss’s government as “the most economically right-wing major party in the developed world”, so yes, in comparison, the Bank of England, and nearly everyone else is to her left.
Reference: https://www.ft.com/content/d5f1d564-8c08-4711-b11d-9c6c7759f2b8
when I saw the Telegraph headline I thought Richard youve finally made mainstream
Seriously Ms Truss where is your hard evidence over the last 40 odd years to support your views ?
🙂
For me this is, perhaps the core point of the article: “The neoclassical/neoliberal viewpoint (and I see them as the same) that exists to support the existing hierarchies of power within our society is deeply embedded within the power structures of this country, precisely because those hierarchies of power that it supports do not wish to be challenged by any other thinking.”.
Something very similar exists in many areas (including my speciality power systems and electricity markets). Gormless people with out of date belief systems that are almost impossible to get rid of.
This begs the question, how to change such structures?
Arendt’s book “Eichmann in Jerusalem” noted about the German civil service – that Hitler did not like them – but worked with them because they understood how the apparatus of the state functioned (the German civil service was an important facilitator in the Holocaust), fast forward to the 1960s and its the same people (albeit with some weeding) – this time under Adenauer (who disliked them but needed them – because they knew how things worked).
Whether it is the European Commission, old Nazis under Adenauer or the UK’s home grown grey men, there seems to be a problem with self-perpetuating self-serving out-dated, unelected (by definition they are) bureaucrats. It is worth noting that the Chinese dynasties had the same problem – even the Mongols were “tamed” by the Chinese civil service.
Arguably, the total failure of “the west” to address the climate disaster is due to a belief that existential crises can be addressed by bureaucrats.
That was very interesting, Richard. I confess, your analysis especially of the BoE quantitative tightening programme, and its implications had not occurred to me**. You had referred to it before I think, but I had not fully taken on board the implications. The same applies to your view of the Treasury; you more accurately described the nature of Treasury ‘thinking’, which I had not throught through. Very refreshing, thank you.
I was trying to remember what followed in the public domain. Does that mean nobody in Treasury, BoE or government (or anywhere), even raised the looming LDI crisis. This is what was exercising me about the changing dynamics of the digital monetary age; it moves fast, and we do not seem to be equipped to handel it.
It all comes back to regulation. In money, in building regulations (remember Grenfell), or Energy compaines using the law to invade peoples homes to enforce payment meters that may jepordise the health of children, the sick and vulnerable. You know, “regulation” or “red tape”; the crucial matters of safety and security the ‘Daily Mail’, the ‘Telegraph’ and ‘Sun’ all hate so much; becuae of their ideology and downright stupidity.
The LBC interview I did with Tory Mp Dan Kawczynski this morning was fascinating on this score
It was riddled with paradoxes
They hate debt, but created it
They want free movement but destroyed it
The free market is left wing
Om and on
They really are clueless
This one, Jeremy Hunt, is also clueless but still in power
https://www.bbc.co.uk/news/av/uk-politics-64498142
“They hate debt, but created it”.
The national debt is 2.5 times the level in 2010 (and gstill oing up, up, up under the Conservatives); when the Conservatives insisted there was no money when they won the election in 2010, and they said the deficit would be eliminated, and the national debt reduced. It wasn’t. They want to say that Covid and the Ukraine war knocked them off course (don’t mention Brexit!), but they had achieved nothing by the time Covid struxk; all they had done was so undermine the public sector infrastructure it was hardly its resilience to fight a pandemic was runied – and it cost vast sums of badly spent money to cover the blunder (we had £1Bn of stored PPE that the Conservatives allowed to decay and become ‘out of date’; ruined) see the Cygnus report, 2017 for the scale of the failure. The Conservatives have been a castatrophe, and neoliberalism has been found out. They are in denial. They should go NOW – not in two years. We cannot afford two more years of this failure and utter incompetence.
If ineoliberalism worked and the free market fixes everything, why did they need to increase the national debt by 2.5 times in 12 years? And why is the economy still sinking like a stone, after 13 years of austerity? They are destroying the economy.
Because, as you say so succintly: “They really are clueless”. Pretty well all of them.
It wuz those FOREX lefties in London, New York, Tokyo and Frankfurt wot dunnit!
“The OBR – abolish it and lets have a parliamentary committee not a neo-lib squawk box.” Bravo, PSR!
Incidentally, I have been pondering for a while, that Parliamentary cross-party Committees seem to be quite valuable, because they have to deal in facts and evidence rather than ideology. If they were perhaps given more power over policy, and strengthened with more evidence-gathering powers, widely, we might get far more beneficial policy outcomes. This might particularly apply to foreign policy, combined with a general presumption against interventions in support of US policy.
Liz Truss’s radical tax-cutting plan was “clearly” not the right approach, according to Grant Shapps, who briefly served in her short-lived government.
This from the Johnson supporter and apologist who was our shortest ever serving Home Secretary. Six days. He lied about using pseudonyms in his business life and is rewarded by Sunak with a Ministerial role as Business Secretary.
You are right Richard. Truss is delusional. There is absolutely no evidence of any leadership capability. Another Tory who, to use Alistair Campbell’s line, “ refuses to be flushed away”. Hopefully the country will flush them all away soon.
Isn’t the Truss as PM collapse really about her empathy failure?
If she put herself in the position of others I doubt she’d have had to resign – indeed isn’t this the fundamental Tory weakness?
http://www.progressivepulse.org/economics/truss-writes-about-her-empathy-failures
The Guardian has reported that before the Truss Budget Dr Charles Read, a Cambridge University economist had spoken to civil servants and sent a paper on the LDI implications to the Chancellor. Dr Read is reported in the Guardian website as follows: ““The argument of the paper was that if interest rates rise any faster than they were, Britain’s financial stability will be imperilled and there is likely to be another financial crisis stemming from systemic risks in the non-banking sector.
Needless to say, it later emerged that the budget was explicitly designed to force the Bank of England to raise interest rates faster than it was by pushing up market interest rates further; to claim that they were not sent warnings that such a course of action would imperil financial stability is highly misleading and should be called out.””.
We may say, well done Dr Read, but I am more interested in what advice was coming out of the Treasury and the BoE to the Government, and the timelines here (after all, strictly speaking it was the BoE that was pushing up interest rates, not Government). This is more important because we should not require to rely on the contingencies of outside parties having the knowledgeand foresight to bring it to Government attention. We live in a digital world that moves too fast to rely on happenstance. I find it disturbing that we seem so vulnerable to these shocks; especially when each time the lead time to catastrophe is shrinking to hours. What next, minutes?
This also seems to me to underline the problem of attempting to split economic responsibility between a sovereign Government and a supposedly independent central bank. Since the decision making and structure is not (formally) united this must open the door to gaps in understanding, management, control, responsibility and understanding, through which serious problems could arise. It may be that the LDI crisis is merely a symptom of the bigger problem of a false distinction; one that is the result of false neoliberal ideology.
George Osborne, in the same article criticises Truss for clearing out of office the people (including civil servants) who were best able to give the advice. That is even more extraordinary; because it suggests our Government is chaotically run by people not fit for office; and the culprit for that can only be the Conservative Party itself, and our old and deficient constitutional arrangements for not providing a more robust and resilient system of Government executive operation.
Thanks
I think Mike Parr is a little harsh on govt bureaucrats. They are paid to put policy on paper and implement those policies by their masters/mistresses – the politicians. If the politicians are unimaginative, prejudiced, incompetent, biased idealogues or zealots those policies just reflect the politicians. If you don’t follow the politicians nowadays it is career limiting. Truss is a zealous idealogue – amongst other things – she sacked the top treasury civil servant because she knew he was going to caution her about her barmy policies. Raab is another who ends up with nodding donkeys as civil servants because he doesn’t want to hear the truth.
The Sunday Telegraph and the Telegraph are always going to be custodians of the Thatcher Intellectual Corset, probably until their dwindling band of readers pushes them to extinction. Understandably, they were delighted when Truss donned the Thatcher Corset Economy as the mode de rigueur, but her and their stupidity has been revealed and confirmed by your perceptive article.
Thatcher at least knew she was right out of personal conviction, and that socialists were always wrong by definition. The Tories still in office have learnt nothing. Still half-blinded by ideological fervour, Hunt wears the Lite Truss. And it seems as if we have the Starmer control briefs to look forward to…
I think the timing of the Truss article and the Publicity push behind it is interesting.
After the horrendous mistakes of Austerity, Brexit, Tory members electing Johnson and then Truss, the Tory-sphere was on its knees.
Its cherished beliefs were shown not only to breed criminality and corruption, but also their mythical tribal god that they laughably describe as a Free Market had humiliated them.
But all was not loss. They still dominated the means of communication.
So stage one was silence and start the forgetting. By all means possible avoid all mention of Austerity, Brexit, Johnson and Truss.
Stage two, fill peoples heads with distractions. Cue Prince Harry.
Stage three. While people are up to their necks in the fuel crisis and the consequences of the Tories continually trying to cut the pay and worsen the terms of employment of public sector workers, start sneaking out articles by Liz Truss headlined with the Big Lie that all the problems are caused by a “Left wing” establishment.
Joseph Goebbels would have been proud of them
There is a Treasury Select Committe inquiry into quantitative tightening (QT), underway. They are taking submissions (which close on 17th March). I have not been able to track down how much QT has been carried out by the BoE in 2023. I wonder how that is going, or whether there are any changes of plan? I certainly do not see much reporting of it being carried through. Clearly the Truss Budget knocked it all askew, as the BoE bought bonds from LDI ‘strapped’ sellers, but how far has the £80Bn (plus unwinding of the LDI response), actually gone?
They have sold the bonds bought to bail out pension funds
I think the rest is running very slowly
No one has bothered to make a profile of her progression from university onwards, if you do, all becomes clear. She is like a lot of politicians a narcissist. They are very damaging to others in personal and professional relationships. Sadly they number about 1in 8/9 across society.
Skilled profilers should be appointed to root out narcissists at the earliest opportunity as they are very toxic, failure to do so can be catastrophic for teams, businesses and structures of all kinds. The Nasty party has always been riddled with them and sadly for some time now the Labour party has destroyed the very basis for it’s foundation.
Most post empire countries go through a phase which like a disfunctional individual benefit enormously from having a ‘breakdown’ and reset period – the UK is long overdue one.
David Blanchflower has said in a recent tweet that Truss has made everybody permanantly worse off. Could this be explained please? Didn’t Hunt cancel her programme and fix the markets? Isn’t the interest rate where the BoE wants it to be, misguided as it is?
She added momentum to BoE rises, which are way above EU levels
My MMT understanding is that the BoE has the power to set interest rates at whatever figure they want and keep them there. So presumably they are happy with our interest rates being out of step with the EU. Is this to do with maintaining the exchange rate?
Yes
And Brexit
And foolhardiness of the same sort