Britain’s mini-budget and the market turmoil
Philip Cunliffe is Associate Professor of International Relations UCL Institute for Risk and Disaster Reduction (IRDR). He is also one of the founding editors of The Northern Star
This article originally appeared at The Northern Star
The tax policies set out by the new UK Chancellor Kwasi Karteng are widely seen as being the consummation of Brexit. For the neoliberal supporters of Brexit, the policies indicate a new boldness in government, a willingness to encourage economic expansion no longer limited by misguided efforts at redistribution. For opponents, the new policies are redolent of all the problems associated with Brexit – ideological hubris, poor planning and execution, and confirmation of Britain’s economic decline outside of the EU. Neither views fits the actuality of Brexit Britain, and both misconceive the problems confronting the country.
In so far as Liz Truss’ new government embodies any vision of Brexit, it is closest to that of ‘Singapore-on-Thames’ favoured by ultra-liberal Tories. In this vision Brexit was not understood as being one of a global series of provincial revolts by the post-industrial ‘left behind’ regions against metropolitan hubs, but was instead explicitly aimed at accelerating rather than restraining the model of liberal globalisation based around those metropolitan hubs – in this case, London. Invoking the success of the free trading South-East Asian city-state, the British Singaporeans imagined that Brexit Britain could flourish once it was aligned with faster-growing areas of the global economy beyond the stagnant Eurozone, and once it was no longer wrapped up in red tape by Brussels.
The delusions of this vision were many – income tax thresholds were never set for Britain by Brussels. More basically, the notion that an authoritarian, single-party city-state in which the state owns most of the national territory, and is locked into regional trading networks in Asia, could function as a model for a vastly larger, industrialised liberal democratic ex-member-state of the EU, always stretched credulity. Nor did the Singaporean vision of Brexit ever have majority support, certainly never constituting more than a fifth of the Brexit-supporting bloc of voters at most. Most Brexit voters wanted sovereignty and control over immigration, not more economic globalisation. That the Singaporean vision of Brexit has been enacted by a government put in place by the Tory party membership rather than the nation as a whole, is entirely in keeping with its anti-democratic tenor.
The reaction of financial markets to Kwarteng’s initiatives also indicates the paradox of neoliberal government. Organised around serving the market, it is also politically dependent on the whims of the markets and it seems that, even there, buyers for Thatcherite dogma are nowadays in short supply. The negative reactions of the global financial markets to the mini-budget has had a profoundly delegitimising effect on the government, perhaps even permanently hobbling it. Neoliberal Brexiters such as Daniel Hannan and Andrew Lilico have sought to square the circle, risibly claiming that the markets were not in fact reacting to the actions of a Tory government, but rather were spooked by the prospect of a future Labour government. Beneath all the intellectual contortions entailed by this view, it is a remarkably defeatist outlook on Brexit, in which they accept the notion that sovereign democratic decisions can be legitimately nullified – by the market, rather than by the voters. If even a future Starmer government is so dangerous that the financial markets are already rallying against the prospect two years before a general election, it begs the question of why free traders would even bother supporting Britain’s democratic sovereignty in the first place.
Just as the gods of the market have spurned Truss and Kwarteng’s offerings, with dreary predictability, the left has sided with those very same gods, still seeking to appease them. Labour has responded by amplifying criticisms of the British government emanating from the globalist technocracy and financial elites, underscoring that the Labour Party remains entirely beholden to neoliberal politics.
Beyond the market turmoil, Truss’ new policies and Starmer’s response indicate that more than tinkering with tax brackets or interventions in the bond markets, what is desperately needed is a new political system: one that is capable of channelling, institutionalising, and expanding the remit of democratic will – including against the market – rather than spasmodically regurgitating the remnants of twentieth-century politics. Until that happens, there will be no respite from the depredation of technocracy and the domination of financial markets.
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