PM

Rishi Sunak and the revenge of the grown-ups

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A famously frustrated Bill Clinton once explained the paradox of American politics like this: While the American people emotionally liked the Democratic Party — loving its nurturing focus on taking social care of the country — it still tended to vote for a colder, more distant, law-giving Republican Party. The Democrats were the “Mommy Party” and the GOP was the “Daddy Party.”

The American people might have yearned for a warm New Testament cuddle, but, when things went bump in the night and goblins came, instinctively they voted for Old Testament Republicans — the grown-ups of their day — to save them from the darkness. You might resent being told to eat your vegetables but you are secretly glad someone has the force of character to tell you to do the hard, necessary things in life.

Something very like this powerful dynamic is playing out in the high-drama surrounding the seemingly endless crisis swirling around Britain’s Conservative Party — historically perhaps the most successful political party in the modern world, though not recently.

Beset by an annoying, otherworldly self-regard for its own internal machinations, the Tories are on their fifth prime minister in six years — and this in the face of the pandemic, cost-of-living crisis, return of endemic inflation, and the war in Ukraine. In other words, international perils make this a time for grown-ups, even as the Conservatives have parochially behaved like children. It is little wonder that they find themselves fathoms behind the center-left Labour Party in the polls. The Tories have squandered their greatest asset and the secret to why they have been the natural governing party in the United Kingdom for much of the past two centuries: They are no longer seen as stern, yet capable, grown-ups.

Rishi Sunak on Tuesday became the 57th prime minister in British history, coming to power precisely to restore the Tories’ sullied grown-up reputation. A few years ago, I remember meeting him at a Tory Party function and he was everything he appears to be at a distance: steady, well-meaning, serious (if rather funny), talented and rather quiet. In other words, he seemed to me even then to be the polar opposite of the bombastic, carnivalesque, louche, strutting Boris Johnson. The Greek philosopher Heraclitus put it well: “Character is destiny.” Johnson as premier and Sunak as chancellor was never going to work well, and the record shows it did not.

Character invariably spills over into policymaking. Johnson was for what came to be known as “cakeism” — in that you can have your cake and eat it, too. In policy terms, this meant the magical thinking view that the UK could have a European-style safety net and pay only American-style taxes. While such an irresponsible view made Johnson popular with the Tory base for a time, a concerned Sunak fought a rear-guard action against this fiscal abomination. Johnson’s undoing for attending a series of Downing Street parties (and misleading the world about it) while draconian strictures were in place for the general public because of COVID was just another form of cakeism. The rules Johnson made were for the little people; they were never meant to apply to him.

The disastrous 45-day reign of Liz Truss followed, fueled (quite properly) by a basic critique of a British economy that is no longer fit for purpose in the 21st century. Decades of low productivity have left the UK with a low-growth, high-regulation undynamic economy, a Europe across the channel. Truss rightly wanted to take advantage of Brexit, using the regulatory freedom it allows to remake the UK as a Singapore-on-the-Thames: low-tax, low-regulation, high-trade and high-growth. All of this macroeconomic thinking was admirable and correct but, during the seemingly endless leadership campaign that followed Johnson’s defenestration, Truss fatally omitted to fill in the policy details lying behind her ambitious aspirations.

Unlike Margaret Thatcher, who skillfully used her spell as leader of the opposition to prepare the British public for radical changes she intended to make, Truss thrust them onto the British people with little warning. It proved to be her undoing. The markets, already spooked by the Bank of England’s derelict performance in taking its eye off the inflation ball, rebelled. Famously, Truss’s shelf-life as premier was shorter than that of a Tesco grocery store lettuce purchased by The Daily Star.

Because of all these self-inflicted wounds, Sunak comes to power with almost nothing left to lose. Upon winning the leadership, his Old Testament admonition to the death cult that has become the Tory Party could not have been more on point: “Unite or die.” In terms of foreign policy, look for the UK to continue its strong (almost worryingly neo-conservative) support of Ukraine in the face of Russian adventurism.

On the economic front, while entirely sharing Truss’s dream of the UK as a Singapore-on-the-Thames, Sunak disagrees with how to get there. First, Truss’s unfunded tax cuts will be shelved for the foreseeable future to steady markets worried about the profligacy of the British political elite. Second, cakeism is over; there will be significant spending cuts. Third, defense spending will hold steady, but probably will not be allowed to stratospherically rise from 2 percent to 3 percent as Truss had announced. Fourth, as a pro-Brexit leader, Sunak will look to make good on the promise of Britain’s hard-won freedom to cut trade deals with the portions of the world that are actually growing (India, the United States, the Anglosphere).

In other words, it’s time for Britain to eat its vegetables. It is a time for the revenge of the grown-ups. I have a sneaking suspicion that Bill Clinton will be proved right. Despite the very tall odds, look for Sunak to succeed in his new role.

This piece was originally published in The Hill

Tough times ahead for Britain’s new PM

/ John Hulsman Enterprises / Leave a comment

In the spring of 1945, after towering over the American political landscape for a generation, Franklin Delano Roosevelt died suddenly at his retreat in Warm Springs, Georgia. At the time, Vice President Harry Truman was up on Capitol Hill, sharing a customary drink with the Congressional leadership at the end of a hard week (yes, opposing leaders actually socialized with one another in those faraway days).

Abruptly summoned to the White House, Truman ran straight into the president’s wife, Eleanor, who told him the news. Shocked into his basic Midwestern decency, Truman asked if there was anything he could do for her. She wisely replied: “No, Harry, is there anything we can do for you? For you are the one in trouble now.”

I thought of this historical vignette last week as Liz Truss succeeded the shambolic Boris Johnson as prime minister of the UK. When Britain’s period of official mourning for Queen Elizabeth comes to an end and the business of government resumes, rarely will a new political leader have been confronted with such a bulging and dangerous in-tray.

Following the semi-criminal failure of Europe and the UK to worry much about their energy policies for the past few decades (indeed, just days before the Ukraine war began, Berlin was still pushing to get the Nord Stream 2 gas pipeline operational, which would have preposterously increased its energy dependence on Moscow), knock-on inflation marching in tune with stratospheric energy price rises has been the doleful result — both on the continent and in the UK.

The beast of inflation, now fully loosed from its cage in Britain, sits at an unhealthy 10.1 percent. The specter of stagflation, and a permanent cost-of-living crisis, beckons. Indeed, in political risk terms, if both Europe and the UK do not master (and quickly) the current economic crisis, the grim reality of overall absolute decline awaits them.

Calmly (a blessed relief from Johnson’s rollercoaster tenure), Truss has set out a four-pronged strategy for dealing with the calamity. First, her administration intends to freeze average annual household energy prices for the next two years at £2,100 ($2,400), including an already agreed-upon energy rebate, with equivalent support for businesses for at least six months. The cost will be a monumental £150 billion. This unprecedented bailout dwarfs the COVID-19 furlough bailout of £69 billion, and will be paid for entirely through new borrowing.

Unlike her Labour Party opponents, Truss refuses to implement a windfall tax on energy companies, on the ground that it would discourage their future investment in further energy projects. This massive spending gamble is designed to allow the Bank of England to more slowly raise interest rates (mitigating the coming recession) and to cap overall inflationary pressures themselves. On her very first day, Truss has wagered the overall success of her premiership on this one, overwhelming economic bet. She is all in.

Second, Truss wants to make sure the UK never again finds itself the prisoner of its energy supply. Fracking, outlawed under the Johnson premiership, will be allowed, in an effort to increase domestic energy production, as will further drilling for oil and natural gas in the waning but still profitable North Sea fields.

Third, the new prime minister is betting on aggressive growth as the ultimate way out of the crisis. Despite the mammoth new borrowing, Truss is pressing for large tax cuts amounting to £30 billion to free up the animal spirits of British business and extricate the UK from its parlous economic state. She has called upon Jacob Rees-Mogg, the new business and energy secretary, to drastically cut government regulation and further unshackle the British commercial sector.

Fourth, with rising Conservative Party star Kemi Badenoch the new trade secretary, Truss will try to bank the winnings from Brexit. I have long been exasperated by both sides of the Brexit debate, locked as they are in their deafening self-regarding theologies. In policy terms, the issue is simple. If, in the medium term, Britain manages to secure free trade deals with the parts of the world that are actually economically growing (India, the US, the Anglosphere countries), then Brexit will have been worth it as the UK looks beyond an economically sclerotic Europe for its economic future. If it does not manage to do so, then Brexit will have failed, and all Britain will have done is alienate its largest trading partner.

On these monumental policy issues, the Truss leadership will rise or fall. During her inaugural session at Prime Minister’s Question Time in the House of Commons, Truss’s tone was strikingly different from Johnson’s. Gone was the bombast, the showmanship, the sly humor, and the loose relationship to the facts. In their place were sobriety, a low-key confidence, a reassuring calmness. In both cases, the style of the two leaders belies reality. For all his gaudiness, Johnson’s actual policy agenda was incredibly boring; he was a vanilla, garden-variety Macmillanite. On the other hand, beneath Truss’s dullness lies a radical, updated, Thatcherite policy agenda that will either actually work or obviously fail. In terms of substance, as was true for Truman, stirring days lie ahead.

This piece was originally published in Arab News.