The French admired the intellectuals for their ideological principles, but the British did not share their enthusiasm. As the poet WH Auden wrote: “To the man in the street who, I’m sorry to say, /Is a keen observer of life/ The word intellectual immediately suggests/A man who is unfaithful to his wife.”
This way of thinking dates back to the French Revolution. Across the Channel, the British shuddered in horror as Parisian fanatics guillotined their political opponents by the thousands in the name of abstract ideas. Memories of the Puritan fanatics who abolished Christmas and closed theaters during the English Civil War also never faded.
The hostile reaction in opinion polls to UK Chancellor of the Exchequer Kwasi Kwarteng’s ideological “mini-budget” last week therefore has a historical pattern. After the market chaos, the Tories now trail Labor by a whopping 33 points ahead of their annual conference. No one wants to be the laboratory animal in a grand experiment conducted by politicians armed with a rigid caste mind.
Liz Truss has been attacked as an opportunist for switching from the Lib Dems to the Conservatives in her youth, but that is not right. The Prime Minister has been a consistent ideological libertarian throughout his political career. It supports greater freedom for the individual, self-reliance and low taxes. Her views coincide with the small-state principles and free-market radicalism of the academically brilliant Kwarteng himself.
To a certain extent, this is admirable. Margaret Thatcher also read the strange book by Friedrich Hayek and Milton Friedman. Politicians need a political compass. Boris Johnson’s lack of fixed principles – or any principle for that matter – means his government has no political purpose after he “delivers Brexit”, despite having the advantage of a large majority in the House of Commons.
But last week’s mini-budget could have done with less ideology and a little more political shrewdness. The government had to trumpet the good news of its £100-plus billion ($112 billion) “compassionate” cap on skyrocketing energy prices. Instead, all eyes were on a £2 billion cut in the top rate of tax and an end to the cap on fat-cat bankers’ bonuses. Arguably, a lower top rate could bring in more revenue, but the cost of living crisis was hardly the time or place to introduce it. “Above all, without too much zeal,” a wise Frenchman once said.
The failure to allow the Office for Budget Responsibility to publish an analysis of the Chancellor’s fiscal framework was the worst mistake of all. This is the kind of reckless disregard for established institutions and common sense finances that British voters would expect from an ideological socialist. It seems only yesterday that the Tories hit a fury with the accusation that Labour’s (last) radical leadership believes in a government “magic money tree” that can pay off any deficit. Now Truss and Kwarteng are the ones with the targets on their backs.
Even before the fiscal event was introduced, Truss’s libertarianism was sounding the alarm. Out of an ideological dislike of the nanny state, she tried to repeal the sugar tax on foods and drinks designed to fight obesity. Hers was a return to cranky libertarian opposition to mandatory seat belts in cars and bans on smoking in public places—pragmatic measures that improved everyone’s quality of life.
If the Labor Party is gleeful at Truss’ embarrassment, then the defeated Remainers are positively jubilant – they believe that a self-inflicted economic crisis will also discredit the Brexit process that largely supports this Conservative government. Pro-Europeans speak from experience. They were also victims of their own inflexible ideology. The last time the markets defeated a Tory government, it was the European cause that took a hit.
In the late 1980s, the lira’s exchange rate was fixed under the European Exchange Rate Mechanism (ERM)—the prototype of the euro—to ensure stability against inflation. However, many economists believed that the exchange rate set for the pound against the old German deutsche mark was too high. This made German exports cheap and British goods correspondingly uncompetitive.
The pound ended up being attacked by the markets. Chancellor Norman Lamont and the Bank of England raised interest rates in vain to protect the value of sterling, but traders continued to pile bets against it. Strong-arming Lamont were influential cabinet ministers who saw the ERM as a precursor to full British membership of a future European currency. Thatcher’s successor, John Major, had also promised to sign the Maastricht Treaty, which transformed the European Economic Community into a fully fledged political entity, the European Union.
On Black Wednesday, September 16, 1992, Lamont finally gave up the fight to defend the pound as interest rates hit dizzying heights. Sterling was allowed to float freely (and down). The government never regained economic confidence. Since then, many Tory MPs and voters have accused pro-Europeans of sacrificing British jobs on the altar of ideology. A straight line can be drawn from Black Wednesday – or White Wednesday, as the anti-Europeans soon dubbed it – to the lost 2016 UK referendum on EU membership.
For a party that bows to the wisdom of markets, the Conservatives seem irrationally angry when city traders burst the bubble of their ideological pretensions.
After financier George Soros “broke the Bank of England” in 1992 and made a billion dollars betting against the pound, the air turned blue with the fury of Tory ministers. This week, similar rancor was reserved for Crispin Oddie, a City trader who made a killer short of the currency after Kwarteng’s statement. Ironically, Oddie is a Brexiteer who backs libertarian tax cuts – the chancellor once worked for his hedge fund, just as Soros was a keen supporter of Britain’s membership of the European Union. But business comes before ideological pleasure; neither Soros nor Odey thought of turning down the opportunity to make millions.
This is a tutorial for Truss and Quarteng. Being “right” or “ideologically pure” is not enough. Voters won’t thank them for it. At the polls, they will elect pragmatists who put safety first. Nervous Tory MPs may be tempted to preempt them.
This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Martin Evans is editor of the Times Literary Supplement. He was previously editor and chief political commentator of the Sunday Times of London.
More stories like this can be found at bloomberg.com/opinion
Add Comment