Truss and Kwarteng’s “Political Experiment”

Photo Courtesy of: The Independent UK

Prime Minister Liz Truss and her cabinet have been in power for little more than a month, yet they have already drummed up a storm that may have long-lasting consequences for the UK. The new government has pushed for the implementation of economic policies reminiscent of the Thatcher era which promise to worsen the current cost of living crisis and increase economic precarity for years to come. What are the ideological foundations of such policies, and what are the possible consequences of pursuing them?

Truss and the former chancellor Kwasi Kwarteng were the main actors in the development of the new Tory government’s economic policies. Scrapping plans to raise corporation tax from 19% to 25%, removing planned increases to National Insurance contributions, and a failed attempt at reducing the higher income tax were some of the central features of Truss and Kwarteng’s recently announced ‘mini-budget.’ Their approach was largely based on the assumption that economic growth could be achieved through ‘trickle-down economics,’ as the wealthiest were set to benefit the most from the new measures. Indeed, these policies all bore strong similarities to those introduced by Margaret Thatcher during the 1970s and 80s.

Thatcher’s philosophy was strongly inspired by supply-side reforms, which sought to lower taxes and weaker regulations to achieve economic growth; and monetarism, the belief that controlling the supply of money within an economy was the best way of ensuring stability. In so doing, Thatcherism greatly reduced the powers of the post-WWII welfare state, whereby the government could intervene in the market to guarantee full employment, a certain level of wealth redistribution, and raise money to support families facing poverty through National Insurance contributions. Importantly, Thatcher’s rise to power also represented a transition from the classical liberal view of the market as a natural phenomenon relying on a logic of exchange, to the neoliberal understanding of markets as artificial, fragile, and requiring competition to survive. As such, this new neoliberal form of governance did not scale down government, but rather expanded it across all facets of life. Indeed, its primary responsibility was now to intervene in society to universalise entrepreneurial conduct, with the goal of creating competitive markets. Thatcher’s policies were thus aimed at aligning social values with economic ones by championing a hard-working ethic, individuality, and self-determination.

It is clear that the incumbent government intended to continue this role. While introducing the mini-budget, Kwarteng claimed that the new policies would “reward enterprise and work, incentivise growth,” and tackle problems that were allegedly “[hurting] the UK’s competitiveness.” Britannia Unchained, a 2012 book that counts both Truss and Kwarteng amongst its authors, also provides a clear picture of their political views and ambitions. In the book, similar demands are made for tax cuts, deregulation, and the need for increased competition. However, the policies are also imbued with an extreme and destructive economic liberalism that will seemingly stop at nothing to secure its aims. There is a total disregard for community and social equality in favour of economic growth. British people are said to be “among the worst idlers in the world,” and the few remaining safety-nets of the welfare state are accused of hindering productivity and weakening ambition. Large sectors of the economy may collapse, bringing widespread unemployment, child poverty, soaring economic disparities, and sky-rocketing mortgage rates – all this is viewed as part of a necessary process to grow the economy.

It should thus come as no surprise that even members of the Tory party expressed concern over what they said risked being a “doctrinaire approach,” with senior members, including former chancellor and fellow tax-cut enthusiast George Osborne, branding it a haphazard and disruptive “political experiment.” However, responsibility for the current state of affairs cannot be solely directed to Truss, as tax-cuts and trickle-down economics have been the norm in British politics since Thatcher’s era. In many ways, Truss has become the scapegoat for decades of crippling neoliberal measures. Still, the decision to rehash a series of Thatcherite policies in this moment of extreme economic precarity, despite widespread consensus that they simply do not work, may well cost Truss her role as prime minister. Indeed, giving back to big businesses and bankers does nothing to grow the economy. Corporations do not invest in productive capacity when no one can afford to buy whatever new high-value products are being sold. Bankers are more likely to use the money to buy back their company’s assets, boosting their share price and ultimately their bonuses. And it has become blatantly clear that trickle-down economics is essentially a myth. Even the International Monetary Fund has stated that “when the rich get richer, benefits do not trickle down,” while “increasing the income share of the poor and the middle class actually increases economic growth.”

Another key reason why Truss’ attempt to reuse Thatcherite policies will not work is that the difference in scope of publicly-owned institutions between 1970s Britain and today is massive. After realising that trickle-down economics did nothing to grow the economy, Thatcher was still able to simulate growth by privatising public sectors such as gas, water, electricity, and council housing. However, forty long years of privatisation and deregulation have left Truss with little to sell.

The government will need to continue reversing most, if not all of the policies introduced in the mini-budget if they wish to avoid completely tanking the UK economy. These policies have already dealt significant damage, the brunt of which have been felt by those who are already struggling the most. In turn, Truss, Kwarteng, and the rest of those responsible for the crisis in the first place are likely to be only marginally affected, if at all. This is the kind of disconnect between politician and citizen which ultimately leads to the “political experiments” we are currently witnessing. Significant changes to British politics are needed now more than ever, but who will enact these changes? Labour is likely to secure a victory in the next election. But will Keir Starmer’s government be radical enough to address the deep-rooted problems plaguing the UK?