Boris Johnson did not leave No. 10 Downing Street because of economic woes. His total lack of integrity forced senior members of his administration to leave in droves because they were too embarrassed by and ashamed of his character rather than his government policies.
His successor, Liz Truss, isn’t really faring much better, except that this time it has nothing to do with her personal character.
Within the first month of her administration, she brought the British pound to a historic low against the U.S. dollar, close to parity at one time, and almost made the British pension fund system bankrupt, had the Bank of England not interfered in the financial market by purchasing U.K. government bonds.
In addition to the turmoil in the financial market, the International Monetary Fund openly criticized her policy as the wrong way to handle the cost-of-living crisis. U.S. President Joe Biden stated frankly that the tax cut by Truss and her administration was a mistake.
Total economic anarchy in the U.K. left Truss no choice but to make embarrassing U-turns in her economic directions. She sacked Chancellor of the Exchequer Kwasi Kwarteng after just five weeks and had to resign herself 44 days after taking over the job from Johnson as the U.K. prime minister.
The mini-budget fiasco made no financial sense at all, against the current background of sky-rocketing energy costs and other living expenses in the U.K. It is just pouring fuel onto the blazing fire of an already runaway inflation.
Then, why did her administration propose this initiative in the first place? Well, tax cut just sounds good to the ears of the ordinary voters, and in the case of Truss, who did not get to No. 10 through general election, to the ears of her own party members.
Who wants to say no to more money? Truss won the Conservative Party leadership by this very promise of a bold plan to cut taxes and build economic growth.
Pumping more money into double-digit inflation, really?
Irresponsible politicians sometimes employ cunning, misleading and even deceptive policies to get votes, disregarding the consequences that might come as a result of the implementation of such measures. Given their knowledge and experience, they know better, or they should know better, but they don’t do better.
Many economists blame the excessive COVID relief packages provided by the U.S. government for the current high inflation in America. Key inflation drivers in the U.S. such as soaring domestic housing prices and high wage inflation in the job market have nothing to do with external factors; since 2019 the U.S. has been a net oil exporter.
Yet few senators or congressmen had the courage to stand in the way of handing out more free money to expectant voters. They were afraid that any insistence on financial discipline might make them unpopular with voters and cost them tickets in the next election.
Yet the plain truth is that a country cannot get out of financial trouble simply by printing more money. Even the greenback is no exception.
When a teenager’s party gets too rowdy, a responsible parent needs to step forward and take away the punch bowl. Doting is never a good parenting practice. Despite its appearance, playing the bad guy can actually be for the good.
It is imperative that responsible politicians gather the same courage to face the hard truth and present feasible policies based on reality, to take away the punch bowl, if necessary, even when delivering such messages might be unpleasant to the ears of the voting public.
Promise of the moon and failure to deliver may lead to dire consequences which have to be borne by the very voters who endorse such unrealistic measures.
(The author is an independent financial investor.)