Our new prime minister is on a mission. A devotee of the free market, Liz Truss once described Britain as “a nation of Uber-riding, Deliveroo-eating, Airbnb-ing freedom fighters”. But the freedom she really wants is for a select group. It’s those at the very top of society that Truss wants to free from the shackles of tedious regulation and taxes that get in the way of their profits.
Truss was elected with the votes of only 81,000 members of the increasingly extreme Conservative Party. She hasn’t won an election, and her policies are at odds with the manifesto that her predecessor, Boris Johnson, stood on. Her new government’s “mini-budget”, announced on September 23, sparked a sterling crisis, sending the British currency into freefall. Analysts have compared the British economy with an “emerging market”, while even the International Monetary Fund – not an organisation known to advocate fair income distribution – has urged the government to rethink its policies due to their likely severe impact on inequality.
It might be hard for those outside Britain to believe we now have a worse government than that of Johnson. But we do. Johnson was deceitful, venal and incompetent but, in his desire to stay in power, he spent money. He knew it was popular. In fact, it was this lack of adherence to free market principles, as much as the shambolic nature of his government, that turned the Conservative Party membership against him.
That membership has now elected a party leader they can trust to deliver the unfettered Brexit they’ve always wanted, turning Britain into the often mentioned “Singapore-on-Thames”, an Ayn Rand-inspired free market haven, where international capital can operate unhindered by regulations that protect the public interest.
Truss is surely one of the world’s last remaining open advocates of trickle-down economics – the idea that if you cut taxes for the rich, you will spur growth, and the benefits will be felt by everyone. It’s a ludicrous idea that, when practised, has allowed the richest to capture nearly all the gains of economic growth, creating a hollowed-out economy which exists as little more than a cash machine for the global elite, atop a society so unequal it’s coming apart at the seams. Even United States President Joe Biden has said that he is “sick and tired of trickle-down economics. It has never worked.”
But this hasn’t deterred Truss. Her “mini-budget” was a giveaway to the rich, pushing through the biggest tax cut in 50 years, while at the same time embarking on massive borrowing to freeze the rapidly rising energy bills that are driving so many people into poverty. The markets clearly think the policy is unsustainable, and are expecting the Bank of England to raise interest rates.
It almost certainly will, but the cost of that will be yet more pain for ordinary people, as debt payments rise and the economy is strangled. At the same time, those struggling most with increasing costs have been told to restrain their wage increase demands, even though Britain’s high inflation rate has nothing to do with higher wages. Yet again, those who did nothing to create the cost of living crisis will pay the highest price.
There’s no question that energy costs need to be frozen. Ordinary households are looking at eye-watering increases in their bills. However, rather than force those benefitting from high prices – the fossil fuel industry, in particular, which is making tens of billions of pounds in windfall profits – to pay, Truss’s economic programme is shifting the cost to ordinary people.
On September 20, United Nations Secretary-General Antonio Guterres called for windfall taxes on corporations driving the climate emergency, with the proceeds used to help those suffering the brunt of environmental crises around the world. But for Truss, these corporations are the “wealth creators”, and must be allowed to return bumper funds to their super-rich investors, whatever the consequences.
Of course, the cost of living crisis is not confined to Britain, though neoliberal policies over many years, if not decades, have exacerbated the consequences here. One much-ignored cause is the role of speculation. Following deregulation in the 1990s, speculative capital flowed into commodities markets, driving up prices of basic goods and creating huge economic instability.
It was a major factor behind the severe food crisis in 2008, which played out in parallel to the financial meltdown that year. Millions more people (pdf) were thrown into poverty. The problem, as so often, then and now is not that there is a lack of food in the world, but that prices are being set by financiers with no real interest in the production of food.
In the wake of that crisis, some limited regulation was introduced to the markets in the European Union and the United States. It was inadequate, but it prevented the most blatant abuse of the market. Truss is now planning to sweep these regulations away, handing even more power to the markets, as part of a major programme of deregulation of Britain’s financial sector. She will even scrap the limit on bankers’ bonuses, passed in the wake of the 2008 financial crash, when it was recognised that the bonus culture was incentivising risky behaviour.
The impact of these policies on Britain will be severe – a more unequal society and a more volatile economy. But sadly, the continuing importance of Britain’s financial sector means that the consequences will not be confined to us. Risky, profit-hungry activity in the City of London and its string of associated tax havens, will ripple around the world.
Yet there is a sign that the British public has had enough. Strike action, related to the rising cost of living, is spreading through the country in a way not seen for decades. Mass disobedience is planned, with many people pledging not to pay their increased energy bills. Even the normally moderate nature conservation charities are angry, and are launching a campaign to take on government plans to sweep away protections on wildlife in the name of opening up opportunities for finance.
Britain’s crisis is not simply a currency crisis but a much deeper one brought about by decades of market-driven reforms which have produced massive inequality. The notion that trickle-down theory has anything positive to offer is farcical. This could be the end of the road for neoliberal Britain.
The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.