By Graham Vanbergen: Economically speaking, there is nothing positive on the horizon for Britain. There are no sunlit uplands as promised by our veritable so-called leaders. The economy is about to spiral out of control.

Britain is not about to suddenly find the economic holy grail of policy-making just because yet another Tory hopeful has a stab at stemming the failures of her predecessors. They’ve tried. They’ve failed. Indeed, even Thatcher’s neoliberal drive, which did work, now doesn’t. You only have to look at the privatization of water to see that failure dramatically spewing its ideology all over Britain’s beaches.

There is no new ‘industrial revolution’ or a 21st-century equivalent of it for Britain. We won’t find a new energy source that will revolutionise the world or invent a new technical advantage over all others as we have done in our historical past. That’s the problem with technology – everyone catches up so quickly.

Liz Truss will do the same as the three previous Tory Prime Ministers. She will fail. And when she does, like the last three efforts – we will all have to pay. So what now for the economy?

Truss is going for broke – literally. She thinks that her policies are somehow untried (by three decades of the last four in Tory hands) anywhere in the Western world – when, in fact, they have. Strangely enough, America is the biggest example of deregulation – but as Joe Biden announced yesterday – trickle down economics, which is exactly what Truss is about to hype up – has failed.

So, in a country where we have a national debt equivalent to 100 per cent of GDP – facing an energy inflation spike that won’t easily go away and a more general cost of living crisis that will quickly erode living standards, what will Truss do? Lowering taxes for the poor by 63 pence won’t do it. Lowering taxes for the wealthy won’t do it. Lowering taxes on corporations won’t either (because trickle-down theory is now a known failure).

My guess is she will go for broke. She will attempt to become a low-tax champion. And in the type of economy we have right now – balanced on the edge of a recession, with record high employment (meaning little bandwidth to increase output), she will spook the money markets.

Targeting the housing market i.e. yet more intervention into a so-called free market to distort reality will not work.

In normal markets, eliminating stamp duty will overheat house prices in the short-term. Eventually they will slow or correct in the medium term. But will it really do anything this time? It could if several million properties suddenly came to market – but that’s not possible. And while house prices have defied the principles of economic gravity over the last few years, they simply can’t keep going because there’s only one trajectory right now – an inevitable increase of base rate interest rates. In other words, mortage payments will start increasing – quickly. Activity in the housing market will over-compensate and all but stop.

So what else will kick start the economy? Not much is the answer. The reason is money. You need lots of it to invest in projects that actually do give you an edge. Education? Every year, the OECD releases its results on the global rankings of students in maths, reading and science across 72 countries. It shows the UK failing to come in the top ten in any of the three categories. Performing consistently well across the board, however, are several Asian countries, notably Singapore, Hong Kong, Japan and Korea. European countries such as Switzerland, Ireland, Finland and Estonia also stand out.

The problem with education is that it takes years to see real results – and politics is very short-termism at best. In reality – Britain has failed to keep up because of political ideology.

And education is just one example of the many problems that represent the incremental decline of Britain.

 

Ideological Extremists

Those on the hard-right of the economic spectrum have all but guaranteed more failure. Today, that’s called neoliberal capitalism. It is the same with the fantasies of those on the far left of socialism. There’s never enough money. Both have to be kept in check by affordability – or you go bankrupt.

Liz Truss and her new Chancellor are about to make some big economic wrong-turns. The money markets will quickly turn against them. The cost of borrowing for the government, businesses and for homeowners with mortgages will quickly head north. This, in turn, will push more inflation into the economy – which will push the value of the pound Sterling downward – that in turn – will push inflation up again. It’s a financial death spiral – and it takes huge financial intervention to stop it once that trajectory takes hold. We don’t hold US dollar reserves to fight back. We don’t have gold reserves to sell and raise capital. The bond markets will lose confidence.

What then?