Britain has now had three different Prime Ministers in eight weeks. Boris Johnson was replaced by Liz Truss, who has now made way for Rishi Sunak.
At least in Britain, they don’t wait four years to replace a leader that clearly isn’t up to the job. They do it in four weeks.
Douglas interviewed on MidDays with Gerard Gibert on SuperTalk Mississippi this week to discuss Britain's political climate.
The latest political drama unfolding in London might make an interesting talking point for many in America, but it also seems rather remote and irrelevant. What could any of it mean over here?
Actually, Britain today provides a useful example of how not to run a county. Britain faces political turmoil because of bad public policy decisions, and Americans would do well to avoid the same mistakes.
Britain is in a mess because of a bad energy policy, excessive government borrowing and an addiction to ultra-low interest rates.
1. Bad energy policy: The home of the industrial revolution is now committed to phasing out the use of hydrocarbons to produce energy. The problem is that moving over to renewables is more expensive. Long before the Ukraine war disrupted natural gas supplies around the world, Britain had banned fracking - despite sitting astride some of the richest deposits of shale gas on the planet. Oil companies wishing to invest in new North Sea production were discouraged from doing so. At the same time, no significant investment was made in nuclear.
So, guess what? Energy prices in Britain are now insanely high. It is a measure of the extent to which UK energy policy has pushed up the price of energy in Britain that natural gas prices across the Atlantic earlier this year were SIX times higher than in America.
Anyone in America wanting to copy Britain and Europe’s energy policy should wait and see how they cope with the coming winter first.
2. Excessive government borrowing: Prime Minister Liz Truss was forced out because her mini-budget tanked. Contrary to what the mainstream media claimed, the tax cuts she proposed were relatively modest. She was proposing to reduce the tax take back to where it had been in 2019. What really spooked the markets was Truss’ not-so-mini proposal to borrow an additional £200 billion to subsidize the energy bills of every British household and business for the next two years (Made necessary due to Bad Energy Policy, see item 1 above). Under Truss’ predecessor, Boris Johnson, Britain had already maxed out the country’s credit card when the government borrowed eyewatering amounts to pay for people to sit at home for months during COVID lockdowns. Unsurprisingly, that has now left Britain poorer.
The Biden administration has spent enormous amounts of money by borrowing. Much of the money has been squandered on various boondoggles. At some point, as in Britain, that cannot continue.
3. Addiction to low-interest rates: Think of the British economy as a Jenga tower, built by piling cheap credit upon excess borrowing. Successive governments have produced an illusion of prosperity as they pile brick upon brick. Asset prices have shot up, and easy money allowed people to spend money that wasn’t theirs. Liz Truss was like the unlucky Jenga player that moves a brick that makes the whole tower wobble and risks bringing it down. Whoever is Prime Minister in Britain, interest rates are going to rise, and a lot of the economy’s ghost growth will simply disappear. Britain is merely the first of many countries to feel the painful consequences of a return to ‘normal’ interest rates.
Britain shows what happens when conservatives govern like progressives. Fashionable theories about climate change and modern monetary theory have clouded the judgment of those that ought to know better. They are about to face a painful awakening.
Ps. The Mississippi Leadership Academy launches: Today is the first day of the Mississippi Leadership Academy. Over 20 young Mississippians have signed up to take part in this six-part program. I will be sure to update you on how it goes!
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