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Liz Truss resignation: why Britain always seems to be in political crisis

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Years of political turmoil in Britain hit a new low this week, with Prime Minister Liz Truss resigning after the shortest term in British history.

Confidence in Truss had collapsed after the UK presented a budget proposal that included the biggest tax cuts in 50 years, benefiting mainly the rich and corporations. Financial markets reacted with shock to the plan, which commentators described as “regressive” and “poorly designed” – sterling bottomed out and the government skyrocketed its borrowing costs.

But Truss’ unprecedented failure is only the latest in a series of crises that have plagued Britain in recent years. Truss replaced Conservative Party member Boris Johnson, who was fined after the disclosure of secret parties organized by his own government in violation of Covid-isolation rules. Johnson’s populist clamor was routinely filled with false statements, and he eventually resigned after being caught in a lie about the sexual misconduct of a senior official.

Johnson’s predecessor, Theresa May, resigned in 2019 after she failed to fulfill her key motto to achieve Brexit, the UK’s departure from the EU that UK voters had called for in the 2016 referendum. The decision to leave the 27-member bloc also led to the fall of May’s predecessor, David Cameron, who campaigned for Britain to remain in the EU ahead of the 2016 election. Cameron resigned shortly after the vote, in which 52 percent voted to Leave.

What is behind the political chaos of these years? I asked Matthias Matthijs, senior fellow for Europe on the Council on Foreign Relations and associate professor of international political economy at Johns Hopkins University’s School of Advanced International Studies. He is also the author Ideas and Economic Crises in Britain from Attlee to Blair (1945-2005).

According to Matthijs, Britain’s troubles have a clear root cause: Brexit. He says the Leave or Stay EU vote has stirred partisan relations in the UK and created new, polarized political identities around a single dominant issue. The decision to quit unleashed serious economic aftershocks that were impossible to ignore or eradicate indefinitely. The result has been a chaotic, unstable Britain battling social unrest and political turmoil in the aftermath of the pandemic and amid an inflationary crisis that has ravaged the global economy.

I spoke with Matthijs on October 21, after Truss’ resignation was announced. (A successor will remain in office until voted on, reported next week.) A transcript of our speech follows, edited for length and clarity.

Michael Bluhm

From the outside, the UK looks unstable. The Conservatives won a decisive victory in the 2019 general election, but they also went through three prime ministers in three and a half years. How did England get to this point?

Matthias Matthijs

This was the logical consequence of the Brexit vote. The Conservative Party has made itself the party of Brexit, but they have never been honest about the inevitable trade-offs of leaving the European Union. You gain sovereignty, but you will have significant economic costs. Even if you can sign new trade agreements with other countries, you will create trade barriers with your largest trading partner.

The question asked in 2016 was “Do you want to leave the European Union?” it happened. The answer was yes for 52 percent of voters. But they never asked or answered what would replace EU membership in that referendum. And the UK now has to accept EU rules in dealing with the EU – without saying anything about the future of the EU.

Before the general election in December 2019, Boris Johnson basically we will clear the Conservative Party of Remains. Everyone is now a committed Brexiteer. And they all depend on my version of Brexit, which is the hardest version of Brexit – so we’re going to leave the EU altogether – the single market, the Customs Union, everything.

He won a large majority in that election, and his government negotiated a trade deal that replaced EU membership. But that’s when Covid hit, so Covid masked the effects of the breakup. Trade and travel collapsed due to Covid, so not all Brexit-related issues were visible until last year.

Subsequently, Johnson’s resignation led to the rise of Liz Truss from the right of the party. The problem now is that his political talents are rapidly depleting. They never committed to being honest about the trades they made. Liz Truss started implementing this fantastic world economic strategy and that’s when the market started to panic.

Now the UK has entered what has been called the emerging markets region in the 1990s, where markets began to dictate fiscal policies. Conservatives have made it very difficult for themselves by choosing this path, and the chickens come to their house to roost.

Michael Bluhm

You talked about the costs and trade-offs of Brexit. What were the economic costs of leaving the EU?

Matthias Matthijs

The economic cost was measured at about 4 percent of GDP over 10 years. But it’s hard to show people that they don’t have what they have. It is an important economic cost. Mark Carney, the former Governor of the Bank of England, pointed out that the UK economy is about 90 percent of the size of the German economy during the Brexit vote. Now it’s about 70 percent of the size. The pound also weakened. There is also a lack of productivity and real economic growth.

There are many other difficulties. For example, travel to Europe. Exiting the Customs Union means much more bureaucracy. Small businesses that have made the European market their main market now face problems: Instead of two-day delivery times, they have 20-day delivery times. For many customers, this is too long. They lose that market without gaining new markets.

A big cost is that the EU has an alphabet soup of regulatory bodies that regulate and set standards for every industry. But now all UK companies have to recertify themselves with a new UK regulator.

It is not clear whether it has real benefits. Now what do you have that is so great that you didn’t have when you were an EU member? Other than the British Imperial stamp on a pint, they have little to show.

Michael Bluhm

How has Brexit affected the voters or partisan identities of the two major parties?

Matthias Matthijs

This is a great question. In the 2019 election, Boris Johnson’s genius was assembling a coalition of voters that included liberal Leavers. This included people who wanted to leave the EU for cosmopolitan reasons, ie more immigration from outside the EU. They wanted free trade agreements with America and India. They wanted the parliament to be the center of their sovereignty.

Others in this camp saw potential financial gains for the financial sector, and particularly the hedge funds sector, from the lower taxes and deregulation possible through leaving the EU.

But Boris also appealed to a working-class electorate who had traditionally voted for the Labor Party. The Tories promised greater protection from the European market and EU immigration. The strength of Boris Johnson is that he has populist appeal that will never work with working-class voters with a cosmopolitan message, and labels The Remains as cosmopolitan.

Many working-class voters who voted for Brexit, particularly in the north of England and the UK in general, felt that the Labor Party did not represent them. They saw the party as highly educated professionals who didn’t care about the plight of the working class and were ready to ignore their vote to leave the European Union.

The Conservatives very cleverly put together a coalition not unlike what Donald Trump managed to win the Rust Belt states in 2016. Boris Johnson promised to raise the country’s level: more resources from London would be invested in the north of England and more resources would be allocated from London. In the forgotten parts of England – the losers of globalization. This would be easier now, as the EU is so strict on industrial policy and so on.

Boris Johnson held this Leave coalition together for a while. But Covid interrupted it, and its own lack of restraint eventually caused it to fall. But the difference between her and Liz Truss is that Truss doubled down on a low-tax, low-spending, deregulation version of Brexit (what some call Singapore on the Thames), the kind of Brexit that few people vote for.

This made many of the voters who had voted for the Tory for the first time understand that Boris’s promises would never come true. It’s gotten a little real the last few weeks. That’s what we’re seeing in the polls, where Labor is now incredibly high.

Michael Bluhm

You say that Boris Johnson created this new coalition of Leave voters, and that the Leaving identity is at the heart of it. This sounds like it is feeding the political polarization around Brexit. How polarized is the British electorate now?

Matthias Matthijs

The polarization between Leaving and Staying reached a high point in 2019. Then there was the election, and then there was Covid. Today, the Labor Party does not promise to return to the EU. Labor talks about how Brexit will work.

The Leave-Remain identity has weakened. Brexit has happened. This is no longer something you can fire up politically. Now we’re back to the old-fashioned left and right questions. How much should the government tax people to have better public services? Who should pay how much tax? What should the government spend money on?

We are back to a more normal politics. Liz Truss’ financial choices were so radical that any new Tory leader would have to return to center because they would otherwise face election oblivion.

Michael Bluhm

Where are the voters’ emotions now?

Matthias Matthijs

Reality has affected many Labor constituencies. Nothing has changed. They voted Leave to show their discontent with the elite consensus on globalization and an economic future focused on cities and services. Then they voted for Boris Johnson, they said, “Well, it sounds like the Labor Party has done nothing for us, but maybe this guy will.” Now, three years later, they think they don’t see the Conservatives trying to do anything for them either.

They’re back to the status quo ante. Identities are much more volatile though, and it’s entirely possible that a new Labor government will disappoint them and then they’ll fall back to the Conservatives.

Michael Bluhm

How do you see possible ways out of this political instability?

Matthias Matthijs

The only way out is a new general election. The Conservative Party will resist it because they will face election destruction if they go to the elections soon, but the party is divided.

There is a more pragmatist, centrist streak represented by Jeremy Hunt, the new prime minister of the treasury. They don’t want to cut taxes amid high inflation. They believe the UK needs more immigration – there is a lack of labor supply as many people have left the UK due to Brexit.

The other wing doubles up to prevent migration. I don’t see how a new Conservative government can hold out after next spring or summer because the party is divided over key government issues.

Michael Bluhm is a senior editor. signal. He was previously managing editor at the Open Markets Institute and a writer and editor for the Daily Star in Beirut.