by Will Lloyd
Thursday, 20
October 2022
Debate
15:20

Mock growth all you like, but on that point Liz Truss was right

Ten growthless years have left our island nation in trouble
by Will Lloyd
Credit: Getty

The speech was as short as Liz Truss’s tenure as Prime Minister. More of a gobbet, a bit, a punchline. Impaled by rising mortgage rates, and her decision to employ Jacob Rees-Mogg as some sort of nightclub heavy last night, Truss resigned from a job she was never fit to hold.

We can expect the Conservative Party to flee from everything Truss set out in the last 45 days. It does not matter whether it is book writer Penny Mordaunt, Rishi I told you so Sunak, shy Winston Churchill fan Boris Johnson, or alleged unity candidate Ben Wallace who takes over. None of them will go near the Truss agenda. It will be buried underground like radioactive waste.

The difficulty here is that Liz Truss was… right… about growth. Ten growth-less years have left our island as Tokyo hitched uneasily to Romania. She wanted to overhaul planning laws. She wanted to lean into Britain’s strengths. These do not involve exporting physical things, romanticising the North and the regions, real ale, and living, as some commentators have suggested, a “Hobbiton” existence post-Brexit. Without growth Hobbiton goes out of business.

Our strengths, as they almost always have been, are centred on London. On financial and professional companies, and on the frictionless ease of conducting business in a world megacity. Could these strengths be parleyed into an economy that grows 2.5% a year? That is an open question. Perhaps crisis, not growth is the new baseline. But after Truss we may never find out.

There will be talk of a return to pragmatism in coming days. The next Tory leader may return to the popular 2019 manifesto — earthily concerned with ‘real people’ in ‘real places’, ‘sensible economic management’ as Neil O’Brien put it earlier today, and new jobs (probably in the public sector) and infrastructure in regional Britain.

None of that is pragmatism. It is the false hope that economic reality and the weight of every century in which this country has been dominated by the South-East of England can be overturned. It cannot, and it won’t be. The ‘pragmatists’ will fail — alongside every other attempt to make the British economy ‘fairer’ that has tried and failed in the last quarter-century.

Truss goes down in history as a bizarre footnote. A Thatcher-larping fantasist whose medicine critically maimed the patient she was supposed to be caring for. Her cabinet was a joke, her policies were unsubtle, and she ended up rejected by the markets she spent her life worshipping. But that does not mean her diagnosis for the patient was wrong.

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Stephen Walsh
Stephen Walsh
1 month ago

The “pragmatists” took fright because the 10 year Gilt rate hit 4.6%, when inflation is running at 10%. The “pragmatists” have left Britain with sclerotic public services, crumbling infrastructure, unaffordable Net Zero targets, and a pensions time bomb, funded by one of the least competitive tax systems in the OECD (now made worse by Jeremy Hunt), and by unsustainable deficit. The “pragmatists” have left us with a financial system which apparently cannot cope with higher interest rates, even when these are required to respond to rampant inflation, and an asset bubble. “Pragmatists” like Neil O’Brien locked us down for 18 months, funded by borrowing and Quantitative Easing, and are surprised by inflation, economic contraction, healthcare backlogs, and lower educational attainment. So much easier to blame the EU, or Brexit, for home grown failures.

Last edited 1 month ago by Stephen Walshe
Aaron James
Aaron James
1 month ago
Reply to  Stephen Walsh

It is ALL Boris – he drove the stake into the economies heart as a total coward (saw how catching covid broke him, he saw death and found he was a utter coward so came out of hospital a wrecked spirit)

He forced Lockdowns- got the print presses just smoking hot to fund that Insane program – gave the Pharma/bio industrial complex a blank checkbook – he allowed every kind of corruption – he had the MSM lie, and lie, and lie, he doubled the wealth of the most wealthy – he acted like a third world dictator, wile skimming off Billions for who ever was the hand in his sockpuppet self…

Then he was broken, corrupt, and 100% owned – he got into the Ukraine conflict KNOWING it will destroy Europe and UK, and the world.

When you send Billions of high tech weapons, impost huge economic sanctions against the nation who controls your VITAL Energy Supply —–WELL WTF do you expect???? Biden and Boris did this TO Destroy the world for the Great Reset – and to become very wealthy – and make their globalist friends filthy rich.

Tuss is just a Boris person – she agrees with every crime against humanity and UK he committed. Truss needed to go – every last corrupt swine who wanted to get into the Ukraine conflict, which was not our business – and the results were know before – every one of them should be thrown out. They killed your pensions and savings, and will cause a global famine and depression. F the lot of them!

Aaron James
Aaron James
1 month ago
Reply to  Aaron James

Biden/Boris Inflation – how is it working out for you? Well Truss was crazy – QT and raising interest rates one side of the inflation ledger – Tax cuts and QE, in the form of paying everyone’s gas bills, on the other side. In a madly rising inflation with record Debt, and in Recession!

It is like spending a Trillion pounds to build huge dams to generate clean energy wile spending another trillion making jobs by having them fallow right behind the dam builders to take down the dams as a creating work jobs-project.

You cannot have two policies which are 100% in opposition with each other – and both policies Very expencive – And that was Trusses Budget.

Scott McCloud
Scott McCloud
1 month ago
Reply to  Aaron James

In the US, the Executive has no direct control over the economy, only Congress and the Central Bank. In the US, current inflation may be laid at the feet of the Central Bank (Federal Reserve).
Quantitative Easing started in 2008 and didn’t end until May of 2022. The US Fed pumped something like 120 billion dollars a month into the US economy and at one point during the Greek banking crisis, purchased German debt to the tune of $500 billion a quarter for over a year (that’s 500 with 9 zeros or $500,000,000,000 every 3 months)).
You may also note that the US Congress has not passed a budget since 2008, yet federal government spending has increased 7.7% per annum since.
pumping up the money supply with no help from the Executive Branch.

Last edited 1 month ago by shootist.mp
Russell Hamilton
Russell Hamilton
1 month ago
Reply to  Scott McCloud

 the US Congress has not passed a budget since 2008″ … can you please clarify that? A quick Google suggests that the budgets (“appropriations bills”) have been passed by Congress.

Peter Wilson Close
Peter Wilson Close
1 month ago
Reply to  Aaron James

Much of what you say is correct!…..But the position we are in, hiked through debt to the Bond Market, means it is very very difficult to even address let alone correct the problem! Your “Trillion pounds” is actually what the economy needs to have injected into it in unfettered money – albeit judiciously and progressively. I say ” unfettered” because the purists will argue that all money is created as debt. When BOE creates money it logs it in its balance sheet on the debtor side. How many people actually know that BOE has created NO NEW MONEY for the economy since Thatcher deregulated the banks in the 1980s. From a GDP of £300bn in 1985 to £2700bn now it has nearly all been created as credit [i.e.DEBT] by commercial bankers. All of 2008 & 2020 QE cascaded into existing assets [Stocks and Shares and Property – especially houses] – virtually none trickled down as BOE had hoped and expected. In 1970 Commercial Bank credit in the economy was 50% at £50bn with Sovereign money an equal £50bn.. Hardly any bankers, journalists and politicians understand how money SHOULD work. As for economists, they all have their own groups with misguided doctrines based on idealised situations! So apart from the likes of Stephanie Kelton and Steve Keen they are pretty well not fit for purpose. You cannot expect a 27-fold expansion in an economy without creating at least some new Sovereign money. To revert to the 1970 50:50 ratio we could inject at least £1000bn into the economy – obviously not all at once! Printing money per se does not cause inflation – printing too much does – and printing too little causes deflation, at best stagnation and ultimately economic collapse.

Last edited 1 month ago by peterclose
Cassander Antipatru
Cassander Antipatru
1 month ago

Infinite growth is impossible in a world of finite resources. A social and economic system that can’t function without continual growth is inevitably going to fall apart sooner or later.

David McKee
David McKee
1 month ago

Not so. Much of the economy consists of services, where there is no connection with material resources. Within certain limits, an economy can grow ad infinitum. The only question is whether there are people willing to pay with (dematerialised) money for the services on offer.

Matthew Baker
Matthew Baker
1 month ago
Reply to  David McKee

Sure, but services done by people (or machines), aka material beings. Nothing is wholly disconnected from material resources, as much as financialization of the economy may obscure this fact.

If you try to disconnect “services” from material things, you will get inflation in some form. Maybe you can place more subjective “infinite” value on some service, but the person getting that service is still spending very real time on it, time which is finite.

You can try to finagle subjective value around infinitely but at the base we are embodied beings, who need to eat. That is the baseline of everything else and has objective value which is rooted in a world of limits.

Cassander Antipatru
Cassander Antipatru
1 month ago
Reply to  David McKee

Not so. Much of the economy consists of services, where there is no connection with material resources.

Those services are carried out by material people, using material objects, and can only exist when other, more fundamental and material, needs are already being met. There’s a reason why societies of hunter-gatherers and subsistence farmers don’t generally have large classes of investment bankers or computer programmers.

William Foster
William Foster
1 month ago
Reply to  David McKee

Please explain your forever growth theory with an example.

Laurence Siegel
Laurence Siegel
1 month ago
Reply to  William Foster

No physical quantity can grow forever at a nonzero rate, but utility (the amount of satisfaction or useful you get out of something) can.
Forever is a long time, so let’s consider a century. The first electronic (non-mechanical) computer was built almost a century ago by Turing et al. It did almost nothing and was gigantic and wildly expensive. Your cell phone has *much* more computing power than Turing’s expensive toy – in fact more than the first space shuttle in the 1980s – and is *much* cheaper. I don’t know the exact rate of increase in utility, but according to https://www.visualcapitalist.com/visualizing-trillion-fold-increase-computing-power/, computing power grew by a factor of 10^12 between 1956 and 2015, so that’s 60% a year, compounded, over a very long period. Extended to a century, that’s a growth factor of 2.2 x 10^20. Of course, growth in computing power may slow down but it won’t stop. So it will be less than 2.2 x 10^20 but still a very big number. That’s my example.

Helen E
Helen E
1 month ago

False equivalence. “Growth”, or progress, in computing power is not the same as economic growth.

Your example, though, shows why there can be a steady-state economy without ever-increasing usage of finite material resources.

William Foster
William Foster
1 month ago
Reply to  Helen E

There is still increasing usage of finite materials to produce the new technology. Even if it is assumed that *all* old materials were recycled there is not a 100% recovery rate. Not to mention the power, transport, etc. requirements involved in doing so.
By Laurence’s own definition of utility, he fails. Neither satisfaction nor usefulness increase (or even maintain) in computing. The opposite is true as per his approximate Moore’s law explanation. On the contrary, the old technology in constant decline of usefulness and satisfaction from the moment of fabrication as the given example.

Aphrodite Rises
Aphrodite Rises
1 month ago

I always thought it was a kind of pyramid selling which would eventually come crashing down leaving those who had not benefited with the extortionate bill.

Scott McCloud
Scott McCloud
1 month ago

see the sky above? it is raining infinite resources 200 km above your head.

Hugh Bryant
Hugh Bryant
1 month ago

Except, of course, that resources are not finite in any meaningful sense in a world where science can replace fossil fuels with seawater and lithium with table salt and where, increasingly, growth is about doing more with less anyway.

Laurence Siegel
Laurence Siegel
1 month ago
Reply to  Hugh Bryant

That is correct in the broad sweep of history, but science is having some trouble replacing fossil fuels with seawater. Fusion is always five years away.

William Cameron
William Cameron
1 month ago

Brexit is irrelevant. Politicians have chosen to increase the population without it producing commensurate economic growth even sufficient to provide services for the additional 10m -largely imported net of leavers- over the last 20 years.
Terrified of being called racist they have degraded infrastructure ,public services, health services, education by spreading it thiner over a 20% increased population.

Hugh Bryant
Hugh Bryant
1 month ago

But she was wrong about immigration – which is beneficial only if it increases GDP per capita, which it has signally failed to do. Quite the opposite, in fact.

Peter Wilson Close
Peter Wilson Close
1 month ago
Reply to  Hugh Bryant

There are two separate consideration here. Seasonal labour at a price core businesses such as agriculture can afford is essential whilst an unlimited flow of un-regulated immigrants is not beneficial.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 month ago

As I never tire of saying.. there is one blindingly simple solution to the problem of needing capital, revenue, investment and spend and not only is it NOT increased taxation, it is precisely the opposite.

How can Britain almost instantly attract trillions of Dollars, Euros and pounds into the economy? By slashing income tax, and corporation tax to 25% and 5% respectively, add banking and investment confidentiality rules… and sit back and watch the stuff flow in…govt revenue does NOT come in percentages.. it comes in £.s.d, …

Scott McCloud
Scott McCloud
1 month ago

I don’t know about UK but in the US if the Money Spinners stop spinning the whole rotten edifice will come crumb, crumb, crumbling down.
Before that happens: #nationaldivorce. It’s for the children.

Peter Wilson Close
Peter Wilson Close
1 month ago

Sadly the Finances of UK Ltd are controlled by the Bond Vigilantes! How many people actually know that BOE has created NO NEW MONEY for the economy since Thatcher deregulated the banks in the 1980s. From a GDP of £300bn in 1985 to £2700bn now it has nearly all been created as credit [i.e.DEBT] by commercial bankers. All of 2008 & 2020 QE cascaded into existing assets [Stocks and Shares and Property – especially houses] – virtually none trickled down as BOE had hoped and expected. In 1970 Commercial Bank credit in the economy was 50% at £50bn with Sovereign money an equal £50bn.. Hardly any bankers, journalists and politicians understand how money SHOULD work. As for economists, they all have their own groups with misguided doctrines based on idealised situations! So apart from the likes of Stephanie Kelton and Steve Keen they are pretty well not fit for purpose.

Last edited 1 month ago by peterclose