The House of Commons during a rain storm in London following the State Opening of Parliament in May.Dan Kitwood/Getty Images
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.
Britain’s current economic stagnation and political gloom is a warning to us all: This is what happens to a nation that won’t face hard truths.
For generations, Britons prided themselves on being the grown-ups in Europe’s dysfunctional political family. Germany succumbed to nazism, France cycled through constitutions and fended off military coups, Italian governments collapsed every few months and Belgium went altogether without for years. Through it all, there stood Britain, the sceptred and stable isle.
Unlike the shaky coalitions that prevailed on the continent, one of the world’s oldest monarchies was underpinned by an electoral system that produced decisive, majority governments with long-serving prime ministers – 10 years for Tony Blair, nearly 12 for Margaret Thatcher.
What a change a decade makes. As Giorgia Meloni approaches her fifth year as Italian Prime Minister (with the polls showing remarkable stability), Britain is about to see its seventh prime minister in a decade, most likely Andy Burnham, the current mayor of Greater Manchester. And with elections due in the next three years and polls showing a fragmented landscape, the betting odds favour him being succeeded by someone else before too long.
At the root of this malaise is what can be called Cleopatra syndrome. Like the heroine in Shakespeare’s play, voters beat any messenger delivering a truth they don’t want to hear.
The country’s economy is beset by structural obstacles that have slowed its growth to a crawl: declining productivity growth, an aging population, a pay-as-you-go pension system whose burden on the Exchequer rises by the year, a deteriorating health service (which is causing ever more people to leave the work force owing to long-term illness), a housing crisis and a stagnant economy.
People hold placards calling for better pay, on a picket line outside the Royal London Hospital in east London in April, 2023.DANIEL LEAL/AFP/Getty Images
Public services are deteriorating in large measure because the government is forced to tighten its belt as other charges rise, not least a pension budget that currently consumes nearly a sixth of the government’s budget and whose share automatically rises according to a fixed formula. The public are thus growing impatient with the cuts to other government budgets, including policing, social care and road maintenance.
With little growth to fund additional spending, governments are thus forced to keep turning to the bond markets, which drives up interest rates. And because governments are so unstable and the future course of the country looks uncertain, investors demand a higher risk premium on U.K. gilts (as British government bonds are called). As a result, Britain now pays the highest interest rates in the G7, further crimping investment.
Yet for all this, any politician who tells the public they must either pay more in taxes or accept cuts to services is quickly shown the door. Instead, voters favour leaders who promise free lunches – and who, when they fail to deliver, likewise suffer the public’s opprobrium in a hurry.
This volatility does little to help the economy. It is difficult for a business to make anything more than short-term plans since government policy might change, and the uncertainty is intensified by a fragmented party system where populists threaten to upend most everything should they win power. It’s no wonder Britain’s investment rate, which was already lower than the G7 average, has been falling steadily for years.
This Cleopatra syndrome may have already been latent, but it seemed to get turbocharged during the 2016 Brexit referendum, when Leave campaigners insisted that the act would magically revive Britain.
Prime Minister Keir Starmer announces his resignation as UK Prime Minister and Leader of the Labour Party, outside No.10 Downing Street on Monday.Peter Nicholls/Getty Images
Well, it didn’t, and politicians have been touting magical solutions ever since. Outgoing Prime Minister Keir Starmer was the latest to fall into the trap, dooming his government to fail before it even took office because his election campaign promised better public services and more houses without tax increases.
However, while Britain’s Cleopatra syndrome may be unusually malignant, it’s common to other countries as well. If elsewhere it hasn’t yet manifested in the sort of instability that grips Britain, that’s probably because the cushion enjoyed by other governments – in the form of lower debt burdens and accordingly better access to credit – is allowing them to postpone hard choices.
That’s not to say problems won’t arise. Canada, for instance, can spend more freely than Britain because its debt burden is much smaller, but that doesn’t make it any better at hard choices. Currently, the country is talking about spending money to revive sectors with dubious long-term futures, such as the auto and oil industries.
When it comes to the latter, talk of making Canada an energy superpower betrays a lack of planning that will later hurt the country. Unlike Norway or the Gulf states, which use their oil royalties to develop new industries, including renewable energy, Canada spends its earnings to fund living standards.
In other words, Britain today is what we could be tomorrow, if we don’t learn from its mistakes.