Until recently, the job description for a UK (and most Western) politician has been fairly simple – look good on television, and only say something when it has been approved by a focus group. The reward was the ability to jet off to important sounding meetings of the G7 and G20, and have agreeable dinners at Summit meetings.
There was no sense that, as was the case before the economic SuperCycle, that politicians needed to have a clear view about economic policy, and what they wanted to achieve. Instead, this “detail” was the responsibility of the central banks, with their seemingly magical powers to guide a global economy of 7.3bn people by printing money and reducing interest rates. Most senior politicians in Europe, the USA and Japan clearly still believe in this presumed ability of their central banks to implement NICE policies that create Non-Inflationary Constant Expansion.
One case study for this behaviour has been the UK Conservative Party, where schoolboy politics has instead come to dominate. Historians will focus on the Brexit debate as the great example. Neither David Cameron for Remain, or Boris Johnson and Michael Gove for Leave, had any understanding of the dark forces around the immigration issue that they unleashed during the campaign. They all assumed a Remain vote was inevitable, and saw the vote itself as simply a proxy for the really interesting battle (for them at least) to be prime minister.
This meant that neither side bothered to prepare a Plan to handle a UK vote to leave the European Union. As a result, Cameron was forced to tell his 27 fellow EU leaders last week that he had no plan at all for dealing with a Brexit vote. Similarly, Johnson simply ducked the issue and went off to play cricket after the result, whilst Gove’s wife has revealed he went to bed whilst the votes were being counted.
Tragedy is always close to farce, and we can see that in the events of the past week, since the Brexit vote. Gove’s comment, “Gosh, I suppose I had better get up!” summarises the shallowness of the preparation for an event which could completely change the course of British history, as well as Europe and the world.
The writing is now on the wall for this wishful thinking. The world’s demographic deficit means the global economy has a demand deficit. Even central bankers are starting to realise they cannot possibly deliver on the expectations they have created. As the Governor of the Bank of England, Mark Carney, clearly stated last week:
“The future potential of this economy and its implications for jobs, real wages and wealth are not the gifts of monetary policymakers.”
Unfortunately, the Brexit vote means that the UK is effectively going to be a test-bed for what happens next, now that the “cult of the central banks” is drawing to a close. And who therefore knows whether Dutch premier Mark Rutte (a long-time UK friend) over-stated the risks with his warning last week:
“England has collapsed politically, monetarily, constitutionally and economically.”
However, although it may be too late, some change does finally seem to be underway, as the photos illustrate:
- We appear to be seeing the end of the schoolboy politics that has dominated for too long
- Instead, it appears that Teresa May, currently Home Secretary, is favourite to become UK prime minister
- Nicola Sturgeon is already First Minister of Scotland, and Arlene Foster of N Ireland
These women appear to be more prepared to take responsibility for the impact of their actions.
May’s first campaign promise was that she would not trigger the start of negotiations to leave the EU “until next year at the earliest“. She clearly understands that nobody on either side has any idea of how to conduct these discussions, let alone what they should cover. This wise decision immediately sets her apart from her schoolboy predecessors, who thought 43 years of economic and legal union could be replaced more or less overnight.
Will May be successful in returning the UK to the world of grown-up politics? Will she get ambushed on the way, as Michael Gove ambushed his supposed friend and colleague Boris Johnson on Thursday? Or will the crisis now facing the UK and EU economies make it impossible for rational debate to take place?
We cannot know the answer.
But we can hope that the events of the past 10 days have begun to change the nature of political debate, at least in the UK. It even seems possible that the schoolboy socialist, Jeremy Corbyn, could soon be replaced as leader of the opposition Labour Party – in which case, the government might also start to be properly held to account for its actions.
But whatever happens now, difficult times still lie ahead for the UK and the world economy:
- As The Telegraph confirms, the UK has hardly anyone with experience of global trade negotiations – nor, indeed, the lawyers to turn their agreements into law. Even the job of assessing what to do about the 12,295 EU Regulations now part of UK law will take years rather than months to resolve
- Similarly, nobody in the world has any experience of a situation where its 5th largest economy suddenly decides to tear up its past 43 years of history, and start again with a clean sheet of paper – as the UK did 2 weeks ago
No adult politician would ever have risked putting their country into such a absurd and potentially risky situation.
WEEKLY MARKET ROUND-UP
My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments:
Brent crude oil, down 53%
Naphtha Europe, down 52%. “The European naphtha market is seen as fairly weak, balanced to long, with demand of light virgin naphtha said to be low.”
Benzene Europe, down 55%. “Higher US pricing supports Europe”
PTA China, down 39%. “Buying sentiment was thin in the week, as buyers took into account the volatile upstream energy prices and stayed on the sidelines”
HDPE US export, down 33%. “Increased supply across most other grades caused prices to slip by a few pennies”
US$ Index, up 17%
S&P 500 stock market index, up 8%