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7 September 2022

The coming autumn crisis

The new government faces a national emergency. If it responds accordingly, the Conservatives could yet remain in power.

By John Gray

As Prime Minister Truss enters 10 Downing Street, the British state is close to buckling. The fantasy politics of the Tory leadership contest is colliding with some intensely painful realities. More than half of the population could fall into fuel poverty this winter (defined as households spending more than 10 per cent of their income on energy). With inflation out of control, the workforce will suffer a fall in real incomes larger than any in their lifetimes. Countless businesses not protected by energy price caps face bankruptcy. Strikes that dragged on through the summer will spread from rail services to the NHS, schools, the justice system and possibly the civil service. There is a distinct possibility of civil disobedience, with many refusing – or simply unable – to pay their fuel bills without a dramatic intervention from the new Truss government.

Energy shortages and droughts, food banks and dysfunctional utilities are not separate developments that together have created a transient spike in the cost of living. Rather, the national and global market regime that has been in place for a generation has broken down.

More than ever, a Labour-led government by the end of 2024 seems the logic of events. But Labour cannot count on winning by default. Keir Starmer remains a politician manqué, a passionless barrister in a trade that requires a killer instinct. Truss, on the other hand, is a politician in every fibre of her being. Her “journey” from student Liberal Democrat to ardent Conservative, Remainer to uber-Brexiteer was doubtless a series of career moves. But it shows a mind that swiftly adapts to new realities, while Starmer plods on, the faithful servant of a defunct ancien régime. There may be a certain charm in his dullness, but it is unlikely to be a winning asset in the midst of such a major upheaval.

What matters is not how the two leaders look today, but the condition of their parties in 2024. If Truss sticks to an ersatz Thatcherism, the Conservatives are electorally done for. If her will to power prevails over her most recent belief system, they could yet win again.

Her first test will be the energy crisis, where she will need to act decisively, as she said she will. Whatever anyone may say, the only route to survival for the new government is a bailout of households and businesses. Whether she does this by reducing taxes, freezing energy bills for a period, or a mixture of the two, the cost will be colossal. This will not be “conservative economics” – an exercise in fiscal prudence aiming to rein back public debt and the state – but an awesomely ambitious experiment in Keynesianism. Economists are warning it could end in disaster by crashing the market in UK government bonds and triggering a run on the pound. But if catastrophe is to be averted this winter there is – as Truss’s supposed role model Margaret Thatcher would have put it – no alternative.

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[See also: Liz Truss and the cost of winning]

If Truss wavers, or is knocked off course by a mutinous crew of Johnson loyalists, cod-Thatcherites and rancid Cameroons, the Conservatives are at an endgame. Some in the party are flirting with the dangerous conceit that the next election is a good one for them to lose. True, a Labour-led coalition might well be swept away in the economic maelstrom. But while it was in power it could also alter the voting system for Westminster and make another Tory majority government practically impossible.

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Emulating a cartoonish version of the Iron Lady’s policies today is the road to ruin. Thatcher mobilised the state against the trade unions, but now the position of the workforce is wholly different. Globalisation weakened the power of workers in Britain, undercutting their wages by moving production to low-income countries. Privatisation undermined workers’ capacity for collective action by fragmenting the labour market. Today it is not trade unions that are overmighty. It is the rapacious companies that run public services that must be made to feel the firm hand of the state.

As Kemi Badenoch observed in the course of her campaign for the Conservative leadership, government must work with the unions and show them some respect. If Truss sets herself up as a union-basher she will make the same mistake as Starmer has done by refusing to let his shadow cabinet join the picket line. Lisa Nandy and Andy Burnham have gauged the public mood more astutely. (Angela Rayner may come to regret confining herself to a carefully worded tweet in support of the strikers.) As it is, the unions might reasonably ask what they are receiving in return for funding the party.

The Labour leader should be given credit for moving his party on from the Corbyn era. As part of distancing it from Corbynism, however, he has recoiled from anything resembling a radical economic programme. A six-month freeze on bills is more sensible than the ever-rising energy price caps that have so far been announced, but it is a bet that prices will stabilise over the six-month period and does nothing to remedy chaos in the energy industry. The arch-centrist Emmanuel Macron is capping energy bills, but he is also taking the giant electricity utility EDF into full public ownership. Ever the calculating trimmer, Starmer has declined to endorse Gordon Brown’s proposal that energy companies that do not offer lower prices should be temporarily nationalised.

We are left in a situation in which much of Britain’s energy infrastructure is owned by foreign companies, including state enterprises such as EDF. Even in the US, the energy system in Los Angeles is wholly owned by a municipal corporation, the Los Angeles Department of Water and Power. In England 80 per cent of Northumbria Water is the property of a Hong Kong multinational registered in the Cayman Islands.

[See also: PMQs today: Liz Truss’s ideological dividing lines could be a gift to Labour]

Nationalising utilities would be a certain vote-winner. In a YouGov poll conducted for the Times towards the end of August, nearly half of Conservative voters favoured nationalising the energy industry. There is a once-in-a lifetime political opportunity here. Why is Labour not grasping it?

One reason is the type of progressivism by which the party has been captured. When Starmer’s supporters talk of occupying the centre ground, they mean advocating policies that no one who attends the funereal meetings of Westminster think tanks will find disturbing or offensive. Contrary to a liberal trope in which culture wars are an invention of the right, it is left-liberals who have redefined politics as Kulturkampf. Identity has displaced class as the defining concern of progressive thinking. As a result, structural economic conflicts are no longer recognised as fundamental. All human beings are assumed to have the same interests – although many seem strangely unaware of them.

Labour’s timidity has another source. An economic agenda as radical as the crisis demands could not be implemented if Britain rejoined the EU. Reversing Brexit would mean submitting to the rules of the EU single market, which preclude national governments asserting control over their economies. For Labour’s metropolitan membership, the only thing wrong with neoliberalism is that it has not been tried on a large enough scale. It is not a view common in Red Wall constituencies.

The often-lamented lack of political ideas is actually an unwillingness to give up an entrenched ideology. The spectrum of thought represented in mainstream British politics consists of variations on neoliberal themes. Thatcher’s challenge to the dogmas of her day hardened into the small-state mantra of the European Research Group. Different strands of neoliberal thinking evolved in Blairite centrism, which accepted a large welfare state but aimed to inject market incentives into it, and in David Cameron’s pursuit of a vaporous “big society” by means of unremitting fiscal austerity. Boris Johnson was as much a neoliberal as a populist. Rishi Sunak has emerged from the leadership contest as a super-clever Goldman Sachs graduate with shaky political judgement,who would rather be running start-ups in Santa Monica.

In all of these variations, the state is merely an enabling mechanism for world markets. A global market order no longer exists, however. Gordon Brown was able to save the world’s financial system from collapse because it was still led by the West. Today, with Russia partially excluded and China’s stance on globalisation unresolved, there is no such system. A moment of seeming Western unity in the immediate aftermath of the Russian invasion of Ukraine – the second time that liberals declared the end of history – lasted not much more than a month. A Western-led order has been replaced by a network of intersecting and competing blocs. Global capitalism has morphed into a patchwork of state capitalisms and war economies.

[See also: The gods are not smiling on Liz Truss]

Neoliberalism was a mirror-image of vulgar Marxism, without Marx’s sense of unremitting struggle in society and the ever-present danger of barbarism. Trade would promote peace, democracy would spread along with capitalism. This naive vision inspired the witless embrace of China by Cameron and George Osborne, and Angela Merkel in yoking Germany to Russian energy. It continues to obstruct new thinking in British politics.

A winter energy famine in Europe will leave Truss with some difficult foreign policy dilemmas. Macron is chasing the old French chimera of entente with Russia, while Germany’s chancellor, Olaf Scholz, is bent on saving the German auto industry by feeding the Russian war machine through gas purchases. Boosterish Western assessments in which Vladimir Putin is losing the war have misread the Russian president’s objectives. Certainly he is suffering major military setbacks, such as the Ukrainian assaults in Crimea and Kherson, high numbers of Russian casualties, low military morale and worsening shortages of materiel. But his goal is no longer to occupy and govern the country. Instead, he aims to disable Ukraine as a state and erase it as a nation.

So far, Putin’s genocidal project has not succeeded. Ukraine is not a failed state, Kyiv is not the Chechen capital Grozny, which Russian forces reduced to rubble between December 1999 and February 2000, and the Ukrainian people have not been cowed into submission. Putin may buy the time he needs by threatening to maintain the shutdown of the Nord Stream pipeline throughout the winter. How far can Britain go in backing Ukraine if leading European states submit to his blackmail and abandon the country to its fate?

Lying behind this is a larger uncertainty. We will know soon enough whether Donald Trump plans to run for president again. If he does, all bets are off on Ukraine (and maybe Taiwan as well). If he does not stand, the way is open for other hard-right candidates such as the Florida governor Ron DeSantis, who has said almost nothing on the invasion. Unless the Democrats stage a surprising recovery, the White House will pass to a Republican president whose view of American involvement in foreign wars is not necessarily positive. On 24 February this year, the axis of the world tilted against the West. A little over two years from now, it may shift against the West again.

The question of the moment in Britain is who has the will to rule. If Truss is ready and able to ditch the parodic Thatcherism she promoted in her leadership campaign, the Tories may have a chance of securing a fifth term. Some politicians who do not fail disastrously, succeed. Truss may be one of them. The political threat she faces comes more from her own party than from Labour. Unhinged by toxic feuds, there are Conservatives who may prefer the satisfaction of seeing her flounder over the prospect of their party winning again.

The next few weeks will be the most consequential in British politics since the end of the 1970s. If Liz Truss’s new government recognises that it is facing a national emergency and acts accordingly, Keir Starmer could end up as the well-paid chief executive of a worthy NGO whose name no one remembers. Alternatively, Truss may shrink from the painful realities or be derailed by her party, and the Labour leader will follow her into Downing Street for a few years of impotent rule. Britain will drift on, until the worsening crisis forces our backward political class to assert the authority of the state over the anarchy of the market.

[See also: Liz Truss’s energy bills plan sounds suspiciously like Labour’s – with a twist]

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This article appears in the 07 Sep 2022 issue of the New Statesman, Liz Truss Unchained