RIP Trussonomics, then. We hardly knew ye. With Liz Truss’s power project already consigned to British political history, it is not too soon to consider its place there. For what the Prime Minister and her now-defenestrated chancellor, Kwasi Kwarteng, were trying to achieve was unusual. It was more ideological than anything since Thatcherism. And one can – as I do – emphatically disagree with their vision and ridicule its shambolic execution while also recognising that it contained an underlying intellectual honesty.
For decades, British voters have been indulged in the fantasy that they can reasonably expect a European-style social model (universal services, a decent social safety net, a resilient public realm) on American-style low taxes. Many politicians have cultivated the have-our-cake-and-eat-it assumption that Britain can have the best of both systems without the downsides of either. In truth, there is a trade-off.
Truss and Kwarteng’s plan for the country implicitly accepted that trade-off. It involved abandoning the aspiration to a European social model and embracing both American-style tax rates and an American-style limited state. Their tax-cutting mini-Budget was meant to be the first step in the revolution: a down payment on radical cuts to spending and regulation to follow. Unattractive, yes, but also on a certain level more internally consistent than much of that offered by their more cakeist political rivals and opponents.
The reality is that, when forced to choose, Britons are fundamentally European in their ideological preferences. It was never realistic of Truss and Kwarteng to believe that they could Americanise the country’s economy, as voters would never have tolerated the cuts needed to lower the tax take sustainably. Markets punished this lack of realism. The result is political humiliation for the libertarian duo, and their de facto substitution by Jeremy Hunt.
The demise of Trussonomics merits wider reflection. As demands on the state rise – climate crisis, pandemics, war, an ageing population – Britain’s political cakeism will only become less tenable. The country will have to choose between a state that remains small by Western comparison but essentially stops doing certain things, and a sustainably larger state that provides the services and security that voters expect of it while escaping its perma-crisis mode.
[See also: Liz Truss and the rise of the libertarian right]
To put it another way: if Britain cannot Americanise its economy, it may have to Europeanise it. True, Canada and Australia make tempting alternative models, but they are vast countries overflowing with natural resources, so are hardly apt templates. The fashionable examples of Singapore and Taiwan are even less directly applicable. Instead, Brits should look to their own neighbourhood. For a political class obsessed with US politics but often ignorant about other countries in Europe, that will be a steep learning curve.
It should start with the Netherlands, which is strikingly similar to Britain in many important ways. Both countries are Protestant, worldly trading states by historical vocation (no continental city resembles London as much as Rotterdam does). Both have economic strengths in financial, high tech, logistics, creative and pharmaceutical sectors, and globally competitive universities. Both are highly urban, densely populated, maritime and, North Sea gas aside, short on natural resources. On foreign policy, both are instinctively Atlanticist. Both have diverse and pluralistic societies rooted in imperial pasts, and politics marked by both liberalism and nativism.
Yet the Netherlands today is about 25 per cent richer per head despite lower average working hours, and consistently outperforms Britain in the World Economic Forum’s competitiveness ranking. It is also a more equal society. Income is more evenly distributed: analysis by the Financial Times shows that Dutch middle and lower earners are substantially better off than their British counterparts. According to Unicef, child well-being in the Netherlands is the best in the world, while the UK is 27 in the same ranking, just behind Slovakia and Romania. Dutch infrastructure and public spaces gleam with civic pride, where all too often those in Britain are crumbling.
To fix its state, and economic model, Britain will have to forge its own path rooted in its own history, experiences and institutions. But it can tap more realistic seams of inspiration from its European neighbours like the Netherlands than it can from across the Atlantic. These might take the form of particular structures or policies: the Dutch fusion of a unitary state and strong regional decentralisation, say; or French childcare policies; or Germany’s research and development strengths; or Denmark’s liberal but solidaristic labour market; or Austria’s housebuilding prowess; or the insurance-based universal healthcare systems across the region. They might also include the broader recognition that a larger British state may be necessary to escape the country’s long crisis, but does not need to spell economic decline.
Most of the rest of north-west Europe has long levied higher taxes: typically approaching or above 40 per cent of GDP over the past years, compared with the low 30s in Britain. Yet most, like the Netherlands, are also both richer and more equal economies. Truss and Kwarteng were right to recognise that Britain has to choose between American and European economic paths. They merely opted for the wrong one.
[See also: The market revolt against Liz Truss does not prove that austerity was justified]
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This article appears in the 19 Oct 2022 issue of the New Statesman, State of Emergency