The Bear’s Lair: Fool, Britannia!

Prime Minister Liz Truss’s £150 billion subsidy to energy consumers is yet another economically foolish policy, of a type that have been regrettably predominant since Lord Liverpool left office in 1827. For a country where previously sound policies had produced the Industrial Revolution, Britain has developed a remarkable propensity to shoot itself in the foot economically, providing a Shakespearean low comedy to disinterested observers but condemning its people to increasing impoverishment. Alas, there is little sign that this behavior is about to change.

The sound and intelligent policies that brought Britain the Industrial Revolution are discussed in my forthcoming book “Forging Modernity – Why and How Britain Got the Industrial Revolution” now scheduled to be published by Lutterworth Press in March 2023. Those policies began to reverse as soon as the last Tory prime minister, the Duke of Wellington left office in November 1830.

The first manifestation of the change was the blizzard of toll bills passed by the new Whig House of Commons in 1831, designed to block adoption of Goldsworthy Gurney’s steam carriages by setting tolls for steam carriages at prohibitively high levels. This special interest legislation, pushed by the stage-coach companies, did them no good – they were about to be replaced by the railways – but it resulted in Gurney’s bankruptcy and the delay of the motor age on Britain’s roads by some 70 years. Continued Whig ineptitude in this area was signified by the Locomotives on Highways Act 1861, passed by the Palmerston government, which for the next 35 years forced all road automobiles to be preceded by a man with a red flag – thus handing the automobile industry’s inception to Germany and France.

The post-1830 “Conservative Party” was no better. Sir Robert Peel, the son of a sweatshop millionaire, ended the policy of high wages that Liverpool had fostered, believing it forced greater innovation in labor-saving technologies. Instead, he pursued a policy of unilateral free trade and cheap labor, slowing British technological innovation and forcing British manufacturers to compete on a tilted playing field against foreign producers who sheltered behind high and increasing tariff walls.

Then Benjamin Disraeli, a total economic illiterate, blackened the name of Britain’s most successful economic leader, put in gratuitously damaging trades union legislation and failed to take action against the rising tide of German protectionism, even though his early political career had been as a protectionist.

It was Disraeli who set up Conservative Central Office (now Conservative Campaign Headquarters) and gave that bunch of now Blairite bureaucrats the first right of selection of Conservative candidates – with the result that the Conservative parliamentary party is now far left of the Conservative party membership in the country, forcing Blairite numbskulls on the Constituency Associations at every opportunity.

From that decision we can trace the appalling quality of most Conservative party leaders since 1945 (with one shining exception) and the recent parliamentary coup d’etat against Boris Johnson, together with the attempt to impose the high-tax socialist coup leader Rishi Sunak as his successor. If the majority of Conservative MPs are Blairite bozos selected by a hidden bureaucracy, you will end up with Blairite bozo governments.

Other 19th century follies included forcing into state control most of the dynamic new industries, such as telegraph, telephone, electricity supply and broadcasting, thus ensuring Britain would be a laggard in all these areas, would benefit little from their growth and would fall behind the world’s innovators.

In the 20th century British economic policy got worse, not better. After Neville Chamberlain had finally brought in a balanced “Imperial Preference” tariff policy by the 1932 Ottawa Agreement, Britain enjoyed an astonishing, innovative boom, with the fastest 5-year period of GDP growth it has ever had, all at a time while the rest of the world was mired in the Great Depression. Then World War II happened, Chamberlain was demonized by both political parties and at Bretton Woods Maynard Keynes gave away Imperial Preference to a Communist-dominated alliance of the Soviet Union and its agents in the Roosevelt administration.

The decision to join the embryonic European Union, whose members shared Britain’s weaknesses of sclerotic heavy industry, immovable trades unions and excessive bureaucracy rather than providing the raw materials and dynamism the country needed, was only the most spectacular of the follies of 1945-79. (A truly imaginative British government would have imported Lee Kuan Yew, in about 1965 once he had proved himself in Singapore, to run the country on a fixed 25-year contract with an incentives clause for mobilizing growth. Top-quality management always pays for itself!)

While Margaret Thatcher temporarily improved British economic management (though not entirely – the demise of the City of London is a major blot on her record) there was a sharp turn for the worse with the advent of John Major and Tony Blair. One minor example – what were they thinking? – was the decommissioning of the Royal Yacht Britannia, an incomparable marketing tool for British goods, services and culture, in 1997; it is only now finally being replaced, assuming some totally cockeyed priority does not cause that replacement’s cancellation.

The soaring of immigration levels also occurred during these years. Britain’s greatest achievements, in science, economics and the arts, came with a population of 15 million. At 55 million Britain was already overcrowded and further low-skill additions, legal and illegal, were the last thing the domestic population needed. Brexit and Priti Patel’s imaginative Rwanda scheme seemed to offer the potential to alleviate this problem; it appears to have been destroyed by the Marxists of the European Court of Human Rights and those in the bureaucracy. Meanwhile Ms. Patel herself has been consigned to outer darkness by a ministerial reordering that appears to prioritize ugliness and stupidity, in neither of which qualities Ms. Patel excelled. (Just because a man is called Cleverly does not make him actually intelligent or qualified to be Foreign Secretary.)

The one truly sensible decision in the last half-century or so, taken of course by the British people themselves against the strong advice of their inept governments and incomparably obstructive Civil Service – was Brexit. For the next three years, governments attempted to get this decision reversed without the public noticing; it is the country’s great good fortune that even in this, they failed.

The Boris Johnson administration appeared likely to be somewhat better – he was after all supposedly very intelligent. However, he quickly made his own ineptitude clear by continuing to fund the useless HS2 rail system, whose projected cost escalates to infinity, while its infrastructure benefits asymptotically approach zero. Meanwhile the Galloway-Ulster Bridge, a genuinely potentially useful infrastructure project, both politically and economically, was promptly rubbished by the civil servants recalculating its projected cost to an astronomical level, then abandoning it. As the great canal builder James Brindley demonstrated perfectly in the 1760s, infrastructure is only worth paying for if it opens up economic capabilities that were not previously available; the Galloway/Ulster Bridge fulfills this criterion, HS2 emphatically does not.

However, the most foolish blunder of recent years has been in energy policy. Britain is lucky enough to have ample natural gas reserves both onshore and offshore, available through fracking; despite its overpopulation it can still be close to energy independence. Instead, the country has built endless useless windmills and embarked on a “net zero” policy that is nothing short of economically suicidal.

Then this week, it has compounded the problem by capping energy bills (the government’s involvement in which, with six-monthly price resets, is itself an utter foolishness of the May years). That will increase consumption artificially at a time of scarcity, the worst possible outcome. It will also increase inflation, the statistics for which will be artificially held down by the price caps, but the reality of which will not, as the Brobdingnagian government deficits strain Britain’s fiscal capacity. Naturally, the principal cause of excessive inflation is Britain’s utterly foolish monetary policy, which the Bank of England is straining every sinew not to reform.

Fool, Britannia! Is all one can conclude, and at this unexpectedly pivotal moment in the nation’s history: God Save The King!

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)