The world’s eyes were on Britain during the Queen’s funeral on Monday, September 19, 2022. It was a somber, dignified, and stately affair. The following Friday, new Prime Minister Liz Truss and her finance minister, Chancellor Kwasi Kwarteng, announced their tax and spending plans. This “mini-budget” was the exact opposite — it promptly drove the pound down to its lowest level against the dollar in history, caused a collapse in the price of UK government bonds (“gilts”), and almost caused a collapse in pension funds on the scale of the global financial crisis. The IMF rebuked the plan, warning that they would stoke economic inequality.
The UK Economic Crisis Might Not Be a One-Off
Britain’s travails are part of a wider set of political and economic problems in Europe.
October 03, 2022
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Summary.
Markets have reacted poorly to the UK government’s new “mini-budget” combining energy price caps with tax cuts for the well off. The government’s search for a quick fix to economic growth is a mistake. In fact, restarting productivity and growth is as important as the Truss government says. But getting there will require a long slog of thoughtful supply-side reforms. And the crisis has lessons beyond the UK. Much of Europe faces the same lackluster productivity and the rise of counterproductive political populism. To keep Europe economically vibrant, politicians and businesses need to address the world’s most important problems head on—by making the right public and private investments.