Special Relationship – Health Check

Every UK Prime Minister feels obliged to talk up the ‘Special Relationship’ between the UK and USA. From Tony Blair to Boris Johnston and then Keir Starmer we see our Prime Ministers desperately seeking recognition from the USA President. Tony Blair’s regime was famously subservient to the USA and foolishly followed Bush into the Iraq war with disastrous consequences. Supporters of Brexit saw the move away from Europe as a move towards the USA and when Boris Johnston was forced out, he advised his successors to ‘stay close to the Americans’.

Within unionism, our UUP has strong ties to the military and values the deep security relationship between the UK and US. Similarly, the DUP celebrates the “Ulster-Scots” connection with America, with some DUP MPs having publicly supporting Donald Trump and viewing his “America First” populist approach as aligned with their own pro-sovereignty and Brexit-backing stances.

Such cross-Atlantic ties have a history. Those old enough to remember Ronald Reagan and Margaret Thatcher will recall their friendship and their economic beliefs reinforced each other.

Reagan was an enemy of ‘big government’ believing that federal government was an obstacle to prosperity rather than its architect. In his inaugural address he claimed ‘Government is not the solution to our problem; government is the problem.’ Reagan viewed regulation of big business as red tape that was strangling industry and believed in reducing taxes for the rich so that wealth could ‘trickle down’.

Similarly, Thatcher believed that Britain was being strangled by a bloated state, militant trade unions, and an inefficient welfare system. Like Reagan, she believed in reducing taxes and in ‘trickle-down economics.’ Perhaps even more than Reagan, Thatcher began a program of selling off a large number of publicly owned organisations. She sold British Telecom (BT), British Gas, the Water Companies, the Electricity companies, British Airways, the Ports (ABP), British Petroleum (BP), British Steel, Rolls Royce, Jaguar and many more. Those once-publicly-owned resources are now in private hands and all the money from those sales has been spent.

Will this Cross-Atlantic-Consensus Continue?

Two online items this week should prompt a rethink.

1)A YouGov poll saw 43 per cent of respondents backing a cooling of relations with Washington in favour of closer ties with the European Union. This is a major shift in public opinion, a 9 per cent jump compared to when the same question was posed in April last year.

Some of this change will be prompted by the Trump tariffs, and the doubling of energy prices caused by the Israeli/US attack on Iran.

2) Gary’s Economics released an excellent video on how to protect ourselves from the economic effects of the US attack on Iran.

In his video Gary tackles head on why more drilling in the North Sea will not solve our energy cost problem. Unlike Norway, we do not own the oil or gas that comes out of the North Sea and nor do we have a Sovereign Wealth Fund. The private companies that we license to drill in the North Sea, will own that oil or gas and sell it at the going rate on the open market. Yes, we can tax the companies to bring in money, but this will not bring down prices in the UK.

Gary points out that other seemingly easy options such as reducing the tax on fuel as advocated by parties like the UUP and DUP will be popular in the short term, but will be enormously expensive and can only be paid for by cutting expenditure elsewhere- ie short term gain for massive long-term pain.

More importantly, Gary focuses on the historic change that have happened across the world as a result of policies like Thatcherism and Reaganomics. Governments have sold off their stocks; they no longer hold enough wealth to protect their populations from economic shocks and have to borrow from the rich at times of crisis. This means either further debt or another bout of austerity, unless governments have the courage to properly tax the rich and tax the wealth of the rich.

To those of you who do not like the idea of taxation, the graph below will seem positive, rather than negative. In all countries listed, government wealth has gone down, while privately held wealth has increased – what could be wrong with that? Well, ask yourself, is that increase in private wealth obvious in your bank account?

The simple fact is that wealth inequality is growing significantly (see here) and is predicted to keep growing. Trickle down economics did not work, ‘selling the family silver’ by Thatcher made us feel wealthier for a short time, but in a finite world, if the very rich are getting even richer the prospect for the ordinary person looks very bleak.