Chris Johns
The Trifecta
Felix Ungar : Of all the times that I've wanted to choke you by the throat, this is the worst! If you say "trifecta" one more time, I'm going to choke you until you are dead, and then that man can arrest me one more time for one more crime one more time in his office, AND HE'S GONNA HAVE A FOURFECTA! SO YOU SHUT THE FUCK UP, DO YOU HEAR ME?
Oscar Madison : I think you can get a fourfecta in Cuba, but it's a cigar.
(From The Odd Couple)
Crisis is a much overused word these days. In recent memory we’ve had the Great Financial Crisis and the Pandemic Crisis. Now, three more can be added to the list of woes. A possible fourth, an Inflation Crisis, could give us Oscar’s fourfecta.
Brexit is a story much foretold. Pretty much everything ‘Project Fear’ said would happen, is happening. The EU is in full control of the UK’s trade border: Exports from the UK are checked - bureaucratically and thoroughly - going into the EU. Imports into the UK from the EU attract no checks at all. ‘Take back control’ was just one of the key slogans, used to great effect, dreamed up by the British Leave campaign.
Add to that trade border problem a global supply chain issue for many goods. This is caused by the sudden reopening of many economies (a demand effect) and still-closed (or only partially reopened) factories and ports in many countries (pandemic-related worker shortages who have Covid or are isolating as close contacts). The latter is the supply effect. So demand and supply work together to prompt empty shelves in shops.
Add that supply/demand imbalance to a sudden imposition of a trade border with a large group of countries with which you have spent the last four decades in an ever-tightening process of supply chain integration.
Then add a pan-European shortage of truck/delivery drivers. Made worse in the UK’s case by the decision to create a hostile environment for immigrant drivers (a lot of HGV drivers are non-British) and rules that prevent them arriving or returning from the EU, should they want to. Which, for the most part, they don’t.
Then add the absence of a plan. Brexit was all about a trifecta of slogans. ‘Get Brexit done.’ ‘£350m a week for the NHS’. And one other I have already mentioned. The slogans were all that Brexit ever was. There wasn’t, and isn’t, a plan.
The Democrat’s fatal conceit
Governments of all persuasions are often accused of short-termism. The absence of strategic planning is painfully obvious is many areas, not least health, education and housing. Dare I say another trifecta.
Politicians retort
We know what to do but we don’t know how to get reelected if we do it
(Jean-Claude Junker, while President of the European Commission)
On this line of thinking, it’s the fundamental flaw in democracy. Citizens won’t vote for you if you think about the longer term, if you do things that have pay-offs only long after you have shuffled off the electoral stage. And you certainly can’t do anything that involves short-term pain for long-term benefit.
There’s some truth in this, but only some. It’s also lazy and conceited. It’s an attitude that holds your electorate in contempt. Proper leaders, we might argue, can explain and persuade. Not all voters are completely stupid.
In the limit, a total government focus on the here-and-now necessitates a laser-like focus on media management. Headlines become all-important. Modern media, to its shame, largely plays along. Even if tough questions are asked, the rules of the game strictly allow politicians never to answer, with journalists happily acquiescing in the pantomime that is any interview with a government representative. There are honourable exceptions, but they are exceptions.
The limit
Brexit is that limiting example. Whereas some governments do think, occasionally, strategically, Brexit was a plan-free exercise, comprising only those three slogans. What has followed was inevitable, particularly when you realise that any kind of Brexit strictly required strategic thinking. That it was the hardest of Brexits, the diamond-hard Brexit so feared by many of us, meant that deep and wide strategic planning was the only possible way to avoid problems, hardship and economic damage.
Plan-free, government-by-slogan, requires that when the evidence emerges of the harms caused by the implementation of your slogans, you must deny them. Notice that implementation of a slogan is not the same thing as implementation of a plan. ‘getting Brexit done’ meant doing things in an utterly unstructured, unplanned way. Including media management.
Get those headlines into the Daily Express promising that mobile-phone roaming charges would not be introduced post-Brexit. Prorogue parliament. Demonise the judiciary. And so on to the present day.
The British Government must, today, pretend that the border in the Irish Sea is causing all sorts of problems while the border at Dover is operating smoothly.
If you eschew planning, especially of the contingency variety, you risk being blown apart by events. So you must hope that nothing too dramatic happens. And, if it does, mount a ludicrous denial campaign
As someone once said, we are where we are. I explore details of the shortages and much else besides, here. Events will determine what happens next - and it’s not looking good.
Energy Crisis
Higher energy prices are all over the headlines. They are boosting inflation and eating into real incomes. Corporate costs are jumping. That’s on top of the supply-shortage, post-pandemic inflation evident elsewhere. If this continues, we will be asking about the possible derailment of the post-pandemic recovery.
If it gets really bad we might start wondering about a global recession. That, for the Brexiteers, will really be an event. One that will interact with Brexit in truly horrible way. But they will say it’s 100% the global economy energy crisis, nothing to do with Brexit.
Inflation Crisis
We all know that prices of everything are on the rise. Central bankers say it’s temporary but are beginning to mutter that it’s a lot less temporary than they originally thought
If Inflation doesn’t prove to be temporary we are in trouble. Including fnancial markets.
China Crisis
This, at least, merits a blog all on its own (watch this space). The Chinese economy is slowing. But that’s not the biggest problem.
It’s beginning to look like all that Chinese economic growth in recent decades was not what it seemed. That’s not a comment about dodge Chinese economic statistics.
Some emerging evidence points to a jaw-droppingly large amount of property speculation that has led to massive over-building, particularly of apartments. Properties that nobody is ever likely to love in. It was a spectacular waste of resources, a huge mis-allocation of capital. The Chinese growth story was not all it was cracked up to be. The authorities have realised this and are seeking to re-allocate that wasted capital. This, it seems, is the truth underlying all those stories about property developer Evergrande, its $300bn liabilities and the possibility of a Chinese Lehman moment.
The chart shows just how distorted the Chinese economy has been by the property explosion. Only Spain has recently come close and we all know what happened when that bubble burst. Even Ireland’s building of ‘ghost estates’ looks small change compared to China’s property story.
All this is explored in here and here. The big question is around future Chinese growth. If they are going to stop building unwanted apartments, what are they going to do? Where will the growth come from? It’s all very well saying ‘rebalance the economy towards consumption’ but that it is a very tricky thing to pull off.
Bottom line: the world may have to get used to a lot less Chinese growth than we have witnessed in the past. That’s a big problem for all of us, not least ‘Global Britain’.
Brexit and Events
So, the British government has crossed its fingers with Brexit - a gamble that has failed. Any one of our crisis tri - or four (five?)- fecta will not combine well with Brexit. Putting it all together and it is easy to see why it has been reported that the strategic genius behind Brexit, Dominic Cummings, has sold all his shares.