How will stock markets perform when democracy collapses?
Chris Johns
When Game of Thrones meets Love Island.
The title of this piece is not designed to be clickbait. At least not intentionally. A touch facile perhaps, but not wholly unserious. ‘If democracy collapses’ raises many questions. How stock markets might perform is, perhaps, the most trivial. But it is, in a way, also a serious question precisely because it embodies so many others.
Motivated by the same rage and frustration as felt by leading Brexit commentator Chris Grey, I put on the record here some of the ongoing lies being told by Brexiteers, the fantasy world occupied by the body politic in the UK and the collapse in real-time of a Tory party whose leadership candidates now record - daily - the failures of 12 years in office. Detailing how nothing works in Britain is usually the job of the official opposition, not members of the incumbent government. Yet here we are. A gift to the opposition who are trying hard to take advantage.
An excellent take on the nuttiness of the Tory leadership can be found here. a key quote:
Over the last few weeks… the Tory Party’s many leadership candidates, and their supporters, have all been behaving as though they were pummeled in the last U.K. election. Their underlying analysis seems to be that Prime Minister Boris Johnson was removed not because of his own behaviour but because of his policies, and that what the nation’s really crying out for is a complete abandonment of the approach of the last several years.
This is obviously crackers. The problem of the last few years isn’t that we made the wrong promises — it’s that we haven’t delivered on them.
The contest is now between one candidate who thinks all of Britain’s deep structural problems can be solved by keeping taxes where they are and the other who thinks the solution is to cut taxes. That’s it. A one-size-fits-all policy that delivers salvation. Maybe its religion in the 21st century.
Both candidates promise that their respective stances on taxation will address a very long list of problems. The collapsing (collapsed?) NHS, inflation, years of chronic underinvestment, regional inequality, deep social and political division, hopeless phone, energy and water utilities, low productivity and on and on. Soundbite solutions to complex problems. What could go wrong? (See below.)
Ritual humiliation
The second heading of this piece references TV shows that are based on ritual humiliation of its participants via repeated rounds of ‘voting’. The fundamental premise of all these programs, about baking, dancing, entrepreneurship or pointless celebrity, is that every contestant bar one loses, suffering varying degrees of rejection and debasement. The point of reality TV is not the competition but the entertainment provided by the suffering of the losers. I am beginning to think that the current battle to be U.K. Prime Minister takes the contest to the next level: everyone loses. All of us.
Maybe the British version of the collapse of democracy is more ‘collapse of stout party’, a phrase with uncertain provenance but one that carries great resonance when looking at the Conservative government. The contest for leader of the Tory party can be described in many ways, none flattering, but all pointing to a most peculiar form of self-immolation.
I mention Game of Thrones for obvious reasons. The gladiatorial contest to become Britain’s next PM does not really compare (except with respect to the the title) to TV’s greatest ever hour - ‘The Battle of The Bastards'. But the basic idea, a bloody contest for power, with only one winner, is clearly front and centre.
Whether we choose our political masters via the sword or the plebiscite seems to result in similar outcomes: characters straight out of Westeros whose only unifying trait is one best diagnosed by psychiatrists.
Tribal politics, policy-free politics. Brexit is a vibe, not a thing.
A UK Prime Minister resigns days after his confident prediction, which he no doubt believed, that he would still be office beyond 2030. The contest to replace him is less a race between individual politicians and more a game show where participants have to invent parallel universes. ‘Reality TV’ it might well emulate in several ways, but a key feature of current UK politics is a daily confrontation with actual reality; participants in the game have to invent their own facts - indeed, that seems to be the point.
The winning alternative reality will be the one favoured by a group of around 150,000 self-selected folk (the actual number is a closely held secret for some weird reason), 97% of whom are white, have an average age of 57 and are rumoured to be obsessed with income taxes. A majority (2/3) of Tory voters say the PM ‘should be born in Britain’. That rules me out at least. Alexander Boris De Ffeffel Johnson promises, Terminator-style, ‘I’ll be back’. I wonder how many Tory voters, currently signing ‘bring back Boris’ petitions, know where Johnson was born (New York).
Janen Ganesh is a brilliant FT columnist. His latest riff (£) on what is happening to our politics is worth a read. Here are some choice quotes that are self-explanatory and speak to our age of tribalism and the weird places that our unexamined beliefs can lead us.
Sunak’s views are rightwing but what you might call his effect is liberal. Truss, an actual Liberal Democrat for a while, is the opposite. He presents as: know-it-all, at ease abroad, richer than God. She presents as no-nonsense and what the British call “regional”. So, on the basis of accent and a few biographic facts, one Oxonian of public-sector middle-class stock appeals to the metro-snobs and the other to the bumpkin-cranks: two tribes into which our unsubtle age triages so many of us. Policies matter, of course. But so do tribal signifiers.
And this:
Nothing exemplifies the purely vibes-based nature of British politics than Brexiteer MPs rallying around Liz Truss.” “Remember, it’s ALL about vibes.” Wince at the modern-ism all you like: the insight into how people form loyalties is sound. Think of the popular and unexamined hunch that Lionel Messi is a humbler guy than Cristiano Ronaldo (ask Barcelona’s accountants about that). Or that John Lennon, who passed his prime years in the stockbroker belt, was edgier than Paul McCartney, who was going to atonal recitals. Or that Tony Blair, that intense believer in things, was a PR man, while Gordon Brown, the most media-obsessed head of government I had covered until Boris Johnson, was deep.
In similar vein, Jonathan Freedland has spotted that Brexit is more a mood, a vibe, than a real thing. It’s now kinda metaphysical. Something that we believe in or not, maybe the fourth secret of Fatima.
Brexit does not always mean Brexit. Or rather, the meaning of Brexit is not confined to its literal definition. There’s both more and less to it than mere advocacy of a British exit from the EU. It is, in a formulation first used, it seems, by the novelist Nick Harkaway, more of a mood than a policy. Regardless of her stance on the policy, Truss embodies the Brexit mood. And Sunak doesn’t…It’s partly cultural. Sunak could be a mascot for the slick, hi-tech, high-finance, international elite. The billionaire in-laws, the CV, the look. As one Westminster veteran puts it: “He is such a Goldman Sachs guy,” even down to his personal manner. He can do affable when the cameras are on, but close up, it’s full “master of the universe stuff”.
Truss’s persona is different. The trace of Yorkshire in the accent, the Thatcher cosplay, coupled with her disavowals of her earlier position – she says she was flat “wrong” to back remain – mean she now has a Brexity vibe.
Freedland gets to the real heart of all of this:
But there is more to the Brexit mood than motifs of class and culture. For the mood is only partly about hostility to Europe. Mainly it’s about hostility to facts. Truss is the true Brexiter in this contest because she subscribes to magical thinking, believing that simply saying something is enough to will it into existence. You just have to close your eyes and wish really, really hard.
The age of disappointment
Nothing works in the UK any more. I’ve written about this here. The reasons are complex: that’s a big problem because we don’t do complexity. Perhaps we never did, but the constant search for solutions that are simple, contain few words and fewer syllables, is something that defines public debate. Yes, we have always responded to the political soundbite, the politician who explains how everything is painlessly solvable in no time at all. Without being able to prove it, it seems to me that our total aversion to complexity is greater than it ever has been and has a lot to do with social media.
The search for simple solutions guarantees disappointment. And anger. Ours is a very angry age. That anger is made worse as the disappointments come rolling in. As we become more and more disappointed, aware of promises not kept, the modern way is to sink further into fantasy. The defining feature of unreality politics is our almost complete inability to change our minds, to acknowledge facts. As some behavioural scientists have noted, asking someone to change their minds these days amounts to asking someone to change their tribe.
The unreality show that is the race to become the next Tory leader has witnessed constant lying, something that by now is so normalised that we barely notice it and rarely attracts much commentary. This is Johnson’s true legacy.
‘Brexit has nothing to do with {blank}’. We could fill in that blank with a very long list of suspects. “Channel crossing delays’ is but the most recent example, with both candidates to be the next PM stating clearly and unequivocally that Brexit is not to blame for queues. When it so obviously is (see below). But we could also mention inflation, exports, costs of regulation for the chemical and many other industries, 90/180 day visiting rules, exclusion from scientific research programs, employing NHS staff from the EU and on and on. Complexity means that Brexit is often not the only cause of these problems but our simple minds cannot handle this subtlety.
Our response to facts that contradict our beliefs is to shout ‘blasphemy’.
Everyone is bored to death by Brexit. It’s become a taboo political subject insofar as it is no longer seems fit for proper debate. Keir Starmer is at one with the Conservatives in not wanting to talk about it. To his shame he regards it as closed. Yet this week he launched a policy program designed to get the UK economy growing again, ignoring the heard of elephants stampeding over British business and wannabe holiday makers.
The queues at Dover and Folkestone are but the latest and most obvious manifestation of the consequences of Brexit. Both candidates to be prime minister are absolutely sure the chaos has nothing whatsoever to do with Brexit. So let’s ignore travel and logistics experts who point out the simple logic of imposing passport controls on tourists and checks on freight traffic. It is all, apparently, the fault of the French. And nothing to do with Brexit. Not even a little bit to do with Brexit. The ex-head of UKIP even blamed Theresa May who (checks notes) has not been in charge of anything for a number of years now.
It is tempting to conclude that Brexit has has infected all political debate. To quote Chris Grey again:
How the queues at Dover show the corruption that pervades Brexit
Just as Brexit isn’t to blame for all of the Border chaos, Brexit is just one source of political corruption, democracy’s decay.
The swivel-eyes loons referenced above - a near 10 year old quote - are enraged by all things European and have been a constant toxic presence in Tory circles for decades.
John Major's rage and frustration with rightwing Tories boiled over this weekend [back in1993] when, in an outburst, he called three of his own cabinet members "bastards". The onslaught against the Eurosceptic ministers not named, but almost certainly Michael Howard, Peter Lilley and Michael Portillo came within minutes of the vote of confidence on Friday which kept him in office. [From The Guardian]
Brexit has been a convenient vehicle for ultra rightists. Trotsky would recognise and admire these entryist fellow-travellers who couldn’t care less about Britain and the EU but merely seek to further a fundamentally anti-democratic, authoritarian version of old-fashioned strong-man politics.
Of course, creeping right-wing politics and ever-increasing nuttiness are not exclusive to the UK.
As Paul Krugman says, if you think that Italy’s latest government collapse portends an unusual threat of an ultra right wing administration of a G7 country, you haven’t been paying attention. A general election looms for Italians and most people think that the winner could be a party with direct links to the one founded by Benito Mussolini
…how different is Italy from the rest of us? The Italian crisis has very little to do with fiscal profligacy or general incompetence … it’s all about the rise of antidemocratic forces, which is happening all across the West.
Italy’s political fragmentation — and the apparent inability of the center-left to get its act together despite the clear and present danger from the right — may bring authoritarian parties to power sooner than elsewhere. But maybe not all that much sooner: It’s not at all that hard to see how American democracy could effectively collapse by 2025.
I agree with David Broder: Italy may well represent the West’s future. And it’s bleak.
Krugman references Italy to warn about what is happening right now in America and what is likely to occur when Trump returns as president or when De Santis or Cruz become the new face of Trumpism. The horror that awaits us all is the return of Trump or, more likely in my view, somebody worse. The list of potential candidates is a long one.
How can all this be resolved peacefully? I suspect the answer to that one is complicated in the extreme.
What are the financial and market implications of all of this? I’ve acknowledged that this is hardly the most important question. But markets being markets, asset price behaviour will be the best signifier of where things, more important things, are heading. They are, relatively speaking, quiet at the moment. We can only hope that this will last.
All rather depressing actually. Sadly I fear there is a strong likelihood that nonsense will prevail 😢