Liz Truss Is Exacerbating Britain’s Deep Economic Woes
The British economy is in shambles. Yet new UK prime minister Liz Truss is making things far worse with a disastrous economic policy that does nothing for ordinary workers.
British prime minister Liz Truss makes a press statement after a meeting of the European Political Community in Prague, Czech Republic, on Oct 6, 2022. (AP Photo / Alastair Grant via Getty Images)
A few years ago, I wrote a report for the Institute for Public Policy Research (IPPR) about how capital flows into the UK housing and finance sectors had pushed up the value of the currency, with damaging effects for our exporters.
This phenomenon — a boom in one sector leading to a decline in another — is known as “Dutch disease.” Its name is in reference to the Dutch experience after the discovery of natural gas in the 1970s.
The booming sector absorbs workers and pushes up growth and prices, leading to higher interest rates, which in turn increases the value of the currency. These dynamics encourage consumers to purchase more imports, and they also make exports seem less competitive to international buyers, reducing export earnings in the non-booming sectors.
This article is for subscribers only. Please login or subscribe to access our full archives and beautiful print and digital magazine starting at just $3 a month.