Blain’s Morning Porridge, 3^rd Nov 2023: Punishing Political Mistakes is Good for Markets and the Economy.

“How oft the sight of means to do ill deeds, makes deeds ill done.”

This week’s Covid Inquiry in the UK has been revelatory for what it revealed about political incompetence. That’s a good thing – a timely reminder that politics is about service rather ambition. Better politics = better economies.

Catharsis is a great word. I am increasing positive on the UK. The Governor of the Bank of England may have warned us of higher rates for longer, and a flat-lined economy into 2025, but my spidey senses say get ready to put your buying boots on as the mood starts to improve. After the absolute sh*t-show revealed by the Covid 19 Inquiry this week, you may have doubts about UK politics, but it represents the absolute nadir of the political competency curve. Things can only get better…

I’ve been baffled, confused and surprised by markets for decades. I’ve tried to make sense of interest rates, stock markets, new tech, employment and wages, bond yields, sentiment, hopes and fears, and what drives economic success. I’ve come to the conclusion it’s got a lot to do with the tides that flow through the affairs of men. These matter. The tide is coming back in for the UK… Politics is part of that flow.

This week’s political theatre during the Covid 19 Inquiry has become a wake-up call for the UK. We can laugh at the shocking gallows humour of it – but where else in the world would Leaders face such a public “trial” and have their multiple incompetency’s revealed for all to see? Where else will future politicians see such a vivid example of the cost of failure?

The Covid-19 Inquiry into the UK’s response to and the impact of the pandemic has exposed  a political culture riven, disconnected, and fractured to the core in the wake of Brexit. It is expected to be the most expensive inquiry ever mounted. It has cost over £150mm thus far, and some estimates are it will exceed £400 mm. (Yours…) It will likely carry on till 2026.

The facts, lest you forgot:

• Covid killed 231,333 people in the UK.
• The government spent in excess of £372 billion on pandemic measures to support businesses, individuals, health and social care, emergency services and other costs. The true cost may be significantly higher.
• The damage done to the economy by lockdown and the behaviours it established are immeasurable.
• The damage to society – particularly children – is even higher, and will have consequences for generations. It has changed the structure, resilience and functioning of the economy.
• It is unclear how much was spent on protective PPE kit – but the National Audit Office has written off £15 bln as unfit for purpose. It is being burnt.
• The British Medical Journal say over £4.7 of the total PPE spend was at “grossly inflated prices”.
• The bill for storing unused PPE is said to be over £150mm per annum!
• Over $5bln of contracts were handed out to MP’s contacts via the much-derided and questionable VIP lane.

We are currently going through module 2 of the Inquiry: Core UK decision-making and political governance.

Need I say more?

Well. Yes. These brutal statistics about deaths and costs – would probably not have been much different even if we’d had a really competent government in place. We still would have suffered costs and heartache. And there were positives – eventually we got vaccines and controls in place. But it’s the dither and dishonesty that matters. Nothing any of the guilty men currently answering questions say will ever excuse what a complete and utter OMNISHAMBLES the response within Downing Street was.

“A lot of good people trying to do the right thing” is how David Halpern, head of the govt’s “Nudge” unit (Behavioural Insights Team), described it. I believe that is probably true. There were and still are many good people in Downing Street. But the evidence and consequences of the bad actors is also clear. These created a culture of failure. Doing the right thing isn’t good enough, not when the performances we’ve seen in recent days have exposed them as misogynistic, arrogant, disinterested, unable to lead, and unable to cope. Consign them all to the rubbish-bin of history.

The last few days of political performance art has been…. revelatory. I’m not advocating a hate crime here, but if the law allowed should we be building a platform outside Parliament and deliberately NOT sharpening the axes? (The death penalty for Acts of Treason against the State was finally repealed in 1998. In fact, apparently there was still a working gallows in Wandsworth Prison tested every six months till 1992… Who knew?)

What have we learnt? Not much except who was insulting whom – which is what ministers apparently spent their time doing. Dominic Cummings looks the “winner” thus far – when asked if his continual swearing and damning criticism of MPs, Boris and others during the crisis went too far, he commented: “I would say, if anything, I understated the position.” Ha, **cking ha, Dominic. Chop.

Let’s consider the case of Boris Johnson. Chop. How much longer will our former prime minister reap millions from his speaking engagements, now he is swamped by multiple proofs of incompetence and inadequacy? Boris – whom I voted for in 2019 much to my eternal regret and damnation of my soul – apparently believed Covid was “nature’s way of dealing with old people.” That’s going to define his place in history. He will not go down as the political martyr his legions of supporters believe him to be – but a very inadequate man.

Cometh the time, cometh the man. In 1940 it was Churchill. Boris was no Winston. He will pass dishonoured and that’s a much more powerful warning to future generations of politicians than any other fate. The only excuse is in the rabbit hole of whataboutism: would Corbyn have been better? Fortunately we don’t have to go there.

The Guardian summed it up nicely: “The major takeaways are this country’s systemic inadequacy, and the sheer monumental unsuitability of the specific set of people charged with dealing with the crisis. It’s like putting the Real Housewives in charge of the Manhattan Project.”

The very fact the UK is having this inquiry, laying bare the dirty linen of the state, exposing the bumbling core of political entitlement, and the inadequacy of incompetent men at its heart is perhaps the best thing to emerge yet from Covid. I do hope Labour, Liberals and Young Conservatives are paying attention. It should remind them politics is about service not ambition.

The UK has a proud history of being absolutely useless at beginning of crises. We muddle through, learning from mistakes before we come back stronger, better, resolute, and determined it shall not happen again. It inevitably will, because we have an open, fair and honest democracy which means we oft get a run a bad politicians. (I pity Rishi Sunak, ultimately inheriting the clusterf*ck from Boris. He’s trying hard – but its time for change. (He should probably stick to the day job, rather than failing to interview Elon Musk at the AI summit.))

Through history the English have had some pretty awful kings. One of Shakespeare’s least known plays, King John, deals with a king so bad his name is banned from the Book of Royal Baby Names. Boris and King John are kindred spirits. Yet, the play contains the best lines to describe the resolute heart of this Island – no matter how badly we *u** up:

• Come the three corners of the world in arms,
• And we shall shock them.
• Nought shall make us rue, if England to itself do rest but true.

And we shall shock them. I hope that is the lesson the Covid Inquiry will remind us of. It’s a lesson our cousins across the Altlantic Pond may care to consider as Donald J Trump blags, blusters, bullies and threatens vengeance in his attempt to avoid responsibility for his actions in the courts. The nation of Israel should be asking similar questions about how the vaunting ambition of Bibi led them to today’s unresolvable impasse.

The West succeeds because leadership failure is punished at the ballot box and the courts of public opinion. If our political structures are compromised and hi-jacked by populism or extremism, we will fail for the same reasons all dictatorships fall – incompetence, corruption, stultification and an inability to deal with reality. Our economies will fall.

Punishing political failure is a vital component of any healthy economy.

Five Things To Read This Weekend

FT                   “Bibi’s finished”: Benjamin Netanyahu loses core support after Hamas assault on Israel

WSJ                Trump Disqualification Challenges Face Tests in Two States

FT                   BlackRock says investors set to face 5.5% long-term borrowing costs

Businessweek Brace for Elections: 40 countries are Voting in 2024

BBerg              Apple Warns of Sluggish Holiday Quarter After China Slowdown

Out of time, have a great weekend..

Bill Blain

Market Strategist – Author of the Morning Porridge