Following Liz Truss’s 45 day stint in office—the shortest in history—the United Kingdom now has its third prime minister in nine weeks. Rishi Sunak has inherited a country that has been in economic decline for years, a phenomenon that was only worsened by Truss’ mini-budget, which proposed tax cuts and heightened government borrowing and sent the pound into a freefall. With the announcement of her resignation on October 26, the pound has begun to climb once more, but Britain’s economic woes are far from over.
Many of those issues stem from the United Kingdom’s controversial decision to leave the European Union in 2016. More specifically, the attitudes that led to Brexit are the same attitudes that have made the U.K. “pretty poor for a rich place”, with lower living standards and wages than the rest of Western Europe. The rejection of globalization embodied by the decision to leave the European Union, coupled with years of falling productivity and a low level of industrialization have combined to result in the economy we see today. Put simply, the United Kingdom chose a “closed and poorer economy” when they could have embraced a more open one.
When Liz Truss came into office, she did little to tackle the problems plaguing her country, primarily the high levels of inflation and the diminishing living standards. Those same issues are currently being dealt with across Europe, with a 10.9% inflation rate being exacerbated by continued economic support for Ukraine in the war against Russia. A lesson can be learned from Truss’ time in office, as short-lived as it was: if leadership fails to address the living standards and inflation rates, they welcome a political meltdown.
Only time will tell whether Sunak has internalized this warning. He has promised to “place economic stability and confidence at the heart of this government’s agenda” and is generally expected to revert to more mainstream tactics in favor of replicating Truss’ trickle-down approach. All eyes will be on the United Kingdom in the coming weeks as everyone waits to see whether they can pull themselves out of an economic tailspin, with their European neighbors watching closely to see which steps falter and which ones breed replicable success.