Truss debacle: markets turned whistleblowers

Truss debacle: markets turned whistleblowers

November 3, 2022 0 By Michel Santi

“We meant to change a nation, and instead, we changed a world” was an emblematic declaration by Ronald Reagan who shared throughout his Presidency with Margaret Thatcher fundamentally individualistic obsessions where the State represented the absolute threat against freedom and against property. And, in fact, their advent – of Margaret Thatcher in Great Britain and Ronald Reagan in the United States – provided these champions of ultra-liberalism with the perfect opportunity to concretize their method, which was carried out with beating drums with joy and attendance. Right off the bat, Reagan’s blunt declaration on January 20, 1981 at his inauguration ceremony – “Government is not the solution to our problem, government is the problem” – was to herald the methodical dismantling of the long, benevolent New Deal process that prefigured post-war Western European social democracy. From then on, economic conservatism and social regression reigned supreme.


How can we forget the devastating effect of the Reagan years, which was the initiator of a policy that reduced in the short, medium and long term the share of industry in national income (from 21.5% in 1980 to 12% in 2005) to obviously increase that of financial services (from 15% in 1980 to 23% in 2005)? It was obvious indeed that this abdication by the State of its prerogatives would be mechanically filled by the hyperbolic development of this octopus that is the financial sector which, from then on, was supposed to render all the services to the economy. Financial markets existed of course before the mid-1970s, but they only really took off when a miraculous virtue was attributed to them, that of generating immense profits, provided (but that was self-evident) that the risk-taking is trivialized and that regulation is necessarily symbolic.


Financial markets, did I say? No: omnipotent and omniscient judges who would restore order to the accounts of businesses and households by impressing all parts of the economy with their benevolent efficiency. “I consider that the efficient markets hypothesis is a simple statement that says that the prices of securities and assets reflect all known information,” said the economist Eugene Fama most seriously at the time. The followers of these “ideal” financial markets were convinced that prices were the result of a rational balance, that any superfluous consideration, any state of mind, had to give way before the markets which indicated THE price to the whole actors. Everything had a price.


But here it is: this neoliberalism cultivated to the excess by Thatcher, by Reagan, by Friedman and by their followers has fortunately passed away under the battering … of these same markets and their recurring crises. It is in this light that we must understand the shipwreck in Great Britain of Liz Truss, disavowed first and foremost by the market for having wanted to resuscitate Thatcherite ignominy, which has now become archaic even in the eyes of big capitalism. Indeed, having become dependent on the State, on their interventions, on their repeated infusions, markets have placed themselves under the protection of the Government, abandoning without scruple the dogma of freedom that they have claimed with arrogance and recklessness for decades. As Truss warned loud and clear that the State would not offer any protection under her mandate, she was almost immediately liquidated by markets suddenly transformed into whistleblowers, thus joining the citizens in issuing a joint request that no politician can ignore anymore.


This paradigm shift discovered at the expense of Liz Truss – supreme irony in a Great Britain considered until recently as the nerve center of neoliberalism – can be simply formulated: like the people, markets want to be governed, guided, protected. The State, today, is therefore expected to act on multiple fronts: Everywhere in the West right wing parties, traditionally hyper liberal, are summoned to distance themselves from the icy individualism once advocated by Thatcher and Reagan. A loud and clear call is launched by the business community, by the markets, by finance in general, all traditionally committed to the right wing: they all request a new impetus, why not some kind of paternalism ? Certainly an irrepressible demand that the State takes the lead in fighting against multiple insecurities: economic, military and of course climatic.

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