Ring exchanges are on the rise in Great Britain lately. Though this isn’t with the warm embrace of marriage vows. On the contrary, it’s slipping through the cold fingers of anxious citizens into the hands of willing pawn brokers. The cost of unanticipated energy price hikes, not to mention 10% inflation on food products, are only the tip of the iceberg for Britain’s financial woes with the onset of winter.
If that alone did not give a sense of an impending crisis, community centers are creating “warm spaces” where residents can turn for refuge from the intemperate elements, as well as debt counseling and food.
While the U.K.’s deep recession — which may touch bottom even farther below what is projected — will likely not affect the U.S. economy, there are a few lessons that can be drawn from the recent woes of Utah’s top trade partner. These include continued trade diversification, an emphasis on growth and commonsense transitions to clean energy.
First, continued trade diversification. Brexit happened at the most inopportune moment. There’s no going back and engaging in historical counterfactuals. Great Britain voted to leave the European Union in 2016, a transition that was inelegantly dragged out over four years, resulting in a clean decoupling from a continental trade relationship going back to 1973, and, as is increasingly seen in retrospect, the many perks of interdependence in the world’s largest democratically based, highly developed trade zone.
Since that time, projections of economic contraction have become stark realities. The U.K. economy is the only one among G7 economies to not exceed pre-COVID-19 growth levels. In terms of projects, it will grow slower than all other nations in the G20, except one. Russia.
Foreign direct investment in the U.K. has dropped, much of that redirected to continental countries where easy trade links facilitate efficient delivery of goods and services, a process frustrated now in the United Kingdom by the need for individual businesses to navigate the varied customs practices of over 25 nations on the continent.
Finally, British banking has lost its top spot in Europe. Displaced for the moment by Paris, the mantle of banking preeminence might ultimately pass to Frankfurt. This is a stunning development given the heights to which British banking and finance rose prior to the Great Recession. According to Adam Tooze in his book, “Crashed: How a Decade of Financial Crisis Changed the World,” deregulatory measures in the U.K. put London and New York on par in a contest for global financial predominance.
It’s heartening to see that Utah’s recently reelected Sen. Mike Lee has been at the forefront of championing a trade pact between the United States and Great Britain. Common sense suggests that this might have been done much earlier, were there not significant barriers. If this makes greater sense at this time, it might provide an additional outlet for British goods (not to mention Utah technologies and commodities) at a crucial moment.
Second, the U.K.’s recent travails point out the importance of continued growth. Last month, new Prime Minister Rishi Sunak and his chancellor for finance, Jeremy Hunt, unveiled the “Autumn Statement,” which included a mix of tax increases and cuts to existing programs.
What is lost in the unfortunate events of the last three months, what with three prime ministers changing offices, is the fact that former Prime Minister Liz Truss was right on one account. Economies do not emerge from recessions without sustained economic growth. This was lost in the reckless effort to pay for energy cost increases, not to mention tax cuts, with borrowed money, but the principle still stands: growth is the cure for what ails recessionary and inflation plagued economies.
Fortunately, Utah’s business and political leadership understand this and have achieved impressive gains during an unprecedented three years of turbulence. The state would do well to find a balance between continued incentives for innovation and addressing the needs of the state’s most vulnerable populations.
Finally, Britain faces unenviable energy decisions this winter. Unlike its continental counterparts Germany, France, Spain and Italy, U.K. prime ministers did little over the preceding months to encourage energy savings. Johnson and Truss tried to reassure the public that the nation had stocked away adequate supply to weather the upcoming winter.
We can call this optimism a fatal case of Borisology or Trussology, but the fact is that the U.K. transitioned too quickly to a dependence on inadequate supplies of wind and solar power to fuel the nation’s baseload electricity requirements. Furthermore, cutting links with the continent reduced potential suppliers in the case of shortfalls.
Clean energy is a priority. All we need to do is look south from I-15 now across Utah County, not to mention north, coming around the point of the mountain for proof.
However, Utah GOP Rep. John Curtis, chairman of the Conservative Climate Caucus, has wisely pointed to the merits of creating a humane energy off-ramp as we transition to clean energy rather than driving the country off of a climate cliff, so to speak.
Our thoughts and prayers should be with our British counterparts this winter. The “special relationship” that our nations, not to mention Utah, share with each other extends also to what we might learn from their difficulties.
Evan Ward is associate professor of history at Brigham Young University, where he teaches courses on world history.