How political power works: what we can learn from the fall of Truss

The short-lived tenure of Prime Minister Liz Truss is a case study of how political power works in the United Kingdom. By any institutional measure, Truss was in a strong position: her party had an unassailable majority in the House of Commons, she could wield the power of the Prime Minister over the civil service and the power of considerable patronage was hers. She also had the option of the Prime Ministerial megaphone: everything she could have said would be newsworthy and reach every home in the country. All she had to do was play the cards she had been dealt tolerably well and she would have been set for a minimum of three years in office.

As she misplayed that hand, though, it became clear how the might of political office is constrained by a series of golden chains, each interlocking and pulling together to ensure that political power (backed, ultimately, by the military force of the state) does not threaten the dominance of the section of society that owns its productive wealth. These same chains ensure that no one individual or faction gets to turn the state into its private property.

The Establishment

To be clear: there is no secret cabal of capitalists directing the state – different groups and factions of wealthy individuals and institutions compete to try and bend political power to serve their interest. Which means, incidentally, that the space is open for the working class, organised consciously and politically, to wrest control of that same machinery and convert it to our own ends.

Truss came to power after an election among Conservative Party members. Thousands of ideologically motivated people joined the political party to advance the cause they believe in. She won because she promised them the policies they wanted – most importantly, lower taxes. In this case, the wishes of the lay membership did matter, and their expressed preference was conveyed by Truss into government policy. She could, indeed, have reneged on that promise, but activists matter because they operate the machinery of competing for elections on the ground: they can only be disregarded so far before it starts to have an effect on the electoral chances of a party.

Truss was, herself, a relative outsider within the networks of UK power. She was a former Liberal Democrat activist, who went to a Leeds comprehensive school. She did, however, go to Oxford, and gained the advantage of the network building opportunities there. By contrast, her Chancellor, Kwasi Kwarteng, was educated at Eton, just like two of the last three Prime Ministers before Truss. The small number of elite schools providing for the upper class in the UK helps build the personal and social bonds and networks that lead to common understanding and a form of trust between them. Truss herself supplemented these general networks by specific links to the Tufton Street set of libertarian lobby groups whose ideas she put into place.

The wider electorate

Politicians, however, also need the votes of the wider electorate: and so, rather than cut government spending to allow tax cuts, with all the economic and social pain that entails, Truss and her Chancellor Kwasi Kwarteng chose to cut taxes and borrow to maintain government spending. They argued the tax cuts would incentivise economic growth (and thus allow the spending levels to be maintained medium term, even as the tax take falls as a share of the national effort). This argument wasn’t entirely without merit, and could, in theory, pay off.

Cutting taxes would raise savings and mean there would be more money in the system available to invest in growth. Likewise, cutting taxes might make what had previously been unprofitable business models work (for their owners, at least), and so spur economic activity. The downside is that by borrowing, the government would still be soaking up a lot of the investable wealth (probably pushing up interest rates across the board), and the rate of profit for businesses might remain so low as to continue deterring growth and investment. Truss and Kwarteng might have been able to sell such a plan, given time, but their proposals were put forward as a response to a weak position in UK government finances, and so it looked more like a panic response, rather than a considered and carefully prepared plan.

Market forces

This in turn brought the great machine of class rule into play: market forces. Investors and speculators responded by moving their money away from the UK: fewer people wanted to do business or hold assets denominated in pounds, and so Sterling fell against the Dollar. This, in turn, led to the Bank of England putting up its interest rates to try and attract them back, and to restore (or at least defend) the value of the pound. Had the Bank failed to act, it would have meant significant increases in the cost of imported goods (and the UK economy depends on imports very much). Although UK exports would have become more competitive, that would not necessarily happen fast enough to offset the immediate pain and cost of living changes people would have experienced.

Again, there was no meeting of capitalists to decide this although undoubtedly, the common ideology, background and prejudices of fund managers may have played a part. They would have met and discussed this in the course of their daily activity; but, fundamentally, they would be acting in the interests of themselves, their funds and their clients by responding to the British government’s policy in this way. By forcing up interest rates, with the government planning to borrow more, this was a devastating blow. The national debt, and the requirement for governments to behave in a manner which will satisfy lenders, is a key means of ensuring the general financial probity of the state.

Another related – and nearly disastrous –consequence of this was that the Bank of England was also forced to intervene to protect the UK pension fund markets. Pension funds have to hedge against a potential fall in their incomes, since they must guarantee pensions to their beneficiaries. The rapid rise in interest rates led to a nominal fall in the value of the bonds they were holding as security (so called Liability Driven Investments, LDIs). So they had to start selling off assets in order to pay the collateral on their hedges, since there was immediate demand for funds. As this happened to many valuable funds at once, this led to systemic risk to the whole pension industry: in turn, the Bank of England had to spend £65 billion in order to shore up the system and prevent collapse.

This was a devastating reputational blow to Britain’s financial system, and also to the Prime Minister, since her policy had endangered the pension provision of much of her core electorate.

The Members of Parliament

This brought into play Conservative MPs. Prime Ministers, although nominally appointed by the monarch, in reality serve at the confidence of their party in the House of Commons. Truss did not have the support of the majority of Tory MPs in the first place, leading some liberal commentators to opine that allowing party members to elect the Prime Minister is an affront to democracy and the Tories should go back to a leader simply ‘emerging’ from within their ranks, or having MPs only voting in a ballot. Keeping the pool of electors small promotes stability and predictability, and benefits the ruling class, but the demand for party members to be involved has drawn that power away, and it looks unlikely that it will be done away with completely – if and when possible, instead we’ll probably get ‘managed’ coronations, like that of Sunak or Brown before him.

Added to this weakness, in Truss’s case, was that the Tory MPs feared that their seats were now at risk en masse, and that Truss was a threat rather than an asset to their political careers. This is a feeling that would have been reinforced financially as various Tory donors made their displeasure felt. In the UK, the party that wins elections is usually the party that spends the most money. This isn’t necessarily a direct result of spending, because the party that looks like winning attracts the most donors and so has more money to spend in any case, but it is clear that funding of political parties is another means by which the wealthy section of society can exert influence over the political direction of the government.

In this case, they were helped by changes in the positions of the opposition party – the fact that Labour was now, again, a safe party for business people to invest in, means it could be used as a threat to the careers and aspirations of Conservative politicians. After all, it doesn’t matter what party is in power, for the truly wealthy, as long as their policies are at least congenial. During the Corbyn years, they could not be sure of the Labour Party, and this helped solidify elite support for the Tories, whatever their other misgivings about them. Now Starmer is in place, and Labour is ‘Pro-worker, pro-business’, they can be used to discipline the Tories. Some large Tory donors even came out of the woodwork to support higher taxes, as necessary to stabilise the economy, ie looking at their long-term interest, rather than the short-term rewards of tax cuts.

The mass media

Finally, the mass media, particularly the newspapers, played a big role, both before and after the rise and fall of Truss. The Daily Mail played a significant part in getting her elected in the first place, emphasising that she was the front runner (and exaggerating her support in the wider party, compared to the actual rather close race between her and Sunak). The Times and The Sun, the Murdoch papers, were typically more sceptical, and intensified their periodic attacks when she was elected. The focus of the press on the failure of her budget exacerbated the crisis, and clearly indicated that they would turn their considerable fire power against the Tories at any coming election while Truss was in charge.

Most people rely on the mass media for their information on how to place their votes. It is indicative that Boris Johnson, who just one year ago seemed utterly invincible, vanished in a puff of smoke the second the press began to focus like a laser on his behaviours. The press is certainly not all powerful, but it typically generates the headwinds which can push up and pull down political careers.

Elections and voting are thus, contrary to the anarchist saying that ‘if voting changed anything, they’d get rid of it’, key to political success or failure, and they involve considerable management to win the ongoing support of the majority of the public for government policies.

To take a counter-factual: if Truss had just won an election, her MPs would probably have stood by her longer. If she had a more connected background, she might have been able to ask informal favours of people in other institutions, or had more trust from important market agents. She would have been able to face down the press more convincingly and might even have been able to stand up to the market pressure (blaming spivs and speculators for the short-term harm) and stabilise the situation. If there had been an election’s worth of debate and policy documents talking up the planned budget, the markets may even have reacted differently. But she had none of that – she had a party divided, a press divided, and a risky, short-term emergency response to the situation with the public finances.

What is clear is that although the power of the state is very great indeed, in practice it cannot challenge the overall balance of class power, international market forces and the inbuilt advantages that accrue to the owners of capital. No secret cabal, no grand conspiracy: but the collective capitalist class lost confidence in their chief executive, and so as a result she was removed by the management board.


Next article: A world without money ⮞

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