It’s Looking a Lot like 1979 in the UK… or Is It?

I am not the first to note that Queen Elizabeth II’s death on September 8th, 2022 heralds the end of an era. For many, her presence was the one constant during these past seventy years of change, and her death has come at the tail end of a summer representing a fork in the road for Britain. Public uncertainty surrounding the fate of the monarchy has also become representative of the general sense of unease that the United Kingdom has dealt with over the past year. In the few months since Boris Johnson stepped down, inflation has skyrocketed, energy bills have nearly doubled, the pound sterling has slumped nearly to parity with the dollar, strikes have continued to intensify, the airlines have continued to face challenges, and public satisfaction with the much-lauded National Health System (NHS) is at an all-time low. As such, it comes to nobody’s surprise that the very real fears of a recession have dominated the headlines. All of this comes at the heels of a fraught few years of former PM Boris Johnson’s repeated scandals, echoes of the coronavirus pandemic, and the continued economic fallout of Brexit.

To anyone who gives even a cursory look to 20th century British history, it is hard to stave off comparisons to the political and economic situation that gripped the UK in the mid to late 1970s, which was also characterized by internal turmoil. During the unprecedented freezing winter of 1978-1979, the so-called Winter of Discontent took hold, during which the country realized the status quo was no longer tenable. Over forty years later, the country seems poised at an eerily similar turning point. While the winter of 1979 heralded Margaret Thatcher’s rise to power, the 2022 so-called “Summer of Discontent” has left the country with new Prime Minister Liz Truss. Ms. Truss has famously attempted to fashion herself as a second Thatcher, and while there are similarities between the two, there are 40 years between them and the contexts in which they are operating. While there isn’t a single solution to fix national sentiment, Britain must understand that Truss is no Thatcher and that the new government must take immediate strides for structural reform, or face a series of dark, recessionary years in the foreseeable future.

For context, in the two decades following the Second World War, Britain experienced an economic "Golden Age”, during which the country experienced its fastest ever economic growth, 2% unemployment, the construction of national motorways, increased productivity, housing construction, the establishment of a strong welfare state, and overall raised standards of living. The prosperity reached such a degree that in 1959, Queen Magazine–now Harper’s Bazaar–declared that “Britain has launched into an age of unparalleled lavish living,” where average wage was high and unemployment low. Keynesian economic thinking came to dominate the post- war economic consensus, and Britain enjoyed nearly twenty years of economic success. All of this came to a screeching halt in the mid 1970’s.

Even though the UK finally entered the European Economic Community in 1972, throughout the decade, Britain experienced mass strikes by coal miners and rail workers, the effects of the 1973 oil crisis, and widespread blackouts due to lack of available electricity. Unemployment rose once again, exceeding 5%, and inflation peaked at a staggering 25%. In 1976, the Labour Government was forced to borrow $3.9 billion from the International Monetary Fund (IMF) to prop up the value of the pound sterling, which had severely dropped in value in relation to the dollar. All of which culminated in the aforementioned Winter of Discontent, where nearly every industrial union went on strike. This included everyone from gravediggers to waste collectors, NHS employees, and truck drivers. They demanded pay raises greater than the limits the Labour government was willing to give, as the government was desperate to tamp down inflation. The strikes caused massive public unrest and inconvenience amid unprecedented freezing temperatures. Unsurprisingly, the Labour government fell in 1979 and Margaret Thatcher was elected as Prime Minister.

Thatcher is perhaps the most controversial figure in modern British politics, equally reviled and beloved. Her government marked a new era in economic policy, adopting what is recognizable to Americans as traditional conservative policies. This included deregulation, privatization, an emphasis on the free market, an overhaul of relations with labor unions, and massive tax cuts. The government adopted stringent economic and fiscal policies to reduce inflation and stuck to them. And to Thatcher’s credit, they were overwhelmingly successful, as inflation was tamped down from 20% in 1980 to around 4% in 1987.

British conservatives are famously known for flip-flopping on issues and are not known for their ideological consistency. Most cynically put, the Conservative manifesto is to adopt policies that will help them stay in power and remain popular with voters. But Margaret Thatcher was famous for sticking to her policies. While there is no doubt as to the widespread suffering Thatcher’s policies caused through cuts to welfare and reduced government spending, she took the country off the brink of economic collapse. 

Returning to the present, it is easy to see where the parallels lie, and on the surface, the current economic situation does not look so different. Liz Truss, another young, female star of the party, from a state-school background, has quickly risen through the ranks to become Prime Minister. Truss has leaned wholeheartedly, and sometimes ridiculously, into this comparison, positioning herself as the second coming of Thatcher. A much-lampooned photo-op saw her in Moscow wearing a nearly identical outfit to Thatcher, and she is even known for wearing the same kind of blouse for which the Iron Lady was famous. However, there are some more meaningful parallels, perhaps best encapsulated by her Reagan-esque belief that cutting taxes will somehow spur productivity growth.

However, this is not 1979, Truss is no Thatcher, and ultimately, her policies make little coherent sense. The ongoing war in Ukraine has defined the current energy crisis, and it was recently announced that the UK was going to face a staggering 80% increase in household energy prices due to limited supply. One of Truss’s first announcements as PM was to cap the per unit cost of energy that providers can charge. This was too popular not to pursue, as the public was nearly united in a push for the government to do something about it. However, this seems to be more of a band aid on a bullet wound, as the government cannot credibly control inflation for the long term by placing a price cap on a good. 

The panic surrounding the Nord Stream 2 Pipeline sabotage is representative of this crisis and how a continued reliance on energy sources from Russia will continue to plague the UK. While Thatcher was saved by the discovery of North Sea oil, a miraculous new discovery of oil and gas resource in British waters seems unlikely. If the war drags on, which it seems likely to do, the scarcity of natural gas available to the UK will persist and prices will continue to rise, ultimately placing more pressure on the government to cover the difference, increasing the deficit––which could ultimately cause inflationary effects. Whether it be a serious investment in renewable energy sources or a shift back towards nuclear, Britain must shift away from this continued reliance on natural gas and oil, especially from foreign sources.  

Despite the inflationary effects that seem bound to occur, Truss seems determined to cut taxes, even as the government remains adamant that they will cover the shortfall between what consumers pay for energy and the market rate. The plan to avoid a fresh windfall tax on energy producers would mean pushing costs on to taxpayers, with as little as 1 pound in every 12 spent on energy support for households recouped from higher taxes on energy firms. Even Thatcher made the unpopular decision to raise taxes in 1981 to manage the deficit and inflation.

While currently Truss appears to hold steadfast in her views to not raise taxes and remain tough on labor unions, for many, she embodies the flip-flopping for which the conservatives are so well-known. For a historical example, she backed the Remain campaign during the 2016 election, but as the tide began turning, and looked as if they were going to lose, she quite suddenly changed her tune and became one of Boris Johnson’s most ardent supporters. While she has timidly announced increased government spending in the form of energy cost caps, she also remains determined to cut taxes, and reduce inflation. But this mixture is far from the Thatcherite policies that worked, and by pursuing what is popular, she remains sailing with the prevailing wind.

While Truss attempts to pursue Thatcherism 2.0, her government must face that they are operating in a completely different time and context. Thatcher was successful in dismantling the postwar economic consensus that was centered around Keynesian thought and instituting neoliberal economic policies, but Truss is operating in a country that is already neoliberalized and thus must face the fact that state intervention is necessary. The war in Ukraine is certain to drag on, and energy prices will continue to rise, especially during the coming winter when demand goes up as well. The leadership also must accept the reality that if they don’t stop the flood of discontent surrounding the party, they are in danger of losing the next general election in two years, as it was under their watch, not Labour’s, that the country has entered its current predicament. And the leader to get the economy back on track does not need to be from the Conservative party.

For millions, Queen Elizabeth II represented stability, reliability, and greatness. Now, without her constancy, the future state of the United Kingdom has been thrown into sharp relief. National sentiment is polling at an all-time low, and it's hard to find anyone in Britain who is optimistic for the future. The Conservative party must adopt hard and fast policies that take aim at the ailments of our time or risk losing the next election. But whether it occurs under Labour or the Tories, a serious change to the status quo is in order.

A special thank you to Daniel Dorey Rodriguez, who contributed much needed economic policy facts and lived experience for this piece!   

The AUKUS Deal, China, and Nuclear Non-proliferation

The AUKUS deal is a security partnership involving Australia, the United Kingdom, and the United States. It was announced in September, and its first project will be to provide Australia with a nuclear-powered submarine fleet. Although diesel-fueled submarines are useful, nuclear submarines can “remain submerged almost indefinitely” without a snorkel, and many suspect that one of the main purposes of this partnership is to offset the power of the Indo-Pacific region. However, while trying to get the upper hand, Australia would “have to become the first non-nuclear-weapon state to exercise a loophole that allows it to remove nuclear material from the inspection system of the International Atomic Energy Agency (IAEA).” China’s perspective is that this will negatively interfere with the arms race, and other influential people involved in non-proliferation efforts worldwide have denounced the agreement. However, 60 percent of US residents do support the AUKUS deal due to national security, and the deed is done. The pact has been made, and Australia’s previous partnership with France for diesel-fueled submarines has ended. The only remaining steps are to prepare for the implications of actually delivering the fleet and be mindful about how other agreements may be compromised by this action.

Interests in the Indo-Pacific Region and Conflict with China

The European Union has strategized over the Indo-Pacific region for a long time. After the United Kingdom left the European Union, however, the U.K. reportedly did not consult with the EU about the AUKUS deal, and foreign policy has become alarmingly less unified. At the same time, it is obvious that the EU would oppose it with the U.K. having left because the agreement caused Australia to cancel a $40 billion submarine deal with France—the country that actually initiated European engagement in the Indo-Pacific. Regardless of opinion on the efficacy of the deal, however, this development also shows the increasing lack of coordination among the European Union, the United States, and allies. Gone are the days of a united front, despite there being an overall goal of non-proliferation.

Meanwhile, it has been four years since Australia’s then-prime minister Malcolm Turnbull declared they would “stand up” to China, the country that actually remains to this day their biggest trading partner. The relationship between China and Australia has also worsened since then, particularly due to the fact that the latter called for a global inquiry surrounding the initial outbreak of COVID-19 and China’s handling of the situation. While their trade relationship is still well, China has responded to Australia’s declarations with bans and restrictions on its goods. In the context of these tense relations, it only makes sense for Australia to be bracing itself in regard to China. 

In reviewing this analysis, it makes sense that the components of the AUKUS deal would be a priority for all parties. Yet, China has argued that those involved in the AUKUS agreement have a “Cold War mentality.” While the White House has disputed the idea that the AUKUS deal has anything to do with the Indo-Pacific region, China’s claims are not entirely unfounded, and there is no denying the substantial difficulties between countries—particularly in the aftermath of the Trump administration. Additionally, many have noted that specifically in regard to China, deterrence has worked relatively well with nuclear activity, and hanging onto mediocre agreements could be the best move as of current.

A Double Standard in United States Nuclear Foreign Policy

To zoom in on the United States, the country has a clear double standard in terms of nuclear technology and foreign policy. For a quick reality check, the U.S. has more nuclear-powered ballistic missile submarines than China, and in terms of submarines as a whole, the United States has 68 while China has 12. In fact, the total number of submarines belonging to the United States is more than that of China, Russia, the United Kingdom, France, and India combined. To top it off, in terms of use, “the United States and Russia each have deployed five times more nuclear warheads than Beijing possesses”—and it is known that the threat of China is one of the main reasons for this deal. Although power cannot be boiled down to submarines or even military resources in general, the importance of focusing on gaining an upper hand with nuclear technology versus focusing on non-proliferation is debatable, particularly in the following context. While boasting a strong fleet of nuclear-powered submarines, the United States has emphasized non-proliferation efforts yet also come into conflict with countries not considered to be allies over their refusal to cooperate with the United States’ wishes. 

Critics have been pointing out Washington’s hypocrisy over nuclear weapons for years. In 2013, Secretary of State John Kerry visited Seoul and said that “North Korea will not be accepted as a nuclear power.” President Barack Obama said the same year that Iran possessing a nuclear weapon at all is “a red line for us.” At the same time, the Obama administration was planning “to spend billions on upgrading nuclear bombs stored in Europe to make the weapons more reliable and accurate.” The United States has also tried to impose a number of sanctions on other countries for nuclear weapons over the years while it expands its own powers. Additionally, the Iran nuclear deal, or the Joint Comprehensive Plan of Action (JCPOA), was made official in 2015, but in 2018, President Donald Trump left the deal, furthering United States hypocrisy surrounding nuclear weapons. 

However, it is important to note that while looking at current statistics about the U.S. military versus the militaries of other world powers, projections for the future are concerning. Reportedly, the nuclear arsenal of China could triple by the year 2030, meaning 1,000 nuclear warheads would be in its possession. Beyond that, the Pentagon is troubled by the prospect of new technology, specifically how nuclear strategists in China are approaching “nontraditional arms,” and the launch of a hypersonic missile in July showed a design that was meant to “evade the United States’ primary missile interceptors, which can operate only in outer space.” While there is a clear double standard in terms of United States nuclear foreign policy, that does not mean that the U.S. should ignore or underestimate the chance of greater threats to come.

Overall Implications of the AUKUS Deal

The AUKUS deal is arguably counterintuitive to rhetoric flowing from the United States about non-proliferation. While the U.S. has sanctioned other countries, particularly ones in the Middle East, for working with nuclear materials, this new agreement will actively help close allies gain nuclear technology. Other countries may perceive the U.S. as hypocritical when observing through that lens. Additionally, although maintaining a strong military is critical in the context of current concerns, including China, a glimpse at U.S. resources indicates that pursuing more may be excessive. Moreover, focusing on the military when it comes to China may actually threaten the security of the United States. Defense analyst William Hartung who focuses on the economics of Pentagon spending argued, “Focusing on China is a good way to pump up the Pentagon’s already bloated budget—which is currently higher than the peaks of the Korean or Vietnam wars or the Reagan buildup of the 1980s—but it will not make us safer.” Consistently bolstering the resources of the United States military is not the way to deal with the flawed U.S.-China relationship. Putting such an emphasis on war can fuel the flames of a conflict.

Furthermore, the whole idea of the AUKUS agreement is debatable, but the most imminent worrisome situation is how the new Australian fleet will set a precedent. If Australia does end up with the nuclear fleet, it will end up becoming the first country without nuclear weapons to utilize a loophole allowing for them to take nuclear material from the International Atomic Energy Agency’s inspection system. As stated by James Acton from the Carnegie Endowment for International Peace, “In the future, would-be proliferators could use naval reactor programs as cover for the development of nuclear weapons—with the reasonable expectation that, because of the Australia precedent, they would not face intolerable costs for doing so.” Since a major part of nuclear non-proliferation efforts is about enforcement decisions, as in, many policies currently in place are subjective to an extent, this sets a dangerous example for the future. 

Moving Forward With Strategic Stability Talks

While the AUKUS agreement is a questionable move, it is important to acknowledge that President Joe Biden has recently indicated after the virtual summit that the White House would like to hold “strategic stability talks,” and China’s President Xi Jinping expressed a willingness to participate in these talks. Concededly, the relationship between countries may not be strong enough to profit from formal negotiations, but alternative options have been explored; for example, the meeting of nongovernmental experts from each country has been put on the table. Although the particular method of discussion has not yet been clarified, the recent summit has opened the door to security measures that do not fully revolve around the military. The AUKUS deal may have thrown a wrench in non-proliferation progress by setting a dangerous precedent for nuclear possession, but the heightened tensions exacerbated by the agreement have been met with a response of cooperation.