Expert Explains: UK financial crisis and global economic outlook | Explained News,The Indian Express
Udit Misra speaks to Adam Tooze, Professor of History, University of Columbia, on the mayhem in UK economy and more.
Udit Misra speaks to Adam Tooze, Professor of History, University of Columbia, on the market mayhem and more.
First of all, if you could tell us what exactly has led to the current financial crisis in the UK? The mini budget was presented and all of a sudden, UK’s currency, bond yields, everything went in a tizzy.
I think the backdrop is deeper. It goes back to the Brexit decision in 2016. So there was a referendum in which a narrow majority of the population led by the right wing of the Tory party opted to exit the EU. And this was a decision taken in the face of every single serious economic opinion in the world, the IMF, the European leaders, the vast majority of economists in Britain, bankers, the American president — everyone.
And in a sense ever since that moment, we’ve been waiting for the shoe to drop. We’ve been waiting for markets to punish an irresponsible, nationalist, sort of a wilful (government). It’s not fair to say that they are populist. The current crop of Tories are not populist in the simple sense of the word. They’re actually pro-business in their own minds. They believe they’re on a crusade to rid Britain of regulation and lower taxes so as to increase incentives, but they are disregarding market sensibility. And what the markets are worried about is the fact that they have in very short succession passed a gigantic energy price stabilisation bill.
So the other immediate factor operating here is that Europe as a result of Russia’s war on Ukraine and tensions in global gas markets worldwide, which were already manifest in 2021, is suffering an epic energy crisis. At times, gas prices have been the equivalent of a thousand dollars a barrel of oil.
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