Liz Truss in the Libertarian Wilderness

Lee Drutman was mentioned in a New York Times article on Liz Truss and western politics.

Many observers suggested that investors feared that Britain would start to behave like an emerging market, in which governments try to cover budget deficits by printing money; fears of inflation would indeed lead to higher interest rates but a weaker pound. But this was a bit hard to believe: The Bank of England is politically independent, and unlikely to ratify deficit spending.

A subtler argument would be that the bank, while presumably unwilling to bail out government finances, would nonetheless act to bail out private actors, notably pension funds, which were in fact placed in peril by spiking interest rates. Indeed, the bank did intervene to limit what it considered the danger of a sort of death spiral driven by forced fire sales of long-term bonds.

But the British economist Simon Wren-Lewis argues persuasively that financial markets were responding in large part to increased uncertainty, which was in turn largely a reflection of political uncertainty. The Truss economic plan was obviously unsustainable politically, but it wasn’t clear what would come next.

I’m still mulling over that story about the markets, but the political point is clear. Truss staked out a political position that, to a first approximation, has no public support either in Britain or in the United States. So failure was inevitable.

Politics in the modern West tends to be more or less two-dimensional. One dimension is the left-right divide in economic policy, between those who favor high taxes on the rich and large social benefits and those who want low taxes and small government. The other dimension is the divide over social issues, between those who favor policies promoting racial equality and gay rights and those who bitterly oppose anything they consider “woke.”

A 2017 paper by the political scientist Lee Drutman mapped out the distribution of U.S. voters on these axes; it’s unlikely to have changed much since. (And the distribution of British voters seems similar.)