Britain is Sleepwalking into Societal Collapse
The sacking of the Chancellor is a symptom of the escalating incoherence of Liz Truss’ Government – not a sign that it is changing course to become more coherent, writes Nafeez Ahmed
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I have spent two decades studying the dynamics of social crisis and societal collapse. It’s now clear to me that Prime Minister Liz Truss is leading Britain into a convergence of crises that is likely to culminate in an unprecedented social and economic collapse that cascades across the government, economy, housing markets, energy, health, the judiciary and beyond.
Worse, these crises risk triggering a global financial crisis bigger in scale than the 2008 crash – one that, like that crash, could have potentially irreversible impacts on global civilisation.
The sacking of her Chancellor, Kwasi Kwarteng, after 38 days in office, is unlikely to significantly reverse these prospects. In fact, it signals a systemic level of incoherence the only outcome of which, at this stage, can be continued breakdown. The danger is that, as this Government collapses, it brings the rest of Britain down with it.
Systems collapse when they are unable to adapt to change. The policies of the Truss Government are not only accelerating conditions of change beyond the capability of British institutions to adapt, they are generating crises across multiple institutions simultaneously in such a way that they are overwhelming the overall system’s abilities to respond.
When a system is overwhelmed in this way, we start to rapidly run out of options within the existing framework. The more it moves in different directions to quell the crisis, the more it inadvertently stokes the crisis. As a result, the system itself becomes an accelerator of its own collapse – and this is exactly the predicament that the Truss team has managed to pull Britain into.
These ingredients are critical preconditions for the collapse of complex societies. Such collapses have taken place over decades, in some cases centuries, in others. While collapse doesn’t necessarily entail the complete evisceration of a society, it involves a breakdown of institutional complexity. This results in a loss of societal capabilities, potentially entailing reductions in living standards and population.
Liz Truss’ agenda is accelerating the risk of such a collapse in a way that is unprecedented. While, to some extent, this can be explained by a penchant for disaster capitalism designed to benefit elites at everyone’s expense, the deeper problem is that the Truss Government appears to be fundamentally incapable of grappling with complexity.
It doesn’t realise that our systems are tightly coupled in complex ways; that these interconnections mean you cannot tinker with one element of the system without upending the entire system; that pulling the rug out from under critical institutions or public services can unravel social cohesion in a way that could generate chronic instability from which there is no easy recovery – leading to a spiral of escalating costs and diminishing returns.
Britain is on the brink of spiralling out of control.
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Perhaps most alarming of all is the risk of global financial collapse. The Truss Government has failed to recognise that its actions are accelerating the risk of such a collapse – the knock-on effects of which would feedback into the British economy and crush all hopes of economic growth. The belated U-turns are too little, too late.
According to Nigel Green, CEO of the Devere Group – one of the world’s leading independent financial advisory firms – the “fallout” from the UK Government’s failure to ensure stability “could spread to impact the wider global financial markets, which themselves are sitting on incredibly thin ice as liquidity disappears”.
He told Byline Times that a lack of a credible, long-term commitment, from both the UK Government and the Bank of England to calming markets “has already blown up the UK bond mark, the mortgage market, UK pensions, amongst others”.
The International Monetary Fund has already predicted slowdown in global growth which will feel like a recession for millions around the world by 2023.
“The crisis in the UK, the world’s sixth-largest economy, and with a reserve currency, could be a catalyst to accelerate or deepen global economic woes,” said Green. “Fear is contagious. Increased bond turbulence in the UK triggered by fund liquidations fuels a sell-off of the pound amid heightened instability, which in turn drives UK stock outflows, which prompts similar sell-offs across international markets.
“Considering the close crossovers of regions when it comes to macro issues such as soaring inflation, slowing growth and tightening monetary policy, markets often extrapolate – especially when there is political change in places, such as Italy, for example.
“It’s clear that the Bank of England have a foot on the brake, and Liz Truss on the accelerator. Unfortunately, this could result in a crash, potentially damaging others as it rolls.”
In this way, the tug-of-war between Truss and the central bank shouldn’t be seen as a scuffle isolated to the British isles. It could have ripple effects across the global financial system.
Private and public debt as a share of global GDP is now at record levels, approaching $300 trillion. It has risen from 200% in 1999 to 350% today. The United Nations Conference on Trade and Development is already forecasting that rapid interest rate increases and fiscal tightening is “pushing the world towards global recession and prolonged stagflation, inflicting worse damage than the financial crisis in 2008 and the COVID-19 shock in 2020”.
The escalating incoherence of the Government’s economic, financial and monetary policies is intensifying this trajectory. And since the 2008 financial crash, the world has largely run out of road for dealing with such a crisis. After 12 years of quantitative easing to ease the crisis, the room for further borrowing without escalating risk is greatly diminished.
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The Housing Market
This can be clearly seen in the knock-on effects on the housing market. With interest rates spiking to help deal with inflation, mortgage rates are soaring. This, in turn, will lead house prices to fall. Both of these factors will dramatically increase the threat that consumers default on their mortgages.
If house prices fall below the value of the mortgage, even while mortgage repayments become unaffordable, this negative equity could result in more people pushed out of the housing market, further reducing housing demand, prices and confidence.
The result would be a deepening economic contraction that increases the severity of a recession. At worse, a collapse in housing markets could trigger further debt-defaults across the consumer sector culminating in a wider debt crisis.
That too would compound the decline in confidence and potentially trigger further crises across the financial system – not just in the UK, but potentially across the world.
The Truss economic agenda has now made the prospect of a housing market collapse that sparks wider contagion much more probable. But, at this point, the economic toolbox is empty – the market is demanding extreme austerity to balance public finances which would escalate the cost of living crisis and drive tens of millions of people into poverty. Yet, if public spending is maintained, the markets will remain in turmoil.
In other words, whichever direction the economy now moves in will result in crisis.
The Government’s response to the energy crisis is compounding these economic and financial risks. This crisis is being driven by our fundamental dependence on fossil fuels – but, instead of moving to rapidly end this dependence, the Truss strategy has been to cement it.
The problem is that this approach ties the UK to the most expensive sources of energy, which are rapidly declining in quality. The Truss Government’s decision to focus on ramping up North Sea Oil production and fracking make no economic sense, because their costs of production are increasing even as their actual production levels are declining.
Meanwhile, the Government is trying to destroy renewable energy growth with windfall taxes on solar and wind companies (but not for fossil fuel polluters), while also pursuing legislation to block solar installations in farmland – despite the fact that solar and wind are now nine times cheaper than gas.
The UK’s energy strategy is locking the country into dependence on increasingly expensive energy resources that are facing economic obsolescence as early as 2030. As energy is the bedrock of all economic activity, this is a recipe that will guarantee economic decline.
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The Collapse of Critical Services
In a complex system, we can expect the unexpected. But these escalating crises are generating further institutional breakdowns that, in turn, could lead to consequences that are difficult to anticipate.
Due to declining pay, pension arrangements and working conditions as the cost of living crisis has intensified, public service workers across the spectrum are in revolt.
A survey by the British Medical Association of more than 7,700 hospital consultants has shown that nearly half – 44% – are planning to leave the NHS next year. According to Dr Vishal Sharma, chair of the BMA consultants committee, the exodus means that “the NHS is in danger of complete collapse”.
The transport system is also reeling, with bus, rail and London Underground strikes now a regular feature of British national life. Postal workers are now joining the fray. With little prospect of pay rising in line with inflation, there is little prospect of strike action diminishing. Instead, such disruptions are bound to become worse and more frequent, and will likely become more widespread than the industrial action seen in the 1970s.
Similar challenges are facing the judicial system. The cost of living crisis drove criminal barristers to strike over low pay. Although a sub-par deal was reached, the profession is still in massive decline with fewer and fewer joining, and increasing numbers leaving for better jobs elsewhere.
The strikes have massively compounded bottlenecks piling up in the criminal justice system, creating a backlog of cases stretching over years, and no clear solution to catching up with them. As the backlog gets bigger, the expected decline in the profession could grind the system to a halt if key reforms are not pursued. Which is partly why in September, the Law Society warned that the criminal justice system was on the brink of “collapse” without funding all parts of it equally.
A Vicious Cycle
As the costs of running the system escalates, returns are diminishing. Every response to these crises only creates greater costs and complexity – and a new layer of problems. This, in turn, requires further responses involving more costs and complexity. This cycle increasingly reduces the capacity of the system to respond, accelerating its trajectory toward collapse.
At this point, the chances of averting collapse become smaller and smaller – because if the crises are simply ignored, the system collapses anyway.
The Truss Government has locked itself into this vicious cycle and is increasingly out of control. The sacking of the Chancellor is a symptom of this escalating incoherence, not a sign that it is changing course to become more coherent.
Many of these crises were bound to happen one way or another at some point. Twelve years of austerity involving constant cuts to public services laid the groundwork. The global energy crisis, escalated by Russia’s invasion of Ukraine, accelerated the impact of austerity and brought forward these crises.
Yet, the Truss Government, driven by an unwavering belief in a narrow economic ideology – which I have argued amounts to a social Darwinistic distortion of neoliberalism – has thrown petrol on the flames without realising that its approach is at risk of burning everything to the ground.
Amid all this, the growing incoherence inside the Government – replete with U-turns, infighting and a disjointed Cabinet that is losing the support of its own parliamentary party – demonstrates the scale of the political crisis. The Government is imploding and this is further diminishing its decision-making capacity to respond coherently to mounting internal and external crises.
Over the coming months, we are going to witness an acceleration of interconnected political, social and economic crises which strike at the heart of Britain’s social fabric, and strain critical institutions and services – energy, transport, housing, food, health, criminal justice, policing and beyond.
The Government has created a national emergency with devastating consequences that will be long-lasting. And it must be recognised that this perfect storm was avoidable. And that it can be fixed – but not within the constraints of our current system.
Because it is now clear that the Truss Government is incapable of doing anything other than stoking the flames of crisis. The collapse of British Conservatism is well underway. But the next Labour Government is going to inherit a bigger and more intractable crisis than the 2008 crash – a comprehensive crisis in which every sector of British society experiences a breakdown, with a destructive impact on the lives of citizens. This is why it is a form of societal collapse.
If Labour is going to successfully lead the country through this unprecedented crisis, it will need to be fully focused on system transformation; ready to think, see and plan holistically; and armed with the capability to recognise and respond to complexity. If it fails to do so, this could herald an even deeper political crisis.