‘The Coming Crash’, ‘Broke Britain’ and ‘Weimar Britain.’ These have all been Spectator cover stories in just the past three months. In fact, more than 30% of that magazine’s recent covers have focused on an impending economic collapse. This reflects the alarming state of the public finances: government spending continues to grow to cover pensions, debt repayments and a rising defense budget, but revenues are not keeping pace. Taxes and borrowing have hit their limits, with millionaires leaving the country and yields on 30-year gilts surpassing 5.6% – the highest in a generation. The economy has reached a point where, without bold decisions, there is no way out. Rachel Reeves, meanwhile, searches for ever smaller sources of revenue, her new ‘taxi tax’ being a prime example. But such tinkering is unlikely to solve the underlying problem. It is like giving painkillers to someone with a broken leg: the pain may ease, but the bone is still broken, and without real treatment the problem only worsens.
Milton Friedman once argued that the technical cure for inflation was well known; the problem was a lack of political will. The same is true today. It is difficult to see the political will to address Britain’s economic challenges head-on. And when problems are not dealt with early, they eventually turn into crises – at which point radical action is no longer a choice but a necessity. With mounting problems in the UK economy and the Government unwilling to take bold steps, we are moving toward a moment when crisis will force the action politicians refuse to take now.
As Friedman put it: ‘Only a crisis – actual or perceived – produces real change.’ Radical reform will come, but crisis is a double-edged sword. The policies adopted afterwards can just as easily worsen the situation if they are grounded in the wrong ideas. That is why Friedman added: ‘When that crisis occurs, the actions that are taken depend on the ideas that are lying around.’ The materialists and neo-Marxists often emphasise the historic events that shape the world of ideas, but they miss a crucial point: what drives post-crisis change is not the crisis itself, but the ideas available when the moment arrives.
The financial crash of 2008 is a good example. It did not produce better policy but rather measures that compounded existing problems. The system continued to reward excessive risk-taking by financial actors confident that the state would always step in to prevent losses – a pattern already evident with the Continental Illinois bailout in 1984. Meanwhile, regulations multiplied without addressing the fundamental issue of moral hazard. Unconventional monetary policies took hold, ushering in the era of near-zero interest rates and quantitative easing. Policies that, just 20 years earlier, would have seemed almost unimaginable even to the most heterodox economists. This is the nature of crisis: unconventional measures suddenly become the default.
Friedman therefore argued that ‘our basic function is to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.’ That is the urgent task today: to popularise ideas among both the public and political class that point toward markets, not the state. The answer to Britain’s woes is not more state power, but less. After all, it was excessive spending, regulating and interference that brought us here in the first place. Yet if we look at the prevailing intellectual climate, it points firmly toward more statism, not freer markets. This needs to change. Otherwise, when the crisis comes, the solutions on offer will be gloomy ones.
‘Never let a good crisis go to waste,’ the old saying goes. Reform UK seem to have learned this lesson well. Wherever there is turmoil, they offer radical policies – some sound, others not – confident that voters will be drawn to their fresh energy rather than to the tired parties who have been in office for years. Yet even Reform presents a mixed bag. On the one hand, Nigel Farage praises Argentina’s Javier Milei and promises cuts to public spending; on the other, Richard Tice entertains protectionism and even nationalisation. Before a crisis, such contradictions may be glossed over. But once it arrives, the tendency will be toward the safer, more statist path.
This is why the policies adopted after crises matter so much: they set the framework of the economic system for years to come. These are the weeks where decades happen, the moments when the climate of opinion determines the future. Britain has seen this before: the IMF bailout of 1976, the radical reforms of the 1980s, the deregulation rush of the 1990s. Each crisis reset the country’s economic environment for a generation. Unless the intellectual groundwork is laid today, the next crisis will not deliver renewal but only pave the way for another, deeper crisis in the future.
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