But when analyzing the
GDP growth more closely, dating back to Anthony Eden in the year
1956, it has become evident that in most situations politicians have
very little influence over the course of the economy in the UK while
they are in office, since there are much greater forces that are out
of their control such as global trends and economic cycles. There is
also inevitable policy overlaps when one prime minister takes over
from the next and in most cases a considerable lag when it comes to
the implementation of policy changes, which is why it takes a lot of
time for a PM to start becoming effective.
For example, under Maggie Thatcher,
GDP growth declined and there were contractions in the economy in
her last years. John Major inherited inflation close to double
digits and 14% interest rates. Many PMS afterward could only claim
modest improvements, which is usually attributed to "the great
moderation" which is a time of stable macroeconomic activities that
is unusual in the developed economies that spanned from 1993 to
2007. This was followed by a classic boom and then a "bust period"
in the late '80s and the early part of the 1990s.
Charles Bean, former
Bank of England Monetary Policy Committee member argued that
healthy doses of "good luck" rather than judgment and skill could be
thanked for this. And to add to this, low apparent risks and
low-interest rates of this time incentivized the financial
institutions into becoming highly geared. This laid the foundation
for this financial crisis.
Boris Johnson perfectly demonstrated
how prime ministers can become a victim of circumstances and cannot
be solely judged on economic policies in relation to GDP. The
economic growth in the UK over the last 60 years has come to an end
with Covid and not Johnson being the cause of a painful contraction
of 9.3% in the year 2020. The following year experienced record
growth of 7.4%. Which was once again inspired by Covid, but aided by
Before Johnson's volatility that was
pandemic-inflicted, Edward Heath virtually performed a similar
trick, yet it was in reverse, which topped the table with a growth
of 6.5% in 1973 which in 1974 was followed by a 2.5% decline.
We will soon find out what type of
influence Liz Truss will have over the economy. Domestic policies
are only capable of doing so much.
managers advise to make sure she makes a mark she will need to
burst the "inflationary bubble" and avoid a recession, navigate
global events such as climate change, and solve the worldwide energy
crisis, which is going to cost the world's economy billions and
billions to deal with. Good luck to you Liz Truss.