Invulnerable

Having advocated shifting to a parliamentary form of government for decades, the recent turn of British politics strikes me as cautionary.

In the space of seven weeks, the UK has had three prime ministers. Of the last five prime ministers (all Conservatives), only one was installed as a result of general elections.

Right now, after all that happened, the Conservative Party is extremely unpopular. In one survey, two-thirds of British voters would likely vote against the Conservatives if elections were held today. If election are not called, the Conservatives will be invulnerable.

This is why the Conservatives are united against the holding of elections. It is perhaps the only thing uniting all the factions and strands of the party today. A general election will surely obliterate their party.

The Conservatives are not obliged to call for elections until January 2025. They will resist public pressure and hold on to power until that date, hoping circumstances change to favor them in the meantime. They will do this even if it means replacing the prime minister every so often in the face of the profound problems facing the UK.

This is the dark underside of parliamentary democracy. A majority party can continue holding on to power, committing endless blunders, simply by defying the public’s call for new elections.

Rishi Sunak is now prime minister, replacing the disastrous six weeks of Liz Truss at the helm. The former prime minister served the shortest at the post in the last two hundred years. No vote of any sort was held in installing Sunak in the abbreviated selection process following Truss’ resignation. He was the only one meeting the requirement of a hundred members of Parliament endorsing his elevation to party leader.

Notwithstanding all the policy errors of the Truss government, Sunak now forms a government composed of the same Conservative stalwarts who served the ejected Boris Johnson and Liz Truss governments. Some Britons fear this crew will simply be rearranging the deck seats on a sinking Titanic.

Nevertheless, Sunak’s elevation helped calm the markets. He is seen as a competent fiscal manager despite his relative youth. The 42-year-old had served as Chancellor of the Exchequer under Boris Johnson. Before joining politics he worked as an investment banker. His wife is heiress to a billion-dollar Indian family fortune.

Although he is the first person of color to become Prime Minister, Sunak is as establishment as any British subject could be. He attended elite schools for his education. Britons say, with only slight exaggeration, that the new Prime Minister is wealthier than the King. There is much hope he will bring order and stability to the UK after the long chaos inflicted by Johnson and Truss.

Whether or not he will restore the vitality of the British economy is another thing. Driven by populist nationalism, the British, by a slim majority, voted to exit the European Union (EU). This could be the root of all that ails the UK.

Although they share the same challenges relating to high energy costs, steep inflation and industrial malaise, the economies of the EU are faring significantly better than the UK. The British economy is in a deep quagmire. This is the result of economic isolationism more than the incompetence of the prime ministers their system produced.

Sinking

If the elevation of Rishi Sunak resulted in the British pound finding some footing and the UK stock market rediscovering some life, the inauguration of Xi Jinping’s third term as Chinese president saw the yuan and Chinese stocks sink precipitously.

In Russia, Putin’s decision to draft men of fighting age into the army was greeted with hundreds of thousands of men voting with their feet – fleeing Russia by every means to avoid the draft. In China, people reacted to the continuation of Xi’s rule by selling down their assets and looking for ways to bring their businesses abroad.

The market rout that happened after the close of the Communist Party of China’s national congress was not a knee-jerk reaction to any specific policy the Xi leadership might pronounce. It is the consequence of the prognosis that the days of pragmatism and market reforms have ended with an ideologue consolidating power at the top, purging his rivals and rewarding his cronies with unbridled clout.

The market rout is a vote of no-confidence in an economy dominated by the Xi Jinping personality cult.

Xi might have succeeded in arrogating political power around himself. This, however, produces great uncertainty in the economy. If everything is centered on one man, this makes the economy unstable rather than strong. Businesses in China have become vulnerable to the strongman’s whims, his ideological proclivities and his simplistic view of the world.

It did not help that in his remarks at the closing of the party congress, Xi said nothing about market reforms. He stuck to his unimaginative spiel about strengthening party rule and magnifying China’s role in the world – all boiling down to aggrandizing his own role in the universe.

Businessmen expect assurance about the stability of policies, the creation of a rules-based environment and diminution of the space for political surprises. The very nature of the Xi Jinping regime, however, militates against all those. It widens the margin for political whim and the space for abrupt political surprises. Extreme reliance on the sustained functionality of one individual runs against the grain of a business-friendly order.

Xi’s personal political project might have won. But his country’s economy suffers because of it.