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My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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“The Nightmare Before Christmas”: The Economists’ Take on the “3rd Alternative” in the Upcoming UK E

Updated: Jul 19, 2020

There are several parties putting forth candidates in the upcoming UK election on December 12th. The two traditional parties certain to gain the majority of votes (collectively) in this round of parliamentary elections are the Conservative Party (led by current PM Boris Johnson, in power) and the Labour Party (led by Jeremy Corbyn). The fear, for those not familiar with the UK Parliamentary system, is that neither the Conservative nor the Labour party win an outright majority, effectively resulting in a “hung parliament” that is incapable of making important decisions without getting one or more of the other parties on side, either on each topic considered or – more formally - in a coalition from the onset. In fact, this is exactly where we are at the moment, with the Conservative Party in coalition with the DUP.

I have covered in some detail in my blog post on November 25th the promises and financial parameters contained in the manifestos of the Conservative and Labour Parties, since these are the two leading parties. However, I found it very interesting that The Economist has gone on record in support of a third alternative, the Liberal Democrats, which they themselves admit cannot win the election but can effectively act as a constraint on the more extreme policies of the Conservative or the Labour Party assuming that whichever of these two parties win the most seats on the 12th does not obtain an outright majority. The article in the Leader section of last week’s The Economist“Britain’s nightmare before Christmas” - contains their reasons why. Perhaps their view is best summed up in the opening two sentences:

“ British voters keep being called to the polls – and each time the options before them are worse. Labour and the Conservatives, once parties of the centre-left and -right, have steadily grown further apart in the three elections of the past four years.”

The article goes on to say, in summary regarding each party:

Labour: “…Mr Corbyn’s ruinous plans at home and bankrupt views abroad mean that [The Economist] cannot support Labour.”

Conservatives: “The Conservatives too have become scarier since 2017. Mr Johnson has ditched the Brexit deal negotiated by Teresa May and struck a worse one…….. No deal is thus still on the table – and a real prospect….” “[Mr Johnson] has purged moderates and accelerated the shift from an economically and socially liberal party into an economically interventionist and culturally conservative one.” “For all these reasons, [The Economist] cannot support the Conservatives.”

Liberal Democrats (Jo Swinson, leader): “That [meaning the extreme left and extreme right views of the Labour and Conservative parties, respectively] leaves a low bar for the Liberal Democrats, and they clear it.” “They are the only choice for anyone who rejects both the hard Brexit of the Conservatives and the hard-left plans of Labour.” “Yet [the Liberal Democrats] will not win.” And finally the real reason: “The principled reason is that the Lib Dems are closest to the liberalism on which [The Economist] was founded.”

In summary, The Economist believes that Lib Dems arguably represent a choice in the As far as Brexit and for the record, the Lib Dems would revoke Article 50 if they win a majority, which is nearly impossible to fathom, and as a minority party which is much more likely, would be in favour of a second Brexit referendum.

A far as I am concerned, December 13th (the day after) can’t get here fast enough. It’s time for the U.K. economy to move forward because the political uncertainty regarding not only Brexit, but the overall fiscal approach of the country needs to be sorted so business investment resumes and the daily distractions of what seems to be a never-ending discussion can be put to bed. Sadly, this is far from certain. Let’s see.

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