Did a mixture of incompetence and racism lead to Liz Truss's firing of Exchequer Kwasi Kwarteng?

Britain's Chancellor of the Exchequer Kwasi Kwarteng, left and Prime Minister Liz Truss during a tribute to the late Queen Elizabeth II at the start of the Conservative Party annual conference in Birmingham, England. Truss fired Kwarteng on Friday. [AP] Kwasi Kwarteng's stint as Chancellor of the Exchequer (Finance Minister) goes down as the second shortest in British history. British-born and of Ghanaian heritage, Kwarteng was Chancellor for only 38 days, achieving the awkward distinction of being the official runner-up to Iain McLeod who served for 30 days in 1970 before dying of a heart attack. On Friday Prime Minister Liz Truss fired Kwarteng for proposing tax cuts in a mini-budget, a move that elicited a negative reception from MPs and confusion from the British public. The immediate consequence of this unexpected fiscal move was that the British Pound received a huge beating that drastically brought down its value to an all-time low relative to the US Dollar. Tax cuts were interpreted more realistically as reducing taxes paid by the higher echelons of British society while maintaining the lower tax threshold. Hurting the poor In essence, the poor would have continued to pay what they were paying in taxes before the changes while the rich would now pay less in corporation tax. The British taxpayers couldn't countenance such an ambitious fiscal move that wasn't backed by contemporary economic fundamentals. Put more clearly, this move would have forced the poor to pay higher proportions of their income in taxes while the billionaires would be paying less. In effect, the poor would shield the tax burdens of the rich! When this happens, the poor sink deeper into poverty while the rich increase in their opulence. Wisdom or lack of it Let's look at the wisdom in Kwasi Kwarteng's fiscal proposals. In economic theory, a reduction in taxes leaves more money in the hands of consumers so that they can consume more and spur economic activity. This leads producers to respond to the stimulus by producing more to meet the surge in consumer demand. This should result in more goods and services being produced, more jobs being created in the economy, and hence more income, more consumption and more production. This is the theoretical basis of the free payments that industrialised economies such as the USA, Canada, Germany, UK and others made to their workers at the height of the COVID -19 pandemic. Britain's Chancellor of the Exchequer Kwasi Kwarteng, second left, arrives at London Heathrow Airport after travelling on a flight from the US, Friday, Oct.14, 2022. He would later be fired. [AP] The payments were meant to keep the economy rotating. The mechanism through which this was done was that with disposable income in the hands of consumers, there was increased demand for goods and services. This demand gave producers the incentive to produce. As they produced, they utilised factors of production such as labour and capital. As factors of production were utilised in the production process, payments were made to them in the form of wages and interest. These would create additional demand for goods and services and investments. The economy would then remain vibrant despite the COVID-19 pandemic. It worked. However, in a situation of high inflation and stable income levels such as the world is currently witnessing, consumers with single-stream incomes ( no permanent income) have considerably reduced disposable incomes. This means that they can only afford fewer goods and services at constant income levels. Put differently, consumers are experiencing reduced welfare unless the government steps in through subsidies. However, subsidies have been proven to be unsustainable in the long run. So, a reduction in taxes means that the top income earners will remain with more disposable income which they can use to adjust their basket of goods and services upwards, thus going back to the welfare position they occupied before the inflation. In other words, the tax cuts will be used to improve consumption at the top, and not the envisaged investments. Meanwhile, the low-income earners will remain unmoved in their welfare position, where they now carry an even heavier tax burden than the rich, and suffer welfare losses. History records that whenever billionaires benefit from tax cuts, more often than not, they respond by buying yachts or homes. They hardly respond by consuming more goods and services or investing in asset classes that have a direct impact on economic growth. Supply-side economics In other words, there's as high a propensity for billionaires to save or spend on ostentatious goods as there's a likelihood for low-income earners to enhance their consumer spending on basic food items. In an inflationary situation, the more effective policy option, therefore, is to tackle the economy from the supply side by increasing production so that prices come down. For example, if farmers are supplied with good-quality fertiliser, fast-yielding seeds, and irrigation, higher crop yields can be assured in the short run, thus reducing the cost of living. It is noteworthy that fiscal stimulation is meant to spur shared economic growth and not wealth accumulation in the hands of a few billionaires. I think that's what Kwasi Kwarteng didn't appreciate well as he grappled with strategies to revitalise the British economy that has been struggling to get its proper bearing since Brexit. Firing a friend: UK Prime Minister Liz Truss. [AP] That sort of warped economic thinking is unacceptable during precarious situations like what the war in Ukraine has visited upon the world. Kwasi Kwarteng is from the cream of British society. He attended Eton College and graduated with a PhD from Cambridge, both of which (and Oxford) are the dream schools of every British citizen. To crown it all, he had a one-year sojourn at Harvard's Kennedy School. Surely, this man should have known the socio-political and economic implications of his decisions. Was he pushed into making those regrettable statements on the economy as a way of edging him out of the mainstream? Maybe some people watched with lots of discomfort his meteoric rise in political ranks in a society that largely frowns upon people of colour, particularly Blacks. The Chancellor of the Exchequer is a heartbeat away from the British premiership. I don't think the Brits are ready yet for a black face at the No. 10 Downing Street. Kwasi Kwarteng's debacle presents a beautiful lesson in the politics of economics. The Prime Minister, who earlier supported his fiscal posture, was quick to make an about-turn immediately after she realised that the move had back-fired, and was threatening to consume her young premiership. Liz Truss made the most intelligent political move: pushing Chancellor Kwasi Kwarteng under the bus as she continued to negotiate with the Torries to give her another chance, and the opposition to be patient as she revised her economic blueprint. Fall guy It's a well-settled canon in politics that every political goof must have a sacrificial lamb. Kwasi Kwarteng happens to find himself in the right place at the wrong time. His blood must now be used to cleanse the new political trajectory that Truss is expected to announce in due course. However, the prime minister's greatest blunders were failure to master the 'power matrix', trying a fiscal experiment that had no history of success in the UK, and the fact that she forgot that the premier position was a highly coveted office which has traditionally brought together enemies to stab the incumbent in the back. She's not out of the woods yet. But, there's evidence of a changed fiscal trajectory. The appointment of Jeremy Hunt, an Oxford graduate, as Kwasi Kwarteng's replacement as the new Chancellor is quite telling. Hunt is a believer in high taxes to underwrite development programs that target the poor. Not surprisingly, Chancellor Hunt has already sent a warning that corporation taxes are likely to go up. It is not lost on observers that Kwasi Kwarteng's sacking smacks of a typical racist move that has become ever so familiar around the world, be it in the field of golf where Tiger Wood's career was threatened by sexual scandals that were neither here nor there or boxing where Mike Tyson's tribulations are now well documented. What's surprising is why Africans who become part of the 'White Privileged Society' so easily forget their heritage and start perpetuating the stereotype of black people --- the category of people who are ever complaining about everything and anything without reasonable causes. Kwasi Kwarteng shocked the world when he questioned the basis of the popular "Black Lives Matter". He didn't think that Africans have suffered any undue discrimination in the UK! Until he was pushed under the bus by his bosom friend and co-author, Premier Liz Truss, Kwasi Kwarteng had not tasted any other rejection from the high society that had defined his life for 47 years. Vilified black society Kwasi Kwarteng can hardly imagine that he's part of the vilified Black Society that constantly fights against injustices, inequality, lack of privileges and political and economic opportunities, and constant discrimination in the UK and elsewhere in the West. He is a typical "House Nigger" who can hardly identify with the struggles that the "Farm Niggers" have to endure every single day of their poor life. He appears to have forgotten that he was a scion of Ghanaian immigrant parents. Had he been British by blood, this matter of inappropriate fiscal choice would have been renegotiated while he was in office. After all, this has happened many times before. The big lesson: no amount of privilege will make a person of Black African extraction anything else; s/he remains an African and black.

Did a mixture of incompetence and racism lead to Liz Truss's firing of Exchequer Kwasi Kwarteng?

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Did a mixture of incompetence and racism lead to Liz Truss's firing of Exchequer Kwasi Kwarteng?

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