Latest / The Capitalism and Freedom in the Twenty-First Century Podcast / Liz Truss (Former UK Prime Minister) on Politics and the Economy in the United Kingdom | Hoover Institution

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Liz Truss (Former UK Prime Minister) on Politics and the Economy in the United Kingdom | Hoover Institution · The Capitalism and Freedom in the Twenty-First Century Podcast

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[MUSIC]
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>> Jon Hartley: This is the Capitalism and Freedom in the Twenty-First Century
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podcast, an official podcast of the Hoover Institution Economic Policy Working Group
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where we talk about economics, markets, and public policy.
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I'm Jon Hartley, your host today.
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My guest is Liz Truss, who served as Prime Minister of the United Kingdom in 2022,
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as a Tory MP from 2010 through 2024, where she served in a number
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of cabinet positions, various Conservative governments, including Foreign Secretary.
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She's also most recently the author of Ten Years to Save the West.
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Welcome, Ms. Truss.
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>> Liz Truss: Great to be on the show.
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>> Jon Hartley: Well, I wanna start with your early life and
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it's a real honor to have you on here.
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You were born in Oxford.
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Your father was John Truss, who's a professor of mathematics at Leeds.
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And you also studied at Oxford, like many British Prime Ministers, and
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you studied philosophy, politics and economics.
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I mean, at what point do you first decide that you like politics and economics and
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that you actually want to do this for a living?
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Was this something that was just destined, given that you were born in Oxford, or
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was this something that you came across over time?
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>> Liz Truss: So I was always quite interested in politics and
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Politics in the 80s was very interesting and exciting and
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of course there was a big battle between the US and
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the USSR who was gonna win the Cold War.
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And my parents were on the left wing side of politics and
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my mother actually campaigned against nuclear weapons.
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She was pretty anti-American actually, and
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certainly anti the policies of the US administration at the time.
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I think one of the first political people I heard about was Caspar Weinberger,
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which must be quite unusual for a child growing up in the 80s in Britain.
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And when I got a bit older and I saw what was actually happening and
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the role that Mrs. Thatcher successfully played in bringing
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to an end the Soviet Union and bringing to an end the Cold War,
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I sort of thought, well, actually, disarming wasn't the right strategy.
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It was the right strategy to actually call out the Soviet Union,
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talk about how there was a huge problem.
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It was obvious when the Berlin Wall fell and
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all the people were trying to get into the west,
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it was obvious that the Soviet Union was not an aspirational model of the world.
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Yeah, I think my mum in particular was slightly misty eyed about what happened,
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even though she'd spent a year in Warsaw in the 1970s.
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So she knew perfectly well that the model didn't work.
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So that's, I guess, my first exposure to politics and talking about politics.
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And then I joined the Liberal Democrats and people were saying, why did you join?
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What was not the Conservative Party.
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But the answer is my parents were very left wing and almost being a liberal
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was the acceptable face of being right wing where I was in Leeds at the time.
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And it was only really when I got to university and met Conservatives that
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I decided I was a Conservative and I joined the Conservative Party.
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>> Jon Hartley: That's amazing.
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And yeah, I feel like certainly college and universities can be one of those,
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I think, transformational periods, I think for a lot of people and
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discovering sort of what they believe in, that's quite interesting.
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So I take it Thatcher has sort of been your North Star for
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you from the beginning.
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>> Liz Truss: So I think the thing that really sort of started me on the road to
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being on the right of politics was actually experiencing
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what happened at my school.
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I went to a comprehensive school in Leeds, which is in the north of England, and
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it was very politically correct.
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There were lessons on racism, there were lessons on sexism.
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And I just thought, this is a load of rubbish.
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Why are kids being taught about this stuff when some of them in the school
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weren't actually very good at reading and writing?
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And that was my first exposure to kind of left wing ideology.
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And it was that that really put me on the road, I think,
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to being a conservative and wanting to live in a country that was successful,
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not a country that was just making excuses the whole time.
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And the places I grew up so Paisley in Scotland and Leeds in England,
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frankly, the, their better days were behind them.
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They had been pioneers of the industrial revolution.
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They'd been huge manufacturing hubs and
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they were now full of disused factories and
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derelict buildings because they'd lost a lot of their purpose.
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And I just thought, why does it have to be like this?
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So it was more being in quite a left wing place and just thinking,
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these left wingers, what are they actually talking about?
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Their solutions don't seem to work.
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And when I got to university and started studying economics and I almost arrived
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at economics by accident, I'd actually gone because I was interested in politics.
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And the degree course was politics, philosophy, and economics.
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So economics was a bit of an afterthought once I started studying it and
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saw everything from free trade to how free markets work,
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I've begun to understand why it was that these places that had been so
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successful had been competed out of business.
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The policies that the British government had adopted of nationalizing industry,
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this is,
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I'm talking about the sort of post war Atley government hadn't been effective.
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And I became very concerned about Britain joining the Euro because which
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was being pushed by the labor government of the time,
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because I could see that having a sort of free floating currency was
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one of the ways that a country could actually adjust its economic policy.
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So all of those things I then started to learn about and I built that worldview.
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>> Jon Hartley: Well, I think it's rare for, I guess, politicians in general and
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members of Parliament to be numbers oriented.
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Obviously you grew up in a family where you have some very amazing
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mathematical minds in your own family and doing philosophy, politics,
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economics and working as an accountant and doing all these things.
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I feel like that's just a rare skill set for politicians in general.
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And I mean, it does seem like there was, I guess this rift in the late 80s too,
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between the Thatcherites and John Major and the role of UK in Europe,
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I think was a big part of that and the euro was a big part of that break.
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So to me, I see that as sort of being one of these key moments,
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also setting Hong Kong on the course that it's been on.
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So I guess, fast forward a good number of decades later here,
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you come in as Prime Minister in 2022,
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you have a firmly pro growth agenda at the outset of your premiership and
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you wrote a book, in fact, ten years prior called Britain.
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Britannia Unchained, Global Lessons for Growth and Prosperity.
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So I think economic growth has been something that I think is always been
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front of mind for you, is my sense.
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You co-authored this with four other Conservative MPs,
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including your Chancellor Kwasi Kwarteng.
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And I'm just curious one, can you describe to me, I guess,
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what this growth sort of thinking and plan has been for a long time?
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Obviously you've been thinking about it for a long time, but
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how badly in your mind does the United Kingdom need pro growth policies and
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sort of a revamp on economic growth?
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We can talk about what's going on now and the Starmer premiership,
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and many things are going in the worst direction, in an opposite direction.
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But I'm curious what's been your vision as far as growth
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United Kingdom over the decades going into your premiership?
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>> Liz Truss: Well, so
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the reason we wrote the book is we felt that Britain was on the wrong track,
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even though at the time we were junior backbenchers in a Conservative government.
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So we felt that the policies the country desperately needed weren't happening.
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And that is why we wrote the book.
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Looking at how do economies actually succeed, what does it take?
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Cuz Britain was already stagnating.
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It was already stagnating by the 2010s.
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It had been going on for some time.
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You could argue that it really started in the 1990s
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with the coup against Mrs. Thatcher.
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That's where it started.
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But that is only the recent history of Britain's economic failure.
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In fact, it goes way back to the end of the 19th century,
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the development of the permanent bureaucracy,
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the failure to really take on the Americans and Germans in manufacturing.
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Britain was a country that led the Industrial Revolution.
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But the fact is that we got overtaken, and
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we got overtaken due to a variety of factors.
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You've talked about the lack of politicians who've got numerical skills.
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I could make that more general point.
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Across the population,
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Britain is not done enough to compete in areas like manufacturing.
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Even though we've had great universities,
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we've not been good at translating that into economic success.
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And what we've had is a very, very powerful bureaucracy.
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We've had elements of socialism in our country for a very long time.
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Of course, those were introduced at the start of the 20th century.
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But if you look at the Attlee government nationalizing huge swathes of industry,
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creating the National Health Service and the welfare state,
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we're now in a position where the British government is spending 45% of our GDP.
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And even, back when we wrote the Book Britannia Unchained,
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it was still up in the high 30s, it's now got even worse since then.
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And at the same time, we've just got huge levels of regulation on our economy.
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Partly that is driven by our membership of the EU,
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where lots of regulations were added, but a lot of it is domestic.
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The Town and Country Planning Act makes it pretty much impossible to build anything
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anywhere in Britain.
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We've got incredibly expensive house prices.
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Our energy costs are four times what the energy costs are in the United States,
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partly because of the environmental agenda,
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partly because fracking has been banned.
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But on every possible measure, [LAUGH] we are economically very uncompetitive and
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we now have the fastest rate of millionaires leaving
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the country of any nation in the world, apart from China.
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But what I'm saying and what we say in Britannia Unchained is
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the seeds of that are very longstanding in Britain.
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It's a cultural issue.
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There's an anti success culture, sort of.
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We call it the tall poppy syndrome of the tallest poppy gets cut off an entry,
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entrepreneurial culture.
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So if I'm to compare us to the United States, there's much more of a fail
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fast culture in the US and people respect people that build up businesses.
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I think that's less, less true in Britain.
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So these were all the things that we were trying to address.
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And it does go back to what I was saying about the places I grew up in.
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I want to see them be successful.
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I think it's incredibly depressing.
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A country that's declining and living in a country that's
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economically declining leads to all other types of decline,
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whether it's high crime rates, drug abuse,
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social unrest, all of those things result or
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are correlated with a poorly performing economy.
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So to me, that was the number one issue that we, we had to deal with.
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>> Jon Hartley: Absolutely.
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And yeah, I mean, it's amazing to see what's happened to the UK so
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over the decades.
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I mean, obviously World War II UK being bombed out,
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I mean, had a huge impact on Britain's growth trajectory and
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the US in many respects overtaking the UK is having the world's
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reserve currency become the world's largest economy,
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in the post war period being almost half the world's GDP at that point.
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Obviously, many other players are, are, are growing now, China and many others.
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So I wanna talk about early in your premiership we have on September 23rd,
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your Chancellor Kwasi Kwarteng delivered a Ministerial
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statement titled the Growth Plan and it proposed to reverse
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an increase in the corporate rate increases that were scheduled,
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also a cut to the personal income tax.
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A proposal to essentially implement many of these.
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I think great ideas aligned in Britannia Unchained and
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really I think a pretty standard sort of pro-growth agenda,
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like in the US largely, in part deficit finance, then all hell broke loose.
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I mean, I'm curious- >> Liz Truss: If I could cut into this
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deficit finance thing that it wasn't deficit financed.
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The fact is the deficit in Britain was huge and the debt was huge.
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But my view was if we'd done nothing, taxes would have gone up because
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that had been legislated for and taxes going up were actually going
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to result in a worse deficit because certainly over a period of five years.
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And a lot of independent economists agree with me on that,
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that if you raise corporation tax so much you damage economic activity,
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businesses stop, stop opening and companies leave the country.
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Which is exactly what's happened.
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And it's the idea it was deficit financed as opposed to all of the spending
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increases which have now been allowed under the Labour government.
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That is a leftist talking point and it's a point that's being used against me.
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But I would argue that what we were doing was not deficit financed.
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It was actually creating the growth would have helped pay off the deficit.
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Now that the policies I put forward were not implemented,
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we've got the counterfactual and the counterfactual is the debt has gone up.
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So it wasn't deficit financed.
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>> Jon Hartley: Yeah and I think I'm with you in that the media, I think,
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portrayed a certain narrative that does incorrect at the time.
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And I think a lot of economists had sort of gone back to this period.
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And there was this big spike in 30 year gilts that moved from
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33.5% to 5% in only a few days.
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And I think in hindsight now, I think a lot of economists now look
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at this as in part being sort of a confluence of factors.
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So things like liability driven investment strategies, employed by pension funds,
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because they have to match the duration of their liabilities,
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even a small jump in guilts can be sort of accelerated by pension
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funds that are now forced to sell their UK government bonds.
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And also you had sort of this auction at the same time.
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And so something that probably would have been a routine small jump in
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government bonds was really exacerbated.
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So I'm just curious,
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how do you think about these sort of other facts in terms of what was going on?
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>> Liz Truss: I think it's important to.
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I think there were various things going on, but
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the fiscal package I announced was smaller even by the Office of
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Budget Responsibilities numbers, which I don't necessarily agree with.
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But it was smaller than the fiscal packages Rishi Sunak announced and it was
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also smaller than the fiscal packages Rachel Reese have announced since.
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So there is something about the way that the mainstream media and
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the economic establishment in Britain
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view public spending as opposed to tax cuts, i.e.
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They're much more willing to accept the idea that whereas they
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don't accept that tax cuts are inevitable or need to be done.
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So there's a asymmetric attitude by what I would describe as Keynesian economists,
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which now dominate the treasury, the bank of England,
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the Office of Budget Responsibility.
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And what has happened in Britain is that those entities have required a lot
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more power.
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So Gordon Brown made the bank of England independent.
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They used to be under the control of the Treasury.
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He put the Civil Service Code into law.
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So it made it much harder, in fact, impossible to hire and fire bureaucrats.
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He also, this actually happened under George Osborne.
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The Conservative Chancellor created the Office of Budget Responsibility,
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which is a bit like an extreme version of the Congressional Budget Office.
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So essentially those bodies were making judgments about economic and fiscal policy
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that I believe should be political judgments, but were made by those bodies.
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And those bodies have a very, very clear worldview.
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And it's the same as the worldview taken by the IMF,
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taken by the Democrat Party in the United States, taken by the World Economic Forum.
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Public spending good, tax cuts bad.
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And this is why, despite the fact Rachel Reeves has announced policies
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that are much larger fiscally, they've been on the spending side.
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So that's entirely acceptable to these people because they like big government.
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So that was one factor, the sort of bias in the system and
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the group think in the system that was pro Keynesian.
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And that's been building up for many, many years.
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Essentially, since the successful supply side of the policies of the 80s,
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that kind of worldview has been building up.
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And I think that if you look at the backlash Donald Trump has faced
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in the markets from economists, it's the same worldview
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that has become prevalent and we need to defeat that.
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And I think Scott Bessent is doing a very good job of making the argument for
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supply side policies.
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But separate to that, there was an issue, unbeknownst to me,
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taking place in the markets themselves, and you referenced it.
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These LDIs that pension funds had invested into, they were essentially a leveraged
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product that depended on interest rates being low in perpetuity.
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Now, of course, they weren't gonna be low in perpetuity.
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They were artificially low.
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Ultimately, interest rates had to rise and those funds were caught short.
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It created a run.
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And what happened is the bank of England, which is meant to be responsible for
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financial stability, rather than ensuring financial stability,
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used the opportunity to try and push the blame onto the mini budget for what
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was happening was in fact their failure to properly regulate the pension funds.
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And that was very difficult for
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us because we weren't aware of the LDI issue at the time.
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We were blindsided.
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And subsequently the bank of England themselves
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have admitted that two-thirds of all the gilt spikes that took place
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after the mini budget were actually downed to LDIs.
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So they've admitted that two-thirds of the market movement
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were essentially their fault, but they've only admitted that last year,
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long after I'd been removed from office.
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So you had a situation where there was a very strong group think in favor of one
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sort of economic policy.
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And I tried to upset that, I tried to disrupt that because I felt that was
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the economic policy that had led our country to decline.
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But the second thing was that there was a tinderbox in
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the market that I wasn't aware of.
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And the bank of England and
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others tried to blame me for their mistakes.
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>> Jon Hartley: I totally agree with you in the sense that one, I mean,
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there has been this enormous rise in new adherence to Keynesian economics,
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especially I think, since the Great Recession.
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And the gold financial crisis in the late 2000s.
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And what's interesting, too, is for
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all these people who say that Keynesian multipliers are very high and
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that in some cases that government spending somehow pays for itself,
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how is it the case that debt to GDP ratios around the world continue to rise
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in advance economies in the way they have, right?
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And so to me, I mean, and if you look at a lot of, I think,
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good empirical work done by economists, including the Hoover Institution,
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by folks like Valerie Rainey and others, the Keynesian multipliers ultimately
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are much lower than they actually are in reality.
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And that doesn't mean that there can't be some stimulus during recessions.
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But I think what it does sort of pink bears that it's ultimately not a growth
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plan and that if there is gonna be some spending during these good times or
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bad, that just government spending tons of money isn't
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gonna cause some economic boom like many seem to think,
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including, the current Labor government and many others.
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And I think, too, would really sort of, I think, strikes at court as well.
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Maybe this is just a characteristic of our
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age is just the desire to lay blame on others.
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I think, the Federal reserve in the US still won't in any way acknowledge
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the role that maybe how late they were to raise interest rates in 2021,
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2022, might have made inflation worse.
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It's just very much a, the inflation came from elsewhere.
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And nothing to do with all the stimulus- >> Liz Truss: Absolutely,
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I mean, and this is back to the point I was making about the bureaucracy.
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The bureaucracy has become increasingly empowered and
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Central Banks are the ultimate case of this.
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And the fact is they've failed.
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Inflation has been rampant, it's been particularly bad in the UK,
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interest rates were raised too late.
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We had massive quantitative easing essentially to pave the way for
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all of this public spending.
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Keynesian economics hasn't worked.
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We've ended up with massive debts.
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And I think the Federal Reserve is more part of
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the American political dialogue that there is talk of ending.
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The Fed being part of the problem,
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in Britain there is less scrutiny of the bank of England, and
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that needs to happen because you've got a system where the bureaucracy
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has gone unscrutinised, they've failed and they're not accountable.
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And I think in order to get the economic policies we want,
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which are supply side policies, small government policies,
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those types of policies, we have to change the role of central banks.
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I think they have become a big part of the problem.
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>> Jon Hartley: Yeah, and at some level it's interesting how independence of
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Central Banks, which I think is an important, in a real thing,
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in the sense that- >> Liz Truss: The word independence,
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when something's independent, independent from what?
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And what it's become is independent from blame or accountability,
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that's what they've become independent from.
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And ultimately institutions that aren't accountable to the public or
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aren't accountable to market become a problem.
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And I think they fundamentally, in Britain,
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we had a better system where the treasury and the Chancellor were accountable and
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then the bank of England was accountable to them.
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The system worked, we moved away from that and our economic problems have got worse.
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>> Jon Hartley: Yeah, whether you think it's research or
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discussion of green monetary policy, or
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how Central Banks can solve issues of race or other things like that.
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It's not to say that these aren't important issues, obviously.
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>> Liz Truss: This is institutions getting captured, because if they're not
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accountable to the public, they start to become accountable to NGOs or
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lobbyists or people with the loudest voices.
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And you've had the green fashion or the DEI fashion,
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and that has taken over the thinking of these institutions and
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they've lost sight of what they're meant to be there for.
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The bank of England has two jobs.
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One is financial stability,
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which it completely failed to deliver in October 2022, and
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the other is keeping inflation low, which it completely failed to deliver.
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If the head of the bank of England had been a politician,
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they would have been sacked long ago.
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And that shows you that there's massive problems
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with the incentives in the system.
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>> Jon Hartley: And I think, I wanna get into the media a little bit cuz I think
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the media plays a role in all of this at some level.
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I think the media does tend to hold water for
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a lot of these, say, bureaucrats.
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I mean, could you imagine how different the narrative would have been if,
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say, Trump was in power in the 2021,
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2022 inflation period and imagine inflation similarly jumped.
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How would the media characterize inflation then?
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And I think rather than painting it as a picture of,
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it's all supply chains coming from elsewhere,
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I think they would have blamed Trump in the same respect that they're trying
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to now look at terrorists and try and sort of look at inflation prints and
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tie them together and maybe tariff will cause some one time price impacts.
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But I guess the point is, to me it seems like the media is obviously biased and
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the mainstream news obviously biased and obviously, I think has played
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a huge role in all of this, I think, including especially in your premiership.
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I think the media obviously went berserk and were relentless and
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I think, to be honest, in my opinion, were quite unfair and
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never really gave your premiership a chance.
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You coined the term anti-growth coalition to describe sort of resistance
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from unions, the media, environmentalists, the parts of the Tory party.
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I'm just curious, obviously real GDP has been flat for
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a decade and a half in the UK.
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What are the major institutional roadblocks in your mind to reignite
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economic growth in the uk?
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I'm just curious, what kind of obstacle do you think these
29:31
groups play in realizing a true reform kind of vision?
29:35
Obviously, the Labour Party's in power now, so the opportunity for
29:41
pro-growth reforms has perhaps even been further diminished.
29:46
But I'm curious, thinking long term 20, 30 years, what sorts of institutional
29:52
roadblocks need to change in order for there to be any hope for growth in the UK?
29:58
>> Liz Truss: I mean, on the media, I think part of the problem is, yes,
30:02
they are biased or the mainstream media is biased towards the left and
30:07
they're also biased towards state institutions because they have kind of
30:12
permanent relationships with civil servants, state institutions which
30:17
are quite undermining, I think, of people trying to change the system.
30:22
So system change is not something they like.
30:26
They want to keep the status quo.
30:28
And the other thing is the media has just got increasingly trivial.
30:33
So whereas there would have been detailed analysis of economic policy, if you
30:38
watched a political show in the 1980s, the expertise has been hollowed out.
30:43
So it's much more of a coverage of a pantomime who's up, who's down,
30:48
who's plotting against who, soap opera than it is real analysis of the issues.
30:55
So I think there's two different problems.
30:57
One problem is their bias, but the other problem is they're shallow.
31:01
And that makes it very difficult for people like me who want
31:06
to change things fundamentally about our country,
31:11
because having those serious discussions is extremely hard.
31:17
Who are the vested interests?
31:19
I mean, the bureaucracy itself is a massive vested interest.
31:23
The government's spending, almost half of GDP.
31:26
Those are people's jobs, their livelihoods, their future careers.
31:29
Of course, they don't want to see that system dismantled.
31:32
Of course, they don't want to see transparency over what they're doing.
31:38
Of course, there's also all of the NGOs,
31:41
and there's been lots of talk about the Soros Network and
31:46
the World Economic Forum, but there are a lot of organizations
31:51
funded from groups outside the UK who are lobbying for policies.
31:56
So this Labour government, they said that they want to build more houses and
32:02
Britain has a massive problem with housing.
32:06
In the 1940s, Attlee introduced a piece of legislation called the Town and
32:10
Country Planning Act, which basically socialized land in our country.
32:14
So it's very difficult.
32:15
So Labour wanted to make some minor changes changing environmental laws.
32:20
There's been a massive backlash from the environmental NGOs and
32:24
now they've stopped that.
32:27
So this means you can't build something because there might be a bat there or
32:30
there might be a newt there, all those kind of things.
32:33
So it's a combination of the bureaucracy, the NGOs,
32:36
the big corporations that benefit from state regulation.
32:42
The people receiving the green subsidies or
32:46
the people getting the DEI money or all this kind of stuff.
32:51
So there's a whole bunch of people.
32:55
And what I think has changed about Britain and America is the elite is now left wing.
33:02
The elite are those people, they tend to live in the big cities,
33:05
they talk to each other, they work in the media, they work in the big corporates,
33:10
they work in the bureaucracy and they want to protect the system.
33:13
Whereas it's the working people who their jobs have,
33:17
gone because the country's de-industrializing or
33:20
they can't run their small business because there's so much red tape.
33:25
It's those people that want change.
33:27
And this is what I was talking about when I was talking about the anti-growth
33:30
coalition.
33:31
It is those vested interests, it is the people who have that political
33:36
power at the moment and ultimately that entire system needs to change.
33:41
I watch what's going on in America and I see that Donald Trump
33:47
is trying to challenge those types of vested interest.
33:52
>> Jon Hartley: I wanna talk a little bit more about the Labour Starmer government.
34:00
I'm curious, where do you see the UK now under the leadership of Keir Starmer,
34:05
who's been in power for- >> Liz Truss: We're heading for
34:08
bankruptcy is what is happening.
34:12
>> Jon Hartley: Well, I'm curious they've passed a number of radical changes.
34:16
On the tax side, they've abolished non-dom and
34:19
are now gonna start taxing profits outside the UK.
34:23
I think for a long time, the UK and London has been a very business-friendly place.
34:31
I mean, I think for people around the world to do business there.
34:35
And I think there were some questions or concerns maybe around Brexit for
34:38
a short period of time.
34:39
But I think those were largely smoothed over, and
34:43
the banks have largely stayed in the UK, but I think this is a pretty
34:48
big sea change now, actually taxing profits from outside the UK.
34:53
The sovereign government's also proposing to lower the voting age from 18 to 16,
34:59
not to mention all this spending and so forth.
35:02
I mean, what is the path in your mind?
35:06
I mean, it's interesting to see how quickly they've, I think,
35:10
lost some of their popularity in the polls.
35:13
But they've got another three years at least or so.
35:18
I'm curious, where do you think the country is heading and
35:23
what hope do you think there is here?
35:27
>> Liz Truss: I think it's important to note that things were bad even before
35:30
Labour got in.
35:32
That's why I tried to do what I tried to do because we had a huge debt,
35:36
we were spending vast amounts of money, taxes were the highest level for 70 years.
35:41
So things were already bad, and Britain was getting less competitive.
35:45
And the reality is that post financial crash we have been the slowest
35:51
country to recover from the financial crash in terms of GDP per capita.
35:57
So there is a fundamental problem with Britain's economic model.
36:02
We're not competitive enough, our energy isn't cheap enough,
36:05
our taxes are too high, our welfare state doesn't work.
36:08
The many problems that we discussed in Britannia Unchained still exist.
36:13
But what Labour have done is they turbocharged it, so
36:18
made it even worse by abolishing non-doms, by putting up taxes,
36:23
everything from VAT on private schools to making it.
36:28
They're introducing a new Employment Act that will make it much harder to
36:31
employ people.
36:33
They're just making everything worse.
36:35
And the reason is that they believed, and this is partly what happens
36:40
when you have a media that doesn't really tell the truth.
36:44
They believed that the reason Conservatives were failing is because of
36:48
austerity, because we weren't spending enough money,
36:51
which is absolutely ludicrous.
36:53
As I've said,
36:53
the reason the country wasn't doing well is we hadn't had enough economic growth.
36:57
So they believed their own publicity.
37:01
They believed that if they got into power, spent a bit more money and
37:05
were nice to the bureaucracy, everything would be fine.
37:08
And in fact that hasn't worked.
37:11
They are extremely unpopular.
37:13
They will be voted out of office at the next election.
37:19
It's not just on economic issues as well.
37:22
We've got huge problems with our criminal justice system, with two tier justice,
37:26
a failure to stand up to Islamism in this country.
37:30
The public are extremely concerned about where everything's going.
37:37
And I wasn't joking when I said,
37:39
I think there will be some kind of fiscal collapse in the 1970s.
37:45
A Labour government had to go to the IMF for
37:48
a bailout in 1976 because the country was stagnating.
37:54
There was high inflation and they were not able to fund government debt.
38:00
And I think that is the situation we could be in in pretty short order.
38:04
And the Labour Party MPs are not willing to vote for spending cuts.
38:11
They rejected some welfare reform that was proposed by the government.
38:16
So unless there is some kind of miracle,
38:19
it's hard to see how the show stays on the road.
38:24
>> Jon Hartley: One thing I think that probably strikes a lot of Americans do,
38:28
I think have a pretty good sense of the First Amendment rights and
38:32
right to free speech.
38:34
And there are very strong protections in the US, unlike in the US,
38:39
the United Kingdom never wrote down its constitution.
38:43
>> Liz Truss: We did have the Bill of Rights in the first place, I think, 1689.
38:50
>> Jon Hartley: Well, Canada, where I grew up, we have a constitution as well,
38:54
terror rights and freedoms.
38:57
But I guess you just don't have the same kind of protections that
39:02
you do with sort of in the same way that the US constitution is
39:06
enshrined a judicial review.
39:08
All these sorts of additional separation of powers, sorts of things
39:14
that you don't really have in a parliamentary system checks on government.
39:21
And so I'm just curious, I mean, do you see this as sort of this maybe global
39:26
challenge across the Anglosphere, where in Canada, the UK, Australia, New Zealand.
39:31
You don't have the same sort of protections to things like free speech as
39:35
you do in the US.
39:36
I mean, I think of things like Speaker's Corner,
39:39
which obviously is meant to, there's a number of things that I think in UK
39:44
that sort of are old messages trying to celebrate these sorts of things.
39:49
But now if you listen to say, Vice President JD Vance's speech and
39:54
you're talking about at the Munich Security Conference, and
39:59
you see these issues where people are being arrested for political films or
40:05
people are being arrested for praying in protest of certain things.
40:10
Those aren't the sorts of things that I think you see in the US regularly.
40:15
And I'm curious what your thoughts are on the state of free speech.
40:19
And these are other sorts of property rights protections and
40:25
other things that may be weaker in the UK and
40:29
how does that get resolved if at all in Uk in your mind?
40:34
>> Liz Truss: The underlying principle of the British Constitution is parliamentary
40:39
sovereignty.
40:40
And we do have a Bill of Rights and we did put in place free speech.
40:48
The problem is that since then legislation has been passed
40:53
which has removed these rights and be done by a majority in Parliament.
41:00
So what needs to happen in order to restore
41:03
the British Constitution to what it was is to repeal those laws.
41:09
It's as simple as that.
41:10
And you're right, it's harder to change things in America.
41:16
So it's harder to get rid of the First Amendment or
41:20
it's harder to change things like the Supreme Court,
41:25
in Britain it's easier to change them,
41:29
but it means there's less long term protection.
41:35
So what I'm saying is, particularly under the Blair government and
41:40
since we have seen the judiciary become unaccountable,
41:43
we've seen the bank of England become unaccountable,
41:47
all of these laws have been passed, these laws against free speech have been passed.
41:53
Like online harms legislation, those need to be repealed, but
41:57
they can be repealed through an act of Parliament.
42:00
The problem is we don't have a government that wants to repeal those things.
42:05
And this is why there is such a massive disconnect between the public and
42:10
the government and the elite that run the country.
42:16
But there are other similar issues in America.
42:19
If you remember, I mean, Hillary Clinton was arguing for
42:22
the First Amendment to be changed.
42:25
There are plenty of people like the woman who I think is now being defunded but
42:31
runs the public radio, she was saying that she didn't believe in free speech.
42:39
So those forces are there in Western societies.
42:43
They're fundamentally anti-democratic forces,
42:46
they don't want the public to have a point of view.
42:49
But I think in each country the battle needs to be fought in a different way.
42:54
And of course the US has the First Amendment,
42:57
we have our ancient British liberties.
43:01
The problem is they've been covered over with all this terrible stuff
43:06
that's been legislated in the past 40 years.
43:09
And what we need to do is elect a government that's gonna restore
43:13
the historic British constitution.
43:17
>> Jon Hartley: I guess, my question when I think of Tocqueville a lot and
43:21
the idea of the tyranny of the majority, could UK even elect
43:25
a government that could really restore these sorts of freedoms?
43:30
And I guess that that's the one challenge sometimes with some
43:35
majority type governance where it only takes 51% of
43:39
the populace to agree to kill the other 49, right?
43:44
And so, an extreme obviously, but I guess, that's the one sort of beauty
43:49
of the US Constitution where it's protecting even minority rights or
43:54
instances of people where the majority be against.
43:58
>> Liz Truss: I think the US Constitution is a very good document,
44:02
don't get me wrong, I think it's a good constitution.
44:08
That's not to say the United States does not have issues with things
44:13
like the Supreme Court, and there's no perfect constitution.
44:19
But you asked would British people vote for it?
44:21
Answer, 52% of the British public voted for
44:26
Brexit, that they are prepared to vote for
44:30
more big change if it is clear what they're voting for.
44:37
So I think the problem has been, and this is why the Conservatives did so badly at
44:43
the last election is the Conservatives were not clear what they stood for.
44:50
And in fact the Conservative Party is deeply split about what it stands for.
44:55
But I believe a proposition to restore the British Constitution and
45:00
give British people back the freedom of speech is incredibly popular and
45:05
people would vote for it.
45:11
>> Jon Hartley: I guess, I'm curious what the path forward is in your mind to
45:16
get to a place like that and who the standard bearers will be,
45:21
leading that charge sort of out of where the UK is right now on
45:25
a number of these sorts of fronts, both economic and legal.
45:30
I mean, I'm curious, you've got the UK Conservatives,
45:36
the Tories being led by Kemi Badenoch now.
45:39
And then you've got the Reform Party UK being led by Nigel Farage,
45:43
they only have four seats currently in Parliament, and Nigel is one of the four.
45:48
But in just the past few months, mid-2025,
45:53
the Reform Party is pulling ahead of both the Labour Party and the Tories.
46:00
I'm curious, obviously the Tories are still very divided and
46:05
I think, you put it this very well to me once where,
46:09
you said that, basically one half the Tories just have
46:13
a completely different sort of view than the other half.
46:18
And I'm curious, where do both these parties go from here,
46:24
and who do you think is gonna emerge victorious in the next few UK elections?
46:32
>> Liz Truss: Just in terms of the Conservative Party.
46:35
The two parts I'm talking about are essentially.
46:39
Do you believe in the sort of the globalist agenda?
46:44
Are you in favor of the international institutions like the European Convention
46:49
on Human Rights?
46:51
Are you in favor of net zero and pursuing environmental policies?
46:59
Are you in favor of transgender ideology?
47:02
These are some of the touchstone issues.
47:05
Or are you more in the nationalist camp?
47:08
You believe in Britain as a nation state.
47:11
You don't believe in following the sort of the international human
47:16
rights rules that mean that you can't deport illegal, immoral, etc.
47:22
That's the split in the Conservative Party.
47:24
And in fact, I think you saw something similar in the Republican Party between
47:29
the more Trumpite Republicans and maybe some of the more old school Republicans.
47:35
So it's exactly the same split that I think you see in US politics is now
47:40
happening in British politics.
47:43
And essentially there needs to be a realignment because there's one bunch
47:47
of voters and I talked about them, the people who voted for Brexit,
47:52
the people who don't believe in transgender ideology.
47:55
They want to see the country re industrialized.
48:00
They're not environmental fanatics who wanna ban fracking, etc.
48:05
And that is what is happening.
48:07
But the process of that is messy and who knows exactly
48:12
how it will turn out before the next election.
48:18
But what I'm convinced about is that the sort of Trump forces in Britain,
48:25
and we didn't really have an equivalent of the Tea Party.
48:30
And I think it's interesting what happened to the Tea Party in the MAGA movement.
48:33
But the Trumpite forces in Britain, I believe,
48:37
will win eventually and will coalesce.
48:40
But we're still going through that process of what you might politely call a debate.
48:49
>> Jon Hartley: You've written this book Ten Years to Save the West.
48:51
I'm curious, I wanna get the- >> Liz Truss: Here's a copy of it
48:55
live here.
48:55
>> Jon Hartley: Very good. >> Liz Truss: Roll with me,
48:56
there you are [LAUGH].
48:58
>> Jon Hartley: Well, I wanna give you an opportunity,
49:03
I'm just curious, is there in your mind at some level,
49:08
what is the real risk in your mind,
49:12
what happens if this coalition isn't successful?
49:17
I think growing up in Canada, there was certainly a lot of hope for,
49:23
I would say pro-growth Conservatives and
49:26
I'd say maybe a similar sort of similarly minded Conservatives
49:31
that Pierre Poilievre would win this election in 2025.
49:36
And because of a whole host of reasons that didn't happen.
49:40
And the Liberal Party of Canada is now entering its fourth government and
49:44
is continuing, a number of things, but it's a little different, but
49:48
largely a number of the same things.
49:50
It's largely the same people populated the Trudeau government.
49:53
I'm just curious, Ten Years to Save the West is certainly a very serious title.
50:01
I'm curious, what is your main argument in the book and
50:06
why is it so important that the people act now?
50:12
>> Liz Truss: What we're facing in Western societies and Anglosphere societies
50:18
are internal enemies who essentially want to undermine Western civilization,
50:24
whether it's importing masses of illegal immigrants,
50:29
whether it's pursuing Keynesian economics to the destruction
50:34
of the economy, the environmental agenda, while China and
50:39
India are busy building new coal fired power stations,
50:43
making our energy completely unaffordable.
50:48
And it's interesting, Greta Thunberg,
50:50
who's really the poster girl of these people, has gone from
50:54
campaigning on the environment to campaigning to be pro-Hamas.
51:00
It's a collection of Islamists, green zealots, big state people.
51:08
And you can see that that was what the Biden administration were doing with
51:14
things like the IRA, spending masses of money, focusing on identity politics and
51:20
Transgender ideology and Black Lives Matter and all that kind of stuff.
51:26
And meanwhile, our enemies, China, Russia,
51:32
Iran, North Korea are working together to take on the West.
51:39
And that's what I mean by we've got ten years because we need to get our
51:44
economic and cultural strength back and be proud of Western civilization.
51:50
Otherwise, we will see a combination of those forces,
51:54
the most potent of which is China dominate the world.
52:00
And the particular threat in Europe is the threat of Islamism.
52:05
And this is another force that is currently being unchecked and
52:12
it poses a threat to our way of life.
52:16
So these are the forces that the west collectively needs to take on.
52:20
I think Donald Trump winning in the United States
52:25
last year was an absolutely key part of the fight back,
52:31
but we now need to fight back in Europe as well as
52:36
the US because the US will be incredibly isolated
52:41
if Europe is taken over by those forces.
52:47
>> Jon Hartley: I'm curious, just what particular common interest on China.
52:52
Because I think China is the one that's really changed in maybe
52:57
the past ten years or so.
52:59
And really the world being now eyes wide open to various human rights abuses.
53:06
And also I think, particularly with the UK what's happened to Hong Kong?
53:10
Hong Kong being previously governed by the UK and it was, I think,
53:15
one of Margaret Thatcher's biggest mistakes with the Sino-British
53:21
declaration and in sort of handing over Hong Kong when it
53:25
arguably didn't really needed to be completely handed over.
53:31
But I'm just curious, what is your take now in terms of, I mean,
53:35
obviously Taiwan is being threatened by China.
53:38
I mean, where do you see the United Kingdom playing a role in?
53:43
Certainly it's been taking a number of Hong Kongers who've wanted to
53:48
leave Hong Kong and giving them BNO, British National Overseas status.
53:53
I'm curious, where do you see the UK playing a role in a world where
53:58
China's on the rise going forward?
54:01
>> Liz Truss: We need to be resisting the efforts of China to infiltrate
54:06
our country.
54:07
So, for example, the Chinese have a plan to build
54:13
a massive embassy in the center of London with huge capabilities.
54:21
They've been warned against it by the US,
54:23
these are the kind of things we shouldn't be doing.
54:25
We shouldn't be allowing the Chinese to take over our media or
54:29
our critical infrastructure.
54:32
There's evidence that that is exactly what they are seeking to do.
54:37
And ultimately the UK and Europe, the best way of fighting back
54:42
against sort of Chinese dominance is by making our countries
54:47
more economically successful and less dependent on China.
54:51
I mean, I've criticized Keir Starmer through this interview,
54:57
but one thing I'm pleased he did is sign a trade deal with the US,
55:02
we need to be working more closely with our allies and
55:06
we should be avoiding economic integration and spying and
55:11
intellectual property theft from China.
55:16
But the reality is of the way the world works at the moment that ultimately
55:22
is the United States that has to form the main bulwark against Chinese dominance.
55:30
>> Jon Hartley: I couldn't agree with you more.
55:33
Miss Truss, I really wanna thank you for coming on.
55:34
It's been a huge honor.
55:35
>> Liz Truss: Great pleasure.
55:36
Good to be on.
55:37
>> Jon Hartley: It's been an amazing conversation.
55:39
>> Liz Truss: Thank you.
55:41
>> Jon Hartley: This is the Capitalism and Freedom, the Twenty-First Century podcast,
55:44
an official podcast of the Hoover Institution Economic Policy Working Group
55:46
where we talk about economics, markets, and public policy.
55:49
I'm Jon Hartley, your host.
55:50
Thanks so much for joining us.
55:51
[MUSIC]