After the Napoleonic Wars, Britain had acquired a large national debt that was 225% of GDP. Britain also incurred an additional layer of debt to pay off slavers when their trade was abolished – which wasn’t finally paid off until 2015. Despite this, the country managed to dominate the world for the next 125 years. It goes against basic intuition, but it is actually quite common, as America demonstrates today, for the world’s superpowers to have colossal debts and yet have colossal power at the same time. The size of state debt throughout history has often been astronomical in size; with the guarantee of repayments sometimes the only factor keeping states one step from disaster.
The Eurozone debt crisis of 2009-2014, which was both destabilizing and predictable, did not just revolve about the size of the debt, but more specifically in terms of the willingness of governments to make debt repayments, and for them to adhere to European Commission fiscal rules. Greece, which was at the epicenter of the crisis, simply could not afford the repayments on debt that it had accumulated since hosting the Olympics in 2004. This reality threatened to severely cripple the government bond market in southern Europe, as far-left parties threatened to cancel sovereign debt, politicians refused to restructure their economies, and some groups advocated the abolition of the Euro currency itself.
The contagion from Greece spread to Italy in 2011, where probably one of the most astonishing political moves of modern times took place. Mario Monti, an economist who had never been in politics before, was made a lifetime senator by the country’s President, Giorgio Napolitano. Despite having no political experience, and having never been elected, Monti was then asked to form a government, and ruled for the next 16 months. As an economist who had previously worked for the European Commission, he was the technocrat put in place by the powers-that-be. His tasks were to make sure that Italy restructured its economy and abided by EU fiscal rules – and avoid the alternatives of cancelling its state debt and leaving the Euro as some citizens wanted. An additional task may have been to let refugee boats reach the shore from their Libyan ports. Incredibly, just like him, his entire cabinet was made up of unelected individuals with no political experience, and all of the political parties in the national legislature, apart from Lega Nord (Matteo Salvini’s party), voted to back this government.
The Eurozone, which had prematurely allowed weaker economies to join in order to boost its membership, quickly realized how dangerous this was. A single currency in Europe sounds good, but when different governments using the same currency have different budgets, interest rates, fiscal structures and stark differences in GDP, a crisis was always possible. And when such a crisis arrived, the central authority in Brussels was forced to act quickly to plug both the economic and political gap, with Monti being the ideal man for the job at the time. It is quite remarkable that Italy’s national legislature voted to be ruled by unelected technocrats imposed by the European Commission, though of course most of the voting public were outraged. As a result, Mario Monti’s government ended up decisively losing the next election, picking up just 10.5% of the vote.
Italy’s symbiotic experience with technocratic government and national debt was unusual, yet 750 miles to the north, another strange situation had also occurred in relation to these two factors. In Britain, the Conservative Party entered government in 2010, largely due to their promise to end the budget deficit and get Britain’s national debt under control – though they never achieved either of these goals. The Conservative Party’s election campaign strategy of 2010 was to highlight the European debt crisis in southern Europe, and then pretend that a similar crisis was about to break out in Britain, and that only they could prevent such a situation. There was of course a small chance of this happening in the future, but it wasn’t as likely as many were claiming. This was because Britain’s credit rating was much higher than Mediterranean countries, its economy was better managed, and of course, it wasn’t in the Eurozone.
Yet once in government, David Cameron, with the support of his coalition partners, did the complete opposite of what he had promised, and embarked on massive borrowing increases, whilst simultaneously claiming that he was adhering to the debt reduction that he had campaigned on. From 2010 when Cameron took office, Britain’s national debt consistently rose annually to £1.78 trillion (86% of GDP) by 2018. The Conservative Party was never really serious about reducing the national debt or ending the budget deficit; in reality, like Mario Monti, they simply wanted to ensure that repayments were made, and that the debt system was able to continue via implementing fiscal restructuring. If anything, the technocrats’ main aim was to restore confidence in the ability of governments to repay their debts, rather than reduce the debts. After all, bailouts in some cases (like Greece) actually raised debt levels, as they too had to be paid back in full; just over a longer, more reasonable time frame.
David Cameron, although elected by the public rather than being appointed by the European Commission, still displayed a technocratic sycophancy when doing the bidding of the Commission in relation to national debt. Indeed, he was accused (quite rightly) by a journalist of being ‘infected by Europe’s technocratic disease’. Cameron’s great role, of playing the small government conservative who claims to cut debt, whilst privately increasing both borrowing and the budget deficit, has quite frankly left him looking like a fraudster. Considering his Conservative Party leadership election and term as Prime Minister were largely managed by establishment liberal Andrew Feldman, none of his actions should be a surprise.
Mario Monti’s tenure as Italian Prime Minister in 2011-13 is now largely forgotten, but was important at the time, because the European Commission parachuted in an economist to save themselves from their own negligence. Admitting weaker economies into the Eurozone before they were able to cope with it was their greatest mistake, and this was largely down to their desire to expand the Euro currency as quickly as possible. The consequence of this was widespread fiscal problems throughout southern Europe, which were then only exacerbated by the migrant crisis of 2015.
Politically speaking, things have changed quite a bit in the West in recent years, with Monti fading into obscurity, and Cameron falling on his own sword 6 months before Donald Trump was elected. For now, the technocrats of today remain in the European Commission, and don’t dare to spread their wings any further, fearing correctly that they will provoke a populist reaction. Yet long into the future, when another Eurozone crisis emerges, or indeed any similar national debt crisis occurs, look out for the two types of technocrat that will emerge into the public domain once again. The first being the non-political fixer, and the second being the highly political liar – both of whom will be dedicated to making sure countries continue paying their debts and borrowing with interest, and more importantly, that those countries remain in the international system.