Gilt trip: Liz Truss’s hobbled leadership

Hey, Ryan Reynolds here for Mint Mobile. You know, one of the perks about having four kids that you know about is actually getting a direct line to the big man up north. And this year he wants you to know the best gift that you can give someone is the gift of Mint Mobile's unlimited wireless for $15 a month. Now you don't even need to wrap it. Give it a try@mintmobile.com Switch upfront payment.

Of $45 for a three month plan.

Equivalent to $15 per month.

Required new customer offer for first three months only. Speed slow after 35 gigabytes. If network's busy, taxes and fees extra. See mintmobile.com hey, Ryan Reynolds here wishing.

You a very happy half off holiday because right now Mint Mobile is offering you the gift of 50% off unlimited. To be clear, that's half price, not half the service. Mint is still premium unlimited wireless for a great price. So that means half day. Yeah. Give it a try@mintmobile.com Switch upfront payment of $45 for three month plan equivalent.

To $15 per month.

Required new customer offer for first three months only. Speed slow. 135 gigabytes of network busy taxes and fees extra. Cmintmobile.com.

Hello and welcome to the Intelligence from the Economist. Today from London, I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Cuba's centralized economy was never all that efficient, but now it's in a crisis not seen for decades. Queues for basics have got even longer. Permitting imports and bumping salaries up five fold hasn't outpaced inflation. We ask what's to be done? And it was Louis XIV who gave us the modern manicured lawn. Beautiful, perhaps, refined even. But in terms of biodiversity, they're a disaster. We look at the case to stop watering, weeding and meddling. Just let lawns do their natural thing. But first. They called it a mini budget, presumably hoping that might spare it much scrutiny. But the economic plan revealed by Britain's new Prime minister, Liz Truss and her chief finance minister, Kwasi Kwarteng, could not have drawn more attention. For three weeks now, Britain's financial markets have been reeling on the suggestion of sweeping and unfunded tax cuts. The pound tanked. Bond prices fell fast enough to spark emergency intervention from the central bank when it looked like pension funds might start to crack. The bank would like to step back, but the markets are fully spooked, leaving mistrusts painted into a politically difficult, maybe even inescapable corner.

Liz Truss's government is already damaged beyond repair.

Andrew Palmer is our Britain editor.

Because of the mini budget that she and her chancellor, Kwasi kwateng outlined on September 23, which included massive unfunded tax cuts and no sense of how they were going to pay for them, the markets rebelled. They are looking for clarity. Ms. Truss is unable to provide it. It's very unclear how she can do so. And as a result, politically and economically, her credibility is shot.

Let's wind back a bit. How did we get to where we are today?

So the measures that were announced on September 23rd are the way to understand this. That created two problems in the markets. One was whether Britain had become a riskier place to lend to. This is a country which was planning to embark on a big borrowing spree and indeed still is at a time of rising inflation. And that begs the question about just how dangerous a place Britain is for creditors. The second is that as those investors got more nervous and markets became more spooked, a specific dynamic was unleashed among pension funds. And that required the bank of England to step in to prevent those funds from selling long dated gilts. So these are very long duration government bonds at very low prices, which would have set this vicious spiral going in markets where people sell, the price drops, people sell again, the price drops, and so on and so forth. The thing to do here is to separate out two dynamics. One is a longer run question about whether Britain is a riskier place to lend to. And the other is this specific and acute problem that the bank of England is trying to resolve about stopping pension funds from selling assets in fire sales.

So has what the bank of England done what it had to do, has that calmed things down?

It's calmed it down a little bit, but not much and not necessarily for good. So the bank's programme was, which involves it buying bonds, being a buyer of last resort in the jargon, is supposed to end this coming Friday. That's October 14th. So the end of the day and there is a worry about what happens when markets open again at the start of next week if the bank is not there. Now, the governor of the bank of England, Andrew Baillie, made it very clear this week, and very publicly, in what many are seeing as an odd gamble, that he does not want to extend that bond buying program, that basically the bank is going to let the market do its stuff beyond the end of this week.

A lot of people are saying, we've announced that we will be out by the end of this week. We think the rebalancing must be Done.

And my message to the funds involved.

And all the firms involved in manage those funds, you've got three days left now. You've got to get this done because again, part of the essence of a financial stability intervention is that it is clear, clearly temporary.

What he's trying to do there is encourage those pension funds which own these long dated assets to basically sort out their finances, build up their cash buffers, get themselves into a safer position by the time the program ends. However, if on Monday it turns out that pension funds continue to sell, there's lots of nervousness. It's likely that the bank is going to have to step in again. The central bank cannot ignore massive market turmoil, in which case Mr. Bailey's own credibility is damaged. At a time when the institutions on which Britain's international reputation relies is kind of in trouble everywhere. That in itself would be another bit of bad news for Britain.

But the bank of England isn't the only player here. The Government could make different plans, better plans, clearer plans to calm those markets.

Yeah, totally right. I mean, fundamentally, this is the Government's problem to solve. They are the one who created the issue by raising questions about Britain's fiscal responsibility. It's up to the Government now to sort things out again. And so far they've done small and relatively easy things. There's been a symbolic but fiscally rather small U turn on one part of their tax cutting package. They have brought forward two to October 31, the date on which Mr. Kwarteng will do his medium term fiscal plan. That's where he lays out his plans for fiscal sustainability over the medium term. And he is now, along with Ms. Truss, talking a good game in terms of showing greater deference to the institutions that previously they disparaged. So the treasury, the bank of England itself, the Office for Budgetary Responsibility, which is a fiscal watchdog here, all, all of those were criticised in one way or another or ignored by the government prior to this blow up in markets. Now they're desperately showing those institutions a bit more respect. That's the easy part, though.

And the hard part is financing all of the cuts that they initially promised. I guess.

Yeah, the hard part is basically a market which is asking, well, how are you going to pay for all these tax cuts? So one option would be spending cuts, but you would need to cut an enormous amount. So the think tank called the Institute for Fiscal Studies this week came out with calculations that reckoned the Government would have to save around 60 billion pounds to fill in the holes created by the mini budget. But Also by rising interest costs on government debt and by deteriorating economic outlook since projections were last done in March, it's very, very hard to see where that kind of money comes from. Government departments are already suffering real terms cuts because of inflation. And then the politics of doing things like clamping down on benefits payments, welfare payments, is obviously extremely toxic.

And what about the prospect that the government should just simply pull the plug on this initial plan and get out of the hole they've got themselves in?

Which would mean reversing the tax cuts that Ms. Truss campaigned on very explicitly over the summer as she bid to become Conservative Party leader and Prime Minister in. It's almost certainly the most sensible course at this point. However, it's just almost impossible to see how she can do that politically. It's her flagship program. Her credibility is already basically shot. So where that leads, the government is stuck. Ms. Truss doesn't want to do spending cuts. She said that yesterday in the Houses of Parliament.

What we will make sure is that over the medium term, the debt is falling, but we will do that not by cutting public spending, but by making sure we spend public money.

Well, she doesn't want to reverse course on tax cuts, so they will probably, in the short term, try and muddle through, remain committed to the tax cuts that they've outlined, promise some really implausible outcomes on growth, say they'll cut spending without specifying exactly where and claiming that this is a global problem. Government bond yields are rising everywhere. That's a way of trying to get through it with a whole great dollop of fudge, but it's unlikely to last beyond the next couple of weeks.

And so while that plan plays out, where does that leave Britain internationally? What will the market say to all this?

Well, internationally, Britain looks like an outlier. Kwasi Kwateng is in Washington today to talk to the International Monetary Fund. The fund has been publicly very critical of the mini budget. So the sort of the voice of international fiscal orthodoxy doesn't get what Britain is doing and thinks it's not sensible. And there's been critical voices from governments outside Britain too, that this is an experiment that they don't want to embark on. Britain looks like an outlier to investors too, as we've discussed, it has poked its head above the parapet and therefore is a bit of a target at this point for markets.

And in any case, as you say, Liz Truss's credibility is shot. He or she is painted into a corner.

She is. I mean, her choices are very, very limited. She had a meeting last night with backbench Tory MPs, the mood was sulfurous. The Tories are behind labor by ludicrous amounts in the polls. And it already feels as though her government is shot. And that's a remarkable record. And if you think about how long she's been in office, she came in to Downing street on September 6th. The mini budget was September 23rd. And that's what started all of this. We had 10 days of mourning in between for the death of the queen. So the trust government was in effect, in control of the political narrative for about seven days, which, as we wrote this week, is the shelf life of a lettuce.

Andrew, thank you very much for joining us.

Thank you, Jason.

Xi Jinping is the most powerful man in the world and a big mystery. I'm Su Lin Wong, host of the Prince, a new podcast from the Economist. It's the real story of China's leader, his traumatic childhood, his rise through a brutal regime and the lessons he learned. Now he wants to reshape the world. To understand what's next, you need to know where he came from. Listen to the Prince from the Economist, wherever you get your podcasts.

Last month, Hurricane Ian tore through Cuba.

Power and many without a roof over their heads. In one province, more than 63,000 homes.

Were damaged, and there is little hope that the storm devastated crops and caused blackouts. But Ian was only the latest in a string of disasters to hit the island. In May, 47 people died in a gas explosion at an upmarket hotel. And in August, a lightning strike caused a fire on the island's main oil storage facility. The inferno rattled Cuba's already struggling energy grid and killed 14. All of it has highlighted the troubles of a country that's crumb. And ordinary Cubans are increasingly demanding more from their government.

Cuba is undergoing the worst economic Crisis since the 1990s, thanks to a cascade of events.

Sarah Burke is our bureau chief for Mexico, Central America and the Caribbean.

It started really with Venezuela's economic collapse in 2014, which limited the amount of cash and cheap oil that it was sending to Cuba. Then Donald Trump tightened the American embargo, and that limited how much money, how many remittances could be sent back by relatives. And then COVID 19 hit, shut the island down to tourism, and that hasn't really yet come back. And then the hurricane has taken out the little crops that were actually growing, including tobacco.

So how has Cuba's government dealt with each of these things as they've come up then?

Well, it has limited ability to I mean, it Runs a centralized economy and it's got a lack of foreign exchange, so it can't buy what it needs for the population, be that food, energy, fertilizer to grow crops. So the government has done what it usually does in this situation and just relax the rules a little for the private sector to play a role. So Cubans can now import some goods to sell rather than just use. And the big thing is last year they said that companies could start. Companies were in theory illegal before then with up to 100 workers and, and since then, 5,000 small businesses have been founded. Some are conversions from businesses that were working anyway but now are legal. But they're very small, they're smaller than state run firms. They don't have access to credit, they have very difficult regulations. So really it's not going to make a huge difference to the economic situation.

And when we've talked about Cuba on the show before, the big question has been how the economy is split into a dollar economy and a peso economy. How is that looking now to try.

And do away with that? At the start of 2021, the government unified the peso, so it devalued it from parity with the dollar to its black market rate of 24 pesos to a dollar. This is a needed policy, but it was very badly timed. Inflation soared to 152% in 2021, and the exchange rate on the streets is now 200 pesos to the dollar and rising. So to counteract this, they, the government had thought that this might happen, but not to this degree. So they increased state salaries fivefold, but that's not kept up with inflation. So people have been getting poorer and they can't afford basic staples, you know, sugar, rice, really simple things they're struggling to eat.

And all of this in a country where it wasn't always that easy to get your hands on staple foods anyway.

No. And now it's harder and the queues are longer and everything's more expensive and people are unhappy about this. Some are leaving, obviously, those who can, others we're seeing more discontinued. So in July 2021, thousands of Cubans came out to voice their anger over shortages and lockdowns and one party rule. And hundreds were arrested. And these small protests despite that continue. I mean, you're seeing more and more. There was a recent blackout after the hurricane, and again Cubans took to the street.

But is any of that protest, any of that protest mood going to lead to change?

Do you think people hoped that Raul Castro, who took over from Fidel, his brother would reform the country. And you know, the private sector has opened a little bit, but it was always dropp as opposed to the actual flow that Cuba needs. And the ruling party and the civil service bits of it are very resistant to large scale change. And the state just doesn't want to hand over control of the economy to the private sector. But you know, things are getting so bad that they may have to just give more and more space. When you don't have crops, when you don't have enough money to buy seeds or fertilizer or food to put in government shops for the ration books that they still have, it's impossible to see how this is going to work.

And you mentioned the people who can get out are already getting out.

Yes, as many as possible. So in the year since October last year, almost 200,000 Cubans have been caught trying to cross the border from Mexico to the us. That's four times the number in the previous two years combined. And it's far more than previous exoduses from the island in 1980 and 1994. The island is emptying because people just see there's no future there.

Thanks very much for joining us, Sarah.

Thank you, Jason.

You have to draw a line when it comes to these big lawns as to just how much you do. Of course, if you wanted these as good as the terrace lawns, you'd probably need 15, 18 people working here, right? Few things in the modern world are as ubiquitous and yet seemingly mad as lawns.

Tom Banham went on a lawn reporting trip for 1843, our sister magazine.

The fine lawns at Tussmore House are a good example. A sprawling mansion and estate 20 miles north of Oxford, its lawns are so perfectly flat and exactingly sure that they induce a kind of vertigo. They're pretty fine, pretty fine. But I visited Tusbore House and spoke to David Hedges, Gower and Paul Gough, the two turf specialists entrusted with the lawns. With lawns, you know you can do so much to them, as you'll see with the three fine lawns that we'll see around the house. Ben, the hair work is really amazing to behold. These lawns speak of wealth and refinement. But even for most of us, the perfect lawn is perfect in the same way. Verdant grass of even length with stripes maintained by regular mowing.

Most lawn care is about planning. I love the saying here. Fails to plan, plans to fail.

At Tussmore, Paul's six month team spend at least 12 hours a week nursing the free lawn to bring the house, you can see an old core hole down here.

So that would have been in a bit of aeration we'd done some time ago.

Okay.

Yeah.

So deep, deep. His gardeners moan water, apply organic fertilisers and winkle out weeds and competing grass species by hand. They scarify the turf with rakes to remove moss and loose grass and use special machines to break up thatch, the dead grass and roots that clot the bottom of each blade. The grasses at Tuskmoor might be at one extreme, but while it might look nice to our sensibilities from another angle, you could say even less exact. Lawns are gardening gone mad. We spray herbicides to continue kill weeds, then layer on fertilizers to provide the nutrients they would have supplied. We water liberally so grass can thrive, then spend hours every Sunday negating that hard work, mowing a few centimeters off a plant that grows a few centimeters each week. At Tuspol, they're almost never not cutting. You know, we've got two people cutting grass five days a week, constantly. Right. Sisyphus himself might have balked at the unproductiveness of the task. So how did something so unnatural become the standard aesthetic for much of the Western world? The modern lawn was invented in France, and largely thanks to the taste of Louis XIV and his principal gardener, Andre Le Notre. Le Notre's gardens at Versailles were an expression of Louis XIV's absolute power, both over the natural world as well as his subjects. When run at full tilt, the estate's fountains consumed more water each day than the population of Paris. To conserve it, engineers devised assistance system of whistles to warn each other when Louis was approaching so they could be switched on and off as he passed. But while the inspiration for lawns came from Louis Court in France, Britain was where they were perfected. Lawns weren't entirely unknown in the uk, but Charles II gave them the royal seal of approval. He was so enthralled with Louis gardens that he commissioned another French landscaper to redesign London's St James's park in the same style. By the early 18th century, the gentry and newly wealthy industrialists of England wanted their country houses to sit in sprawling landscapes with lakes and endless lawns. These lawns were the ultimate signifier of wealth. They were not just expensive to maintain, but were also a signal that the owner was willing to sacrifice perfectly good arable land for a manicured view. They served no purpose beyond the occasional game of palmau or bowls. When, in 1830, Edward Beard budding, an engineer, built the first push Lawnmower, the modern yard got yet another boost. His invention was perfectly timed for members of the newly emerging suburban middle class. As the British Empire expanded, lawns sprang up in places where they had no right to exist, from the Australian desert to the Rhodesian savannah. Lawns were slower to take off in America, perhaps because the landscape was more unforgiving, or maybe because of the lack of a taste. Setting aristocracy. Instead, homeowners either used their yards to grow food or let nature take its course.

Then they came back from the war. 15 million GIs clamoring for new homes and a piece of land.

Private lawns in America became a secular religion only after the Second World War, when suburbs spread like crabgrass. Almost overnight, suburbia was born. Hundreds of hectares of orchard and cropland were plowed up to build millions of houses, joined together by smooth green grass. The uniformity of these lawns was helped by new herbicides and pesticides that had been developed during the war.

Today, chemicals are available which will kill insects weeks after they're applied.

When we think of grass, we think of one thing. There are around 12,000 different species of grass. Grassland is vital to the planet's existence. They support herbivores from zebras to elephants. Their flowers support pollinators and their shoots support insects. And those insects provide food for birds, mammals and the entire food chain. In other words, grasslands are teeming with life. But our typical mown lawns are virtually lifeless in comparison. The lack of biodiversity of our lawns as we cut and weed them is reflected by a wider loss of flora and fauna in the world since the Industrial Revolution, Britain, for example, has lost half of its natural biodiversity. Meadows, with their open fields of grass and wildflowers, were once the defining feature of the British landscape. But 97% of them have been lost since the 1930s. And insect populations have dramatically collapsed over recent decades, with some biologists warning it could lead to a collapse in food production, with society following soon after. Lawns didn't get us to this point. Blame intensive agriculture, with its 100 acre fields and dependence on invertebrate killing chemicals. But lawns might offer a means of escape. If gardens, parks and lawns were returned to their natural state, they would become much more hospitable to insects. There are almost 23 million private gardens in Britain alone. But environmentalists face a tough battle to drive us off our lawns. But the simplicity of their solution is in their favour. Stop mowing, stop spraying and stop meddling. In 2018, plant life, a conservation charity, launched no Mow May to encourage people to let their grass grow in late spring. During last year's campaign, participants discovered more than 250 different species of wildflowers in their lawns. But maybe more impressive is the admittedly small trial that is underway at King's College at Cambridge University. Cambridge, in some ways, is the epicentre of our love of manakid lawns that demonstrate wealth and power. It is full of sublime lawns and ubiquitous signs warning you to keep off them. The meadow itself isn't fantastic. It's only two years old. Before then, it looked like that. In 2019, Stephen Coghill, the college's head gardener, ploughed up a strip of turf nearly 40 meters long and sowed it with a specially blended seed mix. By the next year, the sterile lawn had turned into a glorious wildflower meadow. I went to see it last summer and it bloomed in a riot of red poppies, white oxeye daisies and violet cornflowers. The air was ripe with the smell of blooming life, wafts of mint and citrus. The noise was extraordinary. Crickets churned and insects hummed. Butterflies flitted about. Coghill had to win permission from the gardens committee who agreed to a limited five year trial.

We were astonished, but then again, I had to sort of come over here.

And actually do it. I like the manakers, though, which demand huge amounts of fertilized as pesticides and irrigation. This meadow needs neither extra watering nor chemical treatment. He found that wildflower meadows and our.

Wildflowers in this country are adapted to.

Growing in nutrient poor conditions. While it is beautiful, prettiness isn't the point. The meadow is a step towards reversing the collapse of fauna and flora in Britain. Though the King's Meadow is just a small initiative, the results are staggering. Last year, a biologist at Cambridge found 130 different species of moth in the meadow. The number of plant species has more than tripled. The tall plants, shoots and flowers provided a home for insects, which attracted a plethora of birds and bats.

You know, it's just how often in society do we have the chance to run through a wildflower meadow these days?

No, definitely.

Exactly. You don't. I absolutely love it.

And if this tiny transformation of a comparatively dead manicured lawn to a vibrant meadow serves as an example that spreads across the gardens, estates and yards of Britain, our devastated biodiversity may just start to rebound. All we need to do is let our grasses grow. Californica, this is the Californian poppy. And then we've got lots of lovely grasses. We've got wild marsh around.

That's all for this episode of the Intelligence. Let us know what you think of the show, drop us a line@podcastseconomist.com or leave us a rating wherever you listen. We'll see you back here tomorrow.

It.