Nigel Farage vs The Bond Market: Round One (He Lost)
Farage has discovered what every populist eventually does - you can’t outshout mathematics.
Welcome to Bearly Politics - where I desperately try to keep a straight face while the UK’s populists discover mathematics. I’m The Bear, and today’s piece concerns Farage, the bond market and what happens when nationalism meets a calculator.
“I would want to come back as the bond market. You can intimidate everybody.”
This now famous quote by Bill Clinton’s strategic advisor, James Carville, has been rattling around in my head for the past day or so after the sound of a thousand popping champagne corks was heard coming from the general direction of the City yesterday.
The reason? Nigel Farage - ye olde patron saint of pint-fisted rebellions, man of the people and scourge of economists - has finally been forced to bend the knee to the invisible hand that slaps back. He who once swaggered through talk shows and packed rallies promising billions in tax cuts and a bonfire of bureaucracy discovered that gilts have feelings too - and those feelings become rather panicky when they sense nationalism1 on tap.
The sound we heard yesterday, beyond the champagne corks, was the noise of a populist discovering mathematics2.
His speech setting out his economic plans was an out of place ode to fiscal gravity - framed as “realism” by some, but written in the unsteady and quivering hand of a man who’s just been introduced to a Bloomberg terminal for the first time.
The £90bn fantasy is gone with a poof and has been replaced with a sort of penny-packet tinkering that wouldn’t look out of place in a mid-tier LibDem manifesto.
He admitted to the cameras, normally his friends, that huge tax cuts just aren’t “realistic”, to which you could hear the ghost of Liz Truss choking on her salad and a chorus of people shouting “No shit, Sherlock!”
The man was at the forefront of what was meant to be the economic revolution that would save the UK - Britain unleashed and Union Jack’d to the teeth, red tape aflame, taxes slashed and bureaucracy drowned in a barrel of room temperature bitters.
That man is now gone.
In his place we have someone uncertainly talking his way around smaller ambitions - income tax thresholds to be raised when finances allow, inheritance tax cuts for family farms and businesses3 and IR35 rules dealt with to please the contractors who spend their weekends retweeting him.
And to pay for it all?
Well, that remains as foggy as ever with the magic beans of “growth” and “efficiency” - both of which aren’t so much a plan as a terribly boring motivational poster.
Farage has built quite the career out of sneering at the very idea of fiscal constraint - Brussels was a waste, the Treasury is timid, economists are elitist, experts are boring and the markets were there to be conquered by sheer force of plucky patriotism - but where he stood on Monday, chastened and explaining to his acolytes that tax cuts must wait until the economy is in better shape shows that he is becoming the thing he loathes most: a man quoting fiscal realism instead of slogans.
Don’t make the mistake of thinking that curtseying to the bond markets have resulted in workable numbers or actionable plans - no no. We get vague notions of cutting spending like the public sector is an out of control hydrangea4 that just needs to be pruned back, but on the questions of which departments? Which years? Silence.
Welfare will be reformed apparently - which is Farage-speak (Farago?) for kicking the sick while promising to pray for their recovery. There were of course the mutters about people who would be better off if they didn’t take time off for “mild anxiety” - a phrase that manages to be both medically illiterate and morally repulsive - while hinting at the idea that young people are paid far too much on minimum wage5 and completely evading what his stance is on the pensions triple lock. The man’s economic policy is a see-saw balanced between cruelty and cowardice.
He also made a rather big promise about housing - “the biggest council house building programme ever”, he crowed.
Splendid!
Except - with what workforce, exactly, given that he also wants net zero immigration? Is he planning on having these houses built by the same ghost workers who will fill NHS, hospitality and care vacancies once all the foreigners have been deported? This is such a Farage move - demanding more homes and fewer humans.
There are also promises of unleashing enterprise through lower regulation - but what enterprise exactly is he referring to here? The pub that’s closing every twelve hours? The haulage firms crippled by the border checks that he championed? The self-employed couriers whose wages evaporate the moment the fuel price jumps? Farage’s economic model is the exact one that the Tories have flogged for fifteen years, except shouted louder and spelled worse.
This is, of course, not a uniquely British issue either - it’s something we’ve seen numerous times playing out across Western democracies with a dreary predictability to it.
Populist arrive with promises of revolution, discover that sovereign debt markets don’t care terribly much about your manifesto and they end up becoming more and more technocratic as time goes on.
The best example has to be Giorgia Meloni. She stormed to power with promises of tearing up rule books and defending Italian sovereignty against Brussels while restoring national pride through economic nationalism - but did that actually happen?
Well, not really - she kept the spending taps firmly in the spenta6 position, maintained Italy’s commitment to fiscal rules set by the EU and quickly figured out that when you’re sitting on a debt pile worth nearly 140% of your GDP that the bond vigilantes don’t care terribly much about your views on traditional values.
And why did that happen?
Because populism is, at its very core, an opposition sport - it only ever functions on the luxury of being able to promise everything while at the same time being responsible for nothing. From the opposition benches you can pledge tax cuts and spending increases, closed borders and economic growth, national sovereignty and international trade deals until you’re blue in the face, all while blaming the “establishment” for why exactly these things haven’t happened.
Except the moment that you get to the pointy end of the stick and you approach real power, there are a few things that happen simultaneously - the bond markets start pricing up your policies, coalition partners begin forcing moderation, the civil service patiently explains what is actually legal and materially possible and international obligations turn out to be rather less optional than your very entertaining rallies suggested.
Populism, as a rule, works better as a diagnosis than a cure - it’s very good at identifying grievances (stagnant wages, regional inequality, etc) and very bad at actually solving them, mainly because the solutions it offers are economically illiterate, politically impossible, borderline illegal or physically just not doable - and sometimes they’re all four at the same time.
The fuming and frothing rhetoric works brilliantly when you want to win votes, but catastrophically for actually governing and is why every populist government faces, eventually at least, the same choice - you either moderate and betray your own base, or you govern as promised, a la Javier Milei in Argentina, and watch your economy self-immolate before running off to get a $20bn bailout from the US.
Most populists choose the former and then spend the rest of their time in office desperately trying to convince their supporters that the surrender they’ve been forced into was actually part of their strategy all along.
This is where Farage now finds himself - having to fight every one of his instincts asking him to bellow at something vague and formless while having to look reality in the face.
His followers will be fuming at this - the man who promised to “take back control” now talking like he’s begging for permission after he spent a decade roaring against the elites.
And yet, below the moderation in tone, the nastiness is still there - the welfare rhetoric, the jabs at mental health and the dog-whistled contempt for young people and the poor.
What’s probably most insulting though is the pretence from a few publications that this retreat should somehow be treated as maturity - it is not that.
It’s fear.
He’s not started a long road of moderating because he’s grown wiser, he’s doing it because the fantasy that he’s sold to millions of Reformati around the country unfortunately spooks the bodies that have the UK by the short hairs. The fact is that the City doesn’t give two shiny shits about patriotism - it cares about repayment schedules.
His speech also further illustrated (yet again) just how very little he understands the thing he’s trying to master, because real fiscal credibility requires more than adjectives - it needs an actual confrontation of the hard bits.
The stagnant productivity, regional collapse, broken planning system and a workforce in the UK that’s burnt out and has been underpaid for a good fifteen years. None of that can be fixed out of pure will, and you can’t spreadsheet your way out of national exhaustion.
Farage’s skill - for lack of a better word - lies in selling moral resentment as economic strategy. If people feel poorer, blame the anxious, the lazy, the migrant7.
Definitely don’t touch on the structural rot that his own Brexit wet dream has caused, the impact of the hollowing out of local industry and what it actually looks like when you impose austerity on public services for a decade and a half.
In a way, you kind of have to admire the audacity of this - only a man like Farage can execute a full-body U-turn and have it still be called leadership, and only he can sell outright surrender as strategy.
Carville’s quote remains appropriate because it perfectly captures moments like these - because everyone’s afraid of the bond market, and even the loudest nationalists eventually tremble before the yield curve. Farage has spent decades pretending that he is immune to fear, that the old rules don’t apply to him and that a good old bit of passion and spunk can outmuscle mathematics.
But passion, spunk and pictures outside a pub holding a pint of ale don’t price debt, and the man who once promised to free Britain from a tyranny of experts now scurries around indignantly to reassure them that he is housetrained.
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Thank you, as always.
Generally speaking the markets prefer their nationalism neat and served with austerity and a tax-free cherry on top.
I imagine it to be a long, drawn out squeak.
Read: Donors.
Fun Fact: hydrangeas die when pruned back by men in Union Jack pants quoting Adam Smith.
Young people currently earn £10 an hour - this is in no ways an indication of largesse.
My incredibly rudimentary Italian hopes this means “off”.
Which basically works as a form of “trickled down spite.”
Mr Brexit is very good at making an “arse” of himself, isn’t he?
Merely an 'odious' chancer, never been anything else. Well written critique, thank you Bear.