Rishi Sunak, the technocratic austerian
Rishi Sunak, the youngest UK prime minister in more than 200 years, is very comfortable taking extreme positions. The markets, however, are satisfied that, contra his two predecessors, he's neither fiscally nor morally incontinent. That makes him pretty much the best that they can hope for right now.
Why it matters: Sunak enthusiastically supported Brexit, the root cause of all of Britain's current mess, going against then-leader David Cameron. But he's also pragmatic enough to deal with that mess by using an orthodox austerity playbook that will at least keep the bond vigilantes at bay.
Between the lines: The people who voted Conservative in 2019 don't like austerity, but Sunak has other ways of trying to keep them onside, including promising to do "whatever it takes" to take refugees seeking asylum in the UK and ship them to Rwanda. He has also threatened to withdraw from the European Convention on Human Rights.
The big picture: Inflation in the UK, now at 10.1%, is rapidly eroding real household income. Since 2018, the country's households have had less spending power than those of France, Ireland, or Germany, per a recent report from the Resolution Foundation. That's a big change from 2007, when the UK scored higher than all of those countries.
The intrigue: Sunak worked at Goldman Sachs and a high-profile hedge fund before entering politics, but the reason he's worth somewhere north of $800 million is just that he married a gazillionaire.
- In the U.S., John Kerry and John McCain got rich (if not quite as rich) the same way. Both ran for president on a platform of fiscal conservatism.
Between the lines: People who made their own billions, like Elon Musk or Mark Zuckerberg, generally feel free to spend that money however they like.
- People who come into enormous wealth by inheritance or marriage, on the other hand, tend to be significantly more cautious when it comes to spending the kind of money that could result in a meaningful reduction in wealth.
How it works: After the UK enacted emergency fiscal spending during the global financial crisis of 2008, the Conservative Party implemented an austerity regime. The implicit idea was that after spending too much, the country needed some years of spending too little.
- The current finance minister, Jeremy Hunt, is following a very similar playbook, saying he'll be making "decisions of eye-watering difficulty" when it comes to public spending.
- Sunak's predecessor Liz Truss made it clear that she disagrees with that approach, but Sunak is much more naturally aligned. He spent a lot of money as finance minister at the height of the pandemic, and is OK with swinging in the opposite direction now.
The bottom line: Sunak will be an orthodox technocrat for as long as the current economic emergency remains in place.