Demonstrators block a street in Canary Wharf during a protest outside the Ofgem headquarters in London on August 26. Britain’s struggles look set to continue as an inexperienced government faces multiple crises. Photo: Reuters
Outside In
by David Dodwell
Outside In
by David Dodwell

Brexit-hit, energy-starved Britain leads the way as world enters an ‘omnishambles’ era

  • New British Prime Minister Liz Truss inherits a country reeling from high energy prices, inflation, a weakening pound, Brexit’s effects and more
  • Britain is not alone, though, as Europe, Russia, the US and China are all struggling with various issues at a time when cooperation is lacking
The British seem to have a word for it: “omnishambles” – a string of blunders and miscalculations that lead to comprehensive mismanagement. When new British Prime Minister Liz Truss opens the box on her Downing Street desk marked “The State of the Nation” this week, omnishambles is likely to be embossed on it.

One might have passing sympathy for Truss, not least because she bears little responsibility for the “omnishambles” that greets her. But the sobering reality is that Britain is not alone in its mess.

Mix these omnishambles with an energy crisis, Russia’s invasion of Ukraine, devastatingly damaging weather in many parts of the world, rampant inflation, a looming global recession and a collapse in multilateral cooperation, and the scene is set for bad things to happen worldwide. As Martin Wolf warned in the Financial Times in June, “We are now moving into a new era of world disorder.”
Looking beyond the UK’s omnishambles, our own Hong Kong omnishambles seems positively modest, no matter how much morale-sapping harm it has inflicted on our hermit economy.

Across the European Union, we see most economies in panic mode as they face an energy crisis triggered by Russia’s invasion of Ukraine. Russian President Vladimir Putin has decided to throttle gas supplies to Europe just as winter starts to set in.

In Russia, while Putin will be the last to acknowledge it, a profoundly damaging, self-inflicted omnishambles has been unleashed. Put to one side the colossal human and economic cost of an attritional war, and the biggest harm is likely to be the long-term ruin of Russia’s oil and gas export economy as Putin reaps the whirlwind of his hubris.

New Russia gas halt tightens energy screws on Europe

The United States seems to be heading into November’s midterm elections in its own omnishambles. It is wrestling with fires and floods, a ghost of Donald Trump’s presidency that refuses to die, and a battle to protect trust in democracy and America’s democratic institutions.
I also suspect the floods and droughts in various parts of China in recent months – accompanied by a crisis in the property sector and the stubborn refusal of Covid-19 to bow in the face of the city lockdowns which sit at the heart of President Xi Jinping’s economically crippling “zero-Covid” policies – are fuelling a sense of omnishambles in China, too.
Last week’s massive earthquake in Sichuan recalls the devastating Tangshan earthquake in 1976 that, for some, suggested a withdrawal of the “mandate of heaven” from Mao Zedong. One has to wonder how troubled China’s leaders are ahead of October’s Party Congress, given the terrible price citizens are paying for Beijing’s obstinate efforts to keep Covid-19 at bay.
Back in the UK, when Boris Johnson was forced to step down as prime minister, he described his position as “the best job in the world”, probably because of his shambolic tolerance of omnishambles. Truss will almost certainly have second thoughts as she considers the poisoned chalice she now holds.


China’s Sichuan province hit by 6.8 magnitude quake, killing at least 21 people

China’s Sichuan province hit by 6.8 magnitude quake, killing at least 21 people
As inflation soars towards 13 per cent, the Bank of England says disposable incomes in the UK are set to see the largest fall on record. It says the country will be in recession by the end of the year and stay in recession for at least the next six quarters. The economy will not recover to its pre-pandemic level until at least mid-2025.

Energy bills are about to triple and bank interest rates are heading towards 3 per cent, at which point the average mortgage payment is likely to rise by £200 (US$230) a month. Around 14 million people will be in absolute poverty, according to the Resolution Foundation – more than a fifth of the population.

Here is the epitome of an omnishambles: a government that is ideologically wedded to cutting taxes and gutting government spending faces rising costs in all directions. It faces the need to provide massive subsidies for household energy, boost defence spending in support of Ukraine, finance the transition to clean energy, ensure supply-chain resilience by requiring companies to build “just in case” buffers in place of the lean “ just in time” practices of recent decades, and refinance the National Health Service.
New British Prime Minister Liz Truss speaks outside Downing Street in London on September 6. Photo: AP Photo
Mix this with rising inflation, a weakening pound and daunting debt repayment obligations after a decade of quantitative-easing-driven debt accumulation and you have a perilously neophyte government floundering to reconcile the unreconcilable. At such times, it is essential to clear the decks of all distractions to focus on the most pressing priorities and avoid additional harm.
For the UK, that probably starts with mending fences with Europe and ending Brexit squabbles to respond as effectively as possible to the shared threat of Russia. While defence spending can’t be cut, it can at least be diverted to Ukraine instead of being frittered away in the South China Sea.
For the US, it might start with taking the heat out of the trade and technology war with China and halting any decoupling or “ friend-shoring” initiatives. As Rana Foroohar noted earlier this week, “A deglobalising world will also be a more inflationary one.” The last thing we need is more fuel on the inflationary fire.

For China, an end to “zero Covid” and reengagement with the global economy is likely to be indispensable, as it was in 2008 when the world economy was struggling to recover from the global financial crisis.

For all, recommitment to our multilateral institutions and an openness to global cooperation would provide significant relief. Wolf might be right that we are entering a new era of world disorder, but there is no need to make an omnishambles of it.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades