HyperNormalTimes

Written by our Director of Equity Advisory, Jeremy McKeown, the HyperNormalTimes provides in-depth and considered long-term commentary on major macroeconomic and market-shaping themes.

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January 28, 2024

A Window on Uxbridge from a Green Chicken

Uxbridgechicken

The personalities and parties that dominate politics are its veneer, the more significant ideological shifts operate below the surface. The political analyst James Overton defined the acceptable area of discourse for politicians as a function of what public perception permits, later known as the Overton Window. As the enduring politician Jean Claude Junker said in a de facto statement of EU procedure, we all know what to do, but we don’t know how to get re-elected once we have done it. Junker knew that the fundamental functioning of modern democracies is more about harnessing opinion formers to move the Overton Window than often confected partisan disputes.

After World War II, a Keynesian consensus emerged that saw a widespread acceptance of an enlarged role of government in the economy. This narrowing of the Overton Window became known as Butskellism, a portmanteau derived from Labour’s Hugh Gaitskill and the Conservative’s Rab Butler’s shared views about the nature of the UK’s mixed economy. But by the late 1970s, after wars in Asia and the Middle East, multiple energy crises, economic stagnation and spiking inflation, the Overton Window was shifted by a renaissance in the ideas of economic liberalism sweeping Ronald Reagan and Margaret Thatcher to power. Such was the force of this shift; it also flipped the axis of the Labour opposition from the Clause Four socialism of Michael Foot to the soft left aspiration of New Labour.

After the collapse of the Soviet Union, Western liberal hubris emerged unchallenged. It was, we were told, the End of History. Russia became little more than Europe’s filling station, and China became an untapped pool of indentured labour for global business. There developed an arrogant disdain for the idea either nation could become an oppositional superpower. Today, as we progress into the year of elections, the ground is again shifting underneath our politics, and the Overton Window is in motion. The West’s liberal elites are struggling to keep pace, particularly regarding energy policy, something I was reminded of when I spoke to a chicken last week.

Over the last 18 months, Doomberg moved from being a humorous green chicken on Twitter, pointing out the absurdities of the West’s response to the energy crisis and Russia’s invasion of Ukraine, to becoming the most popular financial newsletter on Substack, with over 200,000 paying subscribers. What he says and how he says it indicates the rails on which the Overton Window is currently travelling.

Doomberg’s subtitle is Energy is Life, an incontrovertible scientific assertion he surprisingly needs to defend. As he says, our economic livelihood is directly proportionate to the amount of primary energy we harness and correlates almost perfectly with the density of the energy form we can access. The five billion people in the developing South are poor because they consume less energy per head than the average Western refrigerator. Unsurprisingly, following the sharpest rise in living costs in forty years and the budget constraints they face, it is not just luxury goods that the West’s electorates struggle to afford but also their political leaders’ luxury beliefs about the energy we consume.

In what was probably the last election victory the Conservative Party can expect to enjoy for many years, in Uxbridge last year, energy’s Overton Window noticeably shifted. Within weeks of this unexpected victory, delivered as a protest against the extension of London’s ULEZ, PM Sunak announced a series of U-turns on climate change targets, pushing back a ban on the sale of new petrol and diesel cars from and the phase-out target for installing new gas boilers. In so doing, Sunak said, “Governments of all stripes have not been honest about the cost and trade-offs,” that the drive for Net Zero would impose “unacceptable costs on hard-pressed British families,” and that “we’re not going to save the planet by bankrupting the British people.” A few days later, Labour quietly dropped its £28bn per annum pledge for a “prosperous green future.” The Overton Window had shifted from saving the planet to saving its electorate.

Meanwhile, as the voters of West London were doing the heavy window pushing, EU politicians hosted a Beyond Growth conference in the EU Parliament Building. It aimed to “redefine societal goals across the board, to move away from the harmful focus on the sole economic growth – GDP growth – as the basis of our development model.” The ultimate ambition was to “put into practice the idea of a post-growth future-fit EU that combines social well-being and viable economic development with the respect of planetary boundaries.” The inconvenient truth for the EU politicians is that the planet does not get a vote in this June’s EU parliamentary elections.

Six months on, with the full impact of Germany’s $1tn malinvestment in wind and solar followed by the closure of its remaining perfectly functioning nuclear reactors, the Euro Zone is getting sucked into a de-industrialising death spiral. And EU voters heading to the polls in June, like the people of Uxbridge last year, will have a far clearer idea of who they don’t want to win than those they do. As such, the elections have become an easy target for the continent’s populists.

Although Doomberg reserves his strongest criticisms for Europe’s energy absurdities, US policymakers are not protected from his sharp beak. Last year, US Energy Secretary Jennifer Granholm told the Senate Armed Services Committee that she supports the Biden administration policy for the US military to implement an all-electric vehicle fleet by 2030. Granholm was only following White House orders, as Joe Biden said the previous year, “We’re going to start the process for every vehicle in the United States military; every vehicle is going to be climate-friendly. Every vehicle. I mean it. We’re spending billions of dollars to do it.”

Perhaps in Joe Biden’s head, “every military vehicle” may not have included tanks. At least, that is now the official policy line from the Democrats. However, as one can imagine, the story of a “woke army” has been grist to the mill for Donald Trump’s speech writers and Doomberg alike. In a brilliant essay entitled, Charge! Doomberg took down the politicians’ soft, one-dimensional thinking with some hard facts. “Weighing in at roughly 60 metric tons – including approximately 1.6 metric tons of fuel – the M1 Abrams tank is the US military’s land war superweapon. It sports a 500-gallon diesel tank that allows it to travel approximately 250 miles between refuelling, which takes just minutes.” Doomberg calculated that electrifying this vehicle would require a forty-ton battery. He asked“Given the extreme power requirements, would an electric M1 Abrams spend more time recharging than travelling? Ironically, the only plausible solution to this problem involves using diesel-powered electric generators.”

Elections will influence the outturn for economies and markets in the EU, the US and the UK in 2024. As Trump marches through the Republican primaries and the rising popularity of the AfD in Germany and the Nationalists in France, both the EU and the US are required to deal with angry populism. In an overt attempt to warn the US left, the Democrat’s favourite Wall Street banker, Jamie Dimon, pointed out in Davos recently that Trump has been “kind of right” about some critical issues over the last decade and suggested that whatever they thought of him, they should perhaps be more respectful. In so doing, Dimon was warning that the populist appeal is reflexive, and the more threatened with obstructions to ballot papers, the more popular it becomes. As Doomberg points out, 50% of the electorate will not accept the victory of whoever wins in November, hardly an endorsement of faith in the fabled US Constitution.

The UK learned eight years ago that populist appeal is less about political extremism than a protest against perceived out-of-touch elites. While one does not wish for political upheaval anywhere, the prospects for constitutional crises increase as democratic processes become stressed, the seemingly inevitable outcome waiting for two of the UK’s most prominent allies and trading partners. In contrast, the UK will have its first general election in memory without its relationship with Europe as a primary campaign issue. The transition to power in the UK will be fought over by two centrist prime ministerial contenders whose manifestos will be largely indistinguishable to outsiders and written mainly as acts of faith in the permissible Overton Window. In a global context and relative to its recent past, the UK election should be a benign affair.

Jeremy

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