A close friend of many years once told me that he has a policy of always seeking advice for any major decision he has to make. In fact, his experience had shown that seeking advice was an effective policy for all decisions he had to make. His comment stayed with me, not only because he was a close friend who I respected, but also because he was a senior official in one of London’s oldest and most revered merchant banks. He also led several British “Quangos” – a Quasi-government entity, outside of the Civil Service, that receives funding from the government. A fairly unique British Government invention, I might add, that works quietly and well.
The British Government, this week, obviously had never heard of seeking advice. Liz Truss, the U.K. Prime Minister admitted, at the end of tumultuous week of financial chaos, that she had discussed her “mini-budget” with only 40% of her own cabinet. The Deputy Head of the IMF, completely out of normal character, publically stated that, in his experience, this sort of irresponsible and dangerous behavior would only be expected from third-world countries. Certainly never from a G7 nation.
Seeking advice requires a certain amount of humility, and that is a rare quality in today’s leadership. To be fair, it has always been a rare quality in leaders of all eras. Meglomania is a very contagious disease. Very few people, in my experience, are immune to its attractions. Even the most hard-nosed, practical, logical people, when given power, seem to inevitably fall into its clutches. Surrounded by sycophants, who tell you how wonderful you are, you gradually, or quickly, begin to believe in your own infallibility. In blunt terms, you begin to think, “why should I follow a policy of seeking advice, when I know better than anyone else”? This week’s decisions and announcements by the British Prime Minister shows how quickly megalomania can take hold. She’s only been in the position for a couple of weeks.
She did not consult with the Bank of England, the guardian of the currency. She did not consult with over half of her own cabinet. She did not even ask for information from the Office for Budget Responsibility, which is specifically set up to help the Government make economic decisions Basically she did not seek advice from anyone except her Chancellor of the Exchequer. That was either very courageous, very arrogant, or very stupid. Reactions from almost everyone seem to agree on the latter two of these descriptions. However, there was another element involved in her decision that, perhaps, is even more concerning, and that is naiveté. Arrogance from a leader is to be expected, naiveté is not and, potentially, is far more dangerous.
Liz Truss’ intentions have won conceptual support. She and her Chancellor wanted to give British’s economy a major kick-start to help its recovery from the Covid epidemic. Unfortunately, it kick-started a major financial crisis. It spooked the financial markets to the point where the Bank of England had to buy up 65 billion pounds of government bonds just to shore up the currency – the pound sterling sank to its lowest value against the U.S. dollar, ever.
Pension funds, which invest in bonds, were forced to start selling at cut-price rates, and several such institutions were heading towards bankruptcy if the Bank of England had not stepped in. A former head of the Bank of England described the “mini-budget” as “working at cross-purposes with the Bank in terms of short-term support for the economy” – a major public rebuke. The Economist has even suggested that Liz Truss’ naiveté/arrogance may have completely, and irretrievably, sabotaged her tenure as Prime Minister, two weeks into the job.
Seeking advice could well have avoided this disaster, which has not only severely damaged the reputation of the British Government but has also damaged the pound as a major world currency. It is a lesson for all of us whether we run a country, a business, or our family unit. Seeking advice is a sound policy unless you are arrogant, stupid, or simply naive.