I gave the following talk at the 13th AIPEN Workshop to be held at the University of Melbourne on 10th February 2023 – thanks to Dr Sara Meger and colleagues for organising. You can view the talk’s slides here, and hear the talk and Q&A audio here. In the talk recording I mentioned a Downtown Josh Brown piece called You Weren’t Supposed To See That.
From Jones to Sunak: How The City and Financialised Hedge Funds Shape The United Kingdom’s Political Economy
Rishi Sunak’s rapid ascension to becoming Prime Minister of the United Kingdom in October 2022 signalled how financialisation and capital accumulation shape the United Kingdom’s political economy. This paper investigates how Sunak’s career in Goldman Sachs and in the hedge funds the Children’s Investment Fund Management and Theleme Partners gave him the reputation and the decision-making skills to outflank former Prime Minister Liz Truss, whose Trussonomics fiscal policies sought to provide unfunded tax arbitrage for her 1% donors. The blow up in October 2022 of Liability Driven Investment leveraged strategies in United Kingdom pension funds created a classic Bagehot-style run on the gilt: financial markets reacted by deligitimating Truss and instead backing Sunak. I show how Sunak was able to use the unique meso-level (organisational) strategic subcultures of hedge funds to accumulate capital and to gain valuable tactical skills for his subsequent political career, from COVID-19 crisis alpha (reflected in Theleme Partners’ position size in the pharmaceutical firm Moderna), to pursuing new fiscal and monetary policies that reflected the City’s Big Bank deregulation experience under former Prime Minister Margaret Thatcher in the 1980s, far more than Liz Truss’s wishful idolisation of Thatcher as a leadership symbol. Global political economy lessons are drawn for future capital accumulation in Sydney (Australia), Tokyo (Japan), and Singapore financial hubs, despite the high likelihood of a bear market and continued geopolitical volatility. The likely result despite counter-hegemonic demands will be a version of the Matthew Effect: the (already) successful will become more successful.