Sadly but unsurprisingly the value of the Pound fell overnight as it became apparent that the Tories would not return a majority, let alone build upon the one they already had.
“The Market”, we are so often told, as if it were a separate entity with its own emotions and preferences, cherishes stability above all else and a hung parliament stability is not.
The idea being that change throws up new challenges to the flow of money and commerce and navigating these new bumps in the road inhibits business.
Of course, the value of a currency falling after a “shock” election result is nothing new and we should all expect the FTSE 100 to also dip into the red later on today as well as the rest of the world’s main stock markets.
In fact, the reaction of the “The Market” is frustratingly predictable at this point. If global finance likes the result of a specific election, ideally in an economically significant nation, it will respond positively with stocks and currencies related to the result soaring accordingly. Just look at the response to Donald Trump winning the US Presidential election last year or Narendra Modi’s rise to Indian Prime Minister in 2014.
However, when the result doesn’t please the logic of money, you’re going to know about it. Remember Brexit? The Pound fell by more than ten per cent after the votes were counted and such pessimism was reflected by share prices globally as they all went through the floor. The Spanish stock market, as just one example, registered the biggest daily loses of its entire history as it dropped by more than twelve per cent upon the news of Brexit.
Always generous, “The Market” will even let us know what’s on its mind before an election takes place. Perhaps the most harrowing contemporary example of this involves Luiz Inácio Lula da Silva’s rise to the Presidency of Brazil in 2003. Months before the vote had even taken place the IMF had to inject $10 billion into the Brazilian economy to counter the flood of capital leaving the country. Foreign investors were so spooked by a candidate who had promised to double the minimum wage, create ten million extra jobs and eradicate poverty that they effectively bankrupted the economy before Lula could even come to power.
Brazil’s story should give you something to ponder over when people tell you we live in a “democracy”. Vote for whoever you want to, but be aware that if “The Market” doesn’t like your candidate, you’ll know about it, and if you even consider bringing in a quote, unquote radical, you better get used to economic turmoil.
It should be stressed that the UK, the world’s fifth or sixth largest economy depending on who you ask, is not in danger of being held to ransom quite like Brazil was fifteen years ago, it’s just too important economically.
Nevertheless, the fall of the Pound and the ripples the UK’s hung parliament will have sent around the world should serve as a reminder of the kind of world we live in.
And that world is a monied one where the logic of finance has seeped into our common sense understanding of almost everything. This is shown by the fact that the Tories, who the majority of the people in the UK still believe to be more capable of running the economy than Labour, despite being in power since 2010 and having actually increased the UK’s debt pile whilst making most of us poorer and unhappier, were the party “The Market” wanted to win.
In short, any party or individual who openly embraces the logic of “The Market” will receive its backing, but anyone who suggests anything even slightly different, towards the betterment of the majority of people, will be punished.
What that means for the UK depends on whether the Tories are able to govern as a minority or form some form of coalition or not. Remember stability is a must and as we’ve already been shown, Labour under Jeremy Corbyn does not represent that as far as “The Market” is concerned.
The fact the Tories lost seats, despite gaining votes, appears to indicate that many people are beginning to question the logic of global finance, which is a good thing, however, those very people are already being punished for their audacity.