Howard Davies: Why didn't the men in grey suits stop Trump?

The markets are calm but we'll have to wait and see what America's new president and Brexit do to the economy.

by Howard Davies
Last Updated: 21 Nov 2016

Amid all the political turmoil of the last few months, one big question has come to preoccupy me: where have the men in grey suits gone? Over the years, they have perhaps not had such a great press. The phrase was first coined by the late, great Alan Watkins, whose weekly political column was a pillar of The Observer for decades, to denote the group of senior Conservative men who famously told Mrs Thatcher she had to go in 1990. Many in the Party have never forgiven them.

In fact Watkins' original coinage was the more prosaic 'men in suits', and Willie Whitelaw always maintained that he would not have been seen dead in a grey one in White's. But the colour grey soon crept into the phrase and has been there ever since, to describe those shadowy grandees who run political parties, acting as gatekeepers to repel unsuitable boarders, and bouncers to remove those who have outstayed their welcome.

Internationally, there are many shades of grey, of course, but the concept is very familiar elsewhere. Throughout the Republican primaries, the media expected a group of senior congressmen, senators and governors to emerge, tell The Donald that he had had his fun, and install a more reliable and conventional candidate. It never happened. The grey suits remained in the closet.

Over here we expected something similar to happen in the Labour Party. Surely party bigwigs would step in over the summer and persuade The Jeremy to stand down in the interests of unity and electability. It never happened. Grey suits are thin on the ground in Momentum salons, but surely Messrs Brown, Prescott, Straw and Darling could rustle a few up to ensure the deed was properly done?

In Paris, too, the suits have taken French leave when most needed. In France, they call French leave filer a l'anglaise - roughly translated as 'to run away in the English manner'. Someone needs to put President Hollande, languishing in the opinion polls with a 4% approval rating, out of his misery. He must surely be persuaded to stand down in the interests of promoting an electable Socialist Party candidate. But no one has been found to beard the president in his elysee den and hand him a jewel-handled revolver.

How can we explain this? Have Brooks Brothers and M&S simply stopped making grey suits? If so, they bear a heavy responsibility. The world is a far more dangerous place as a result. In Australia, where fetching tailored shorts are more common, the phrase is used to describe sharks who swim quietly underneath surfers waiting for one of them to fall off and provide a tasty lunch. But in the northern hemisphere, the grey suits have performed a much more socially useful function.

In the US, the suits have missed their chance, and the Trump era is upon us. In New York just before the election, some Wall Street Upper East Siders asked me how it felt in the UK after Brexit. I said they would find out when Donald Trump was elected. How they laughed. Now they are trying to work out what it all means.

The social implications are hard to discern, and will depend on the kind of people he puts on the Supreme Court and in other key positions. But, curiously, the broad lines of Trump's macroeconomic policy are not a million miles from the prescription favoured by many centre-left economists in the United States. They have increasingly lost faith in unconventional monetary policy, as successive bouts of Quantitative Easing, combined with near zero interest rates, have failed to lift the economy above a rather sluggish growth trend. So a rebalancing of policy towards fiscal stimulus is in principle quite desirable, although arguably there is more room for such a shift in Germany and Canada than in the US or the UK.

It looks as though we're going to find out just how much room there is, before too long. Trump says he plans tax cuts for the better-off and a big boost in infrastructure spending. The first is faster-acting than the second, and may attract more support in Congress, but will play less well with his blue-collar fanbase.

The markets have reacted to this enticing prospect by pushing up long-term rates in anticipation of more government borrowing, and boosting the stock prices of financial firms, in the hope that the latter will make more money when interest rates are a little higher than they are today.

This is the dynamic which goes some way to explaining why neither Brexit nor Trumpet has kicked the economy out of bed so far. But in both cases they are risky gambles to take, with unpredictable long-term consequences. Very brave, Minister, as Sir Humphrey would have said.

Is it bliss in that dawn to be alive? Or are we watching the stirrings of a new rough beast slouching towards Bethlehem to be born? The Brexiters and Trumpistas are with Wordsworth on this one, while most conventional mainstream opinion is with Yeats. The battle of the poets is now joined. Will the English Romanticism of The Prelude or the apocalyptic Irish mysticism of The Second Coming win the day? I can hardly wait to find out.

Howard Davies is chairman of RBS. Follow him on Twitter

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