As my three readers will recall, I took a break from writing any political commentary after the policy-bereft Canadian election, where topics of long-term importance were subsumed to the question of who could deal with Donald Trump. The answer, of course, remains unknowable, but we are now seeing how the brave talk of “elbows up” is meeting the juggernaut of nonsense and bullying that is the Orange Threat. As Trump himself might say—he has all the cards, and you can play as well as you might, but the cards will not lie. The urgently sought silver lining is the potential for Conservative policies within a Liberal minority framework to finally bring attention to certain long-standing Canadian issues. (For context: Canada’s 2021 and 2025 elections produced a minority governments, much like the UK’s hung parliaments, shaping the short-term focus of both countries’ politics.)

However, during my brief hiatus, I had a revelation. Could it be that the inadequacies and lack of vision of politicians—of all stripes and all geographies—are not entirely their fault, but the result of years of inattention to long-term policy and the harsh realities of electability in pluralistic democracies? Worth an examination. Given my residency and citizenship, I’ll stick to the British and Canadian experiences, as I know these best—and both suffer from similar ills. I would note that none of my individual commentaries are likely to be completely novel, but I think that the depth of issues to be faced today requires a deeper examination.

ASYMMETRICAL PAYOFFS

My first thought is that the asymmetrical payoff of political calculation makes it extremely difficult for politicians. What do I mean?

 

• • In Canada, about 40% of households are net recipients from government, not net taxpayers (Statistics Canada, 2023). In the UK, the figure is similar—roughly 44% of households receive more in benefits and public services than they pay in taxes (Office for National Statistics, 2023).

• • Conversely, the top 10% of Canadian taxpayers pay over 54% of all income tax, while in the UK, the top 1% pay nearly 30% of all income tax.

What does this mean? A substantial part of the voting base is insulated from the immediate fiscal consequences of government decisions, except when it comes to changes in current net consumption taxes or benefit levels. A much smaller number are directly affected by policies that impact productivity, wealth, or investment returns. For example, over-regulation may make food marginally safer, but it hits the wealthy harder in the short term—both in direct income and in the valuation of their investments, which depend on future economic growth. However, in the longer term all suffer from reduction of productivity and thus real wages as well as the direct taxation costs of over-regulation.

So, politicians focus where the votes are, not necessarily where the long-term interests of the economy lie. There are votes in pandering to net recipients and in vilifying wealthier taxpayers as “rich” and therefore expendable. Any policy framed around current sacrifice for future productivity falls on deaf ears. And any talk of fiscal limits—like the “bond market”—is ignored by most voters.

This is hardly unique to Canada or the UK. Across the OECD, similar patterns are found: in France, for example, over 50% of households are net beneficiaries of government redistribution. The challenge is universal, not parochial.

ECONOMIC LITERACY

Both Canada and the UK score reasonably well in OECD measures of financial literacy—Canada ranks among the top five globally, while the UK sits in the upper tier. In the 2018 PISA study, Canadian 15-year-olds ranked 2nd in financial literacy among participating countries. But these studies don’t measure economic literacy.

 

• • In a 2022 survey, only 27% of Canadians could correctly answer three basic questions on inflation, interest rates, and risk diversification.

• • In the UK, only about 38% of adults demonstrated a basic understanding of inflation and compound interest.

Economic literacy is not just about balancing a chequebook or knowing what a mortgage is. It’s about understanding trade-offs, the cost of capital and how inflation relates to government spending and the money supply. These are not easy concepts, and they’re rarely explained well if at all in political campaigns.

This makes policy-driven elections nearly impossible. Trade-offs are hard to explain, and concepts like the cost of capital or the relationship between inflation and money supply are lost on most voters. Instead, elections become referendums on personality, not policy. The “throw the bums out” mentality typically prevails, regardless of the economic context. Even worse is the strong charismatic leader who likely has an overblown belief in his or her own literacy.

The conceit that a political party can “manage” the economy in the short term is pervasive. The UK’s 2022 political chaos—where the Liz Truss government’s likely well-intentioned and in the longer term positive but poorly communicated mini-budget triggered a £65 billion Bank of England intervention and tanked pension funds—shows how quickly credibility can evaporate. Yet, the roots of economic malaise run decades deep, and no government can fix productivity overnight.

DEMOGRAPHY AND THE UNCOMFORTABLE TRUTH

David Foot’s maxim that “demography explains two-thirds of everything” is more relevant than ever. The NHS in England is facing a record backlog of over 7.5 million patients waiting for treatment (NHS England, 2024). In Canada, wait times for medically necessary procedures reached a median of 27.4 weeks in 2023—the longest ever recorded. The US Social Security system is projected to be insolvent by 2035 without reforms. The UK’s state pension faces a £300 billion funding gap over the next 20 years. All due to demographic change which was visible decades ago.

Despite the writing on the wall for decades, voters do not react. The systems are patently unsustainable, but the political cost of honesty is simply too high.

It is clear that more money will have to come from individuals to pay for the demographic bulge. Setting the elderly against the young does not seem to be the way to develop either a cohesive society or useful improvements to productivity and sanity of the medical and pension systems.

To be fair, both countries have attempted reforms—Canada’s phased increases in retirement age, the UK’s auto-enrolment for pensions—but these have been incremental and politically fraught. As can be seen by the UK government’s U-turn on winter fuel payments, not just for the poor, even minor reductions in what is viewed to be demographic “entitlement” is political suicide.

BLIND OPTIMISM VS. STRAIGHT OUT LIES

The issues above are serious impediments to using politics for the general good. But they’re not enough to make structural change impossible. For that, you need blind optimism—or outright lies.

 

• • Billions in business subsidies have not created the “good, well-paying middle-class jobs” politicians promise. In Canada, despite $18 billion in subsidies for the auto sector since 2000, employment in the sector has declined by over 20%.

• • The famous “the budget will balance itself” line is belied by reality: Canada’s federal debt has doubled since 2015, reaching over $1.2 trillion in 2024.

• • In the UK, “net zero” policies are projected to cost up to £50 billion per year by 2030, but energy bills have soared rather than fallen.

The payoff asymmetry is clear: it’s easier for politicians to promise the moon than to explain why tough choices are necessary. And voters, lacking economic literacy, are happy to believe them.

THE TRAP WE’RE IN

The three factors—asymmetrical payoffs, economic illiteracy, and the triumph of blind optimism (or outright lies) over honesty—are not going away. Politicians of every stripe have repeated the same comforting lies, and the public has rewarded them for it. When the next government comes in, it will be trapped in the same morass, forced to pretend that the old promises can be fulfilled as they could not come to tell the truth in opposition, but only add to the lack of honesty.

Is there a way out? Perhaps a leader with true gravitas could persuade the public to make hard, long-term decisions. But in the age of social media pile-ons and relentless interest group lobbying, those people know better than to step forward.

So, no, it’s not all the fault of politicians. It’s ours for sustaining their ability to continue to ignore the future in favour of an increasingly dysfunctional present. As a famous bumper sticker in the US once said: “Don’t Vote, It Only Encourages Them.” Obviously not a solution, but it captures the issues.

Building on the analysis, the core dilemma remains: do we have to rely on the bond market to rein in the falsehoods of politicians, or is some other cathartic event necessary to force honesty and reform?

THE BOND MARKET AS RELUCTANT POLICEMAN

The evidence from the UK and Canada is unambiguous: politicians rarely confront fiscal reality until forced by external constraints. In the UK, the national debt has soared to over £2.8 trillion—more than £95,000 per household, up £3,500 from just a year ago. The deficit for the year ending March 2025 hit £152 billion, more than double what was budgeted, as higher debt interest and weaker tax receipts battered the Treasury. With borrowing costs on 10-year government bonds rising by over 110 basis points since September 2024, the UK faces its highest borrowing costs since the 2008 financial crisis. Every uptick in yields means less money for essential services, more pressure on taxpayers, and shrinking room for political manoeuvre.

This is not unique to Britain. Globally, national debt now exceeds $100 trillion, with the inevitable increase in interest payments crowding out other priorities. When governments overspend and markets lose confidence, the bond market acts as an unforgiving enforcer: rates rise, borrowing becomes more expensive, and suddenly, even the most populist government is forced to choose between painful spending cuts or tax hikes.

As a recent Bloomberg article noted: “Politicians won’t focus on the tough trade-offs needed unless markets force the issue.”

THE LIMITS OF MARKET DISCIPLINE

But relying on the bond market as the ultimate disciplinarian is a dangerous game. Markets are not omniscient—they can ignore warning signs for years, then react suddenly and brutally. The UK’s experience in 2022 and again in 2025 shows how quickly sentiment can shift, with devastating consequences for public finances and political stability. The market’s discipline is often indiscriminate, punishing both prudent and profligate governments alike, and leaving little room for gradual adjustment.

Moreover, the pain is not evenly distributed. Rising borrowing costs hit ordinary citizens hardest, through higher taxes, reduced services, and a cost-of-living squeeze. The wealthy, who own the debt, can be less affected by the turmoil, but obviously higher rates eventually punish equity returns as well, in addition to adding to the productivity crisis.

IS A CATHARTIC EVENT THE ONLY ALTERNATIVE?

If not the bond market, what else could force a reckoning? History suggests that major policy shifts often require a crisis—a cathartic event that shatters the status quo and makes the costs of denial impossible to ignore. Greece is a classic example and Argentina a current one. This could take the form of:

 

• • A financial crisis: A sudden loss of market access, currency collapse, or banking panic. Rampant inflation coupled with growing unemployment.

• • A political earthquake: The rise of a disruptive new party or movement that breaks the old consensus.

• • A social tipping point: Widespread public anger over unemployment, inflation, collapsing services, inequality, or intergenerational unfairness.

But these events are unpredictable, often chaotic, and come with immense collateral damage. The 2008 financial crisis, for example, forced a global rethinking of debt and risk, but at the cost of a decade of stagnation and political upheaval.

CAN ANYTHING PRE-EMPT THE CYCLE?

Is there a way to break the cycle before catastrophe? Theoretically, yes. A more economically literate electorate, stronger institutions, and transparent fiscal rules could force politicians to level with voters before the bond market or a crisis does. Yet, as recent history shows, such reforms are rare and often watered down unless crisis looms.

International Example

Some Nordic countries have managed to build consensus for long-term fiscal discipline and pension reform through broad-based public education and transparent, non-partisan commissions and fiscal overseers. Not impossible, just very hard.

CONCLUSION: THE CHOICE BETWEEN PAIN AND PAIN

In the end, the options are stark:

 

• • Wait for the bond market to impose discipline—with all the unpredictability and hardship that entails.

• • Endure a cathartic crisis—which may finally force honesty but at enormous social and economic cost.

• • Or, against the odds, build a culture of honesty and long-term thinking—requiring a level of political courage and public engagement that has so far proved elusive.

If you’re looking for a glimmer of hope, it lies in the small, incremental steps: supporting independent fiscal watchdogs, demanding transparency, and insisting that politicians at least attempt to explain the trade-offs. Otherwise, the cycle of false promises, mounting debt, and eventual reckoning will continue. The bond market is not a substitute for leadership, but in its absence, it remains the last line of defence against the comforting fictions of modern politics.