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Why Government Doesn’t Work Anymore | Steve Baker

Channel: The Peter McCormack Show Published: 2026-01-05 14:00
The Peter McCormack Show

Peter McCormack interviews former UK MP Steve Baker about why Britain feels politically and economically broken. Baker argues the core problem is long-running managerialism, state expansion, fiat money, and weak constraints on power; he repeatedly says the public and politicians have normalized higher spending, higher taxes, and currency debasement.

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Detailed summary

This is a long-form interview centered on Baker’s broad thesis that modern government no longer works because it has escaped effective constraints. He frames the post–World War II era as a long drift into managerialism, where voters accepted more state power, more intervention, and eventually chronic borrowing and money creation. In his telling, the UK now faces a “crisis of control by the state,” not a failure of markets, and the practical symptoms are visible in taxation, regulation, housing costs, and living standards. A major strand of the conversation is Baker’s claim that political incentives are broken. He says ministers are often incompetent or disinterested, civil servants are structured to cope with that, and elected politicians mostly optimize for reelection rather than governing well. …

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Main takeaways

  1. Baker’s central claim is that Britain is in a long-running institutional and fiscal decay driven by managerialism, state overreach, and fiat money.
  2. He sees the real problem as constraints on power, not a shortage of technocratic fixes or a need for more state activism.
  3. He believes politicians mostly follow public incentives, so lower spending and tighter limits on government require public opinion to shift first.
  4. He argues that money creation is the most dangerous state power because it drives inflation, unfairness, debt, and social conflict.
  5. He thinks housing unaffordability and falling living standards are downstream effects of monetary and fiscal excess.
  6. He wants stronger democratic accountability mechanisms, especially recall of MPs and more active party membership.
  7. He warns that polarization, identity preference, and demagoguery can create social fragmentation and even violence.
  8. He frames his politics as peaceful, lawful, and liberty-first, not revolutionary in the violent sense.

Market read by horizon

Short term

Near term, the actionable setup is political/fiscal rather than tradeable macro: Baker expects more spending strain, more tax pressure, and more public frustration, with little immediate relief from the current government structure. The short-term risk is that policymakers keep kicking the can while markets and voters normalize deterioration.

  • Immediate tactical message: Baker is urging people to join parties, show up locally, and pressure candidate selection rather than waiting for elections to fix things.
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  • He treats the winter fuel payment cut as a politically useful but economically small example of a much larger need to cut spending.
  • Near-term risk in his framing is that Labour and the opposition parties keep exploiting short memories while voters stay passive.
Mid term

Over the next few months, the base case in Baker’s framing is continued living-standard pressure unless there is a visible political shift toward spending cuts, tighter accountability, and better candidate selection. If public opinion does not move, he expects the same fiscal and currency pressures to persist.

  • Over the next several weeks or months, his base case is continued fiscal strain, worsening living standards, and no credible party fully committed to spending cuts and constraint.
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  • He expects the political system to keep rewarding short-term promise-making unless voters punish candidates at the selection stage and in local organization.
  • He sees the path to improvement as a public shift toward classical liberal or libertarian ideas, especially lower taxes, lower regulation, and tighter limits on money creation.
Long term

Structurally, Baker is calling a regime shift away from state discretion and fiat-era management toward harder constraints on money and power. His long-run thesis is that societies function better when coercion is limited, monetary power is separated from the state, and liberty is treated as the default rather than the exception.

  • Baker’s structural thesis is that the state should be much smaller and that power must be boxed in by law, democratic accountability, and monetary restraint.
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  • He sees fiat currency and state monetary discretion as a lasting civilizational risk, not merely a cyclical policy mistake.
  • He believes the long-run alternative is separation of money and state, with sound money, private-sector money, or hard-money assets like Bitcoin and gold playing a larger role.
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Key claims (12)

NEUTRAL constitutional constraints / monetary system

The biggest mistake in the US Constitution was the lack of constraints on money creation, and if money could not be constitutionally created, that would have effectively constrained government power.

The speaker contrasts Federalists vs Anti-Federalists, arguing the Anti-Federalists have been proven right because the Constitution failed to constrain the government's ability to create money, which is the root of broken governance.

BEARISH Fiat money / monetary regime

Fiat money allowed politicians to create money unconstrained since 1971, which is the root cause of inflation and societal division.

The speaker traces the problem to the 1971 end of Bretton Woods, claiming it removed constraints on politicians' ability to create money, causing inflation and social division.

BEARISH fiscal sustainability / currency debasement

The UK public wants higher spending and lower taxes, which forces politicians to borrow and debase the currency to get reelected.

The speaker observes over 14 years that politicians seeking reelection respond to public demand for both higher spending and lower taxes by turning to borrowing and currency debasement, leading to fiscal problems.

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Assets discussed (8)

Bitcoin — BTC
BULLISH crypto

Baker presents Bitcoin as part of separating money and state and as protection against fiat debasement.

gold — XAU
BULLISH commodity

He repeatedly says gold is part of sound money and notes state-level gold legal-tender use.

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Speakers

GUEST Steve Baker INTERVIEWER Peter McCormack

Interview (36 Q&A)

country decline

Why is the country not working anymore?

Steve argues the country is suffering from the end of a long period of managerialism. He says postwar politics embraced more state power and intervention, and that over decades this has produced chronic spending beyond means, currency debasement, and a system that blames the wrong causes.

westminster dysfunction

What is really like in Westminster, and why doesn't it work?

He says incompetence is a central feature of government. In his view, the civil service is built to keep things running even with disinterested ministers, but what the country really needs is ministers who actively govern rather than focus on ambition and internal status games.

political ambition

What is the one unifying goal politicians have?

The transcript cuts off just as the answer is about to be stated, but the discussion points to politicians primarily aiming to get re-elected rather than serve the public.

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Where this transcript pushes against consensus

  • Baker treats public preference for higher spending/lower taxes as a main cause, but that may understate how much policy is driven by elite choice, lobbying, or institutional inertia.
  • He repeatedly attributes broad social and economic decline to fiat money, but the causal chain is asserted more than demonstrated in detail.
  • His preferred remedies are normatively clear but operationally vague: local party participation, recall, and persuasion are not enough on their own to produce the scale of change he wants.
  • The claim that a peaceful mass withdrawal of consent could realistically force change is not well evidenced and seems highly uncertain.
  • His critique of migration, unions, welfare, and identity preference is philosophically consistent, but the interview often shifts from structural critique to culture-war generalization without hard empirical support.
  • The theological conclusion is coherent within his worldview, but it does not resolve the practical political question of how to build a governing majority.

Topics

managerialismstate capacityfiat moneydemocracy and recalltaxation and spendinghousing affordabilitypolarizationsound moneyclassical liberalismreligion and politics

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