The Real Reason Why Keir Starmer Has Resigned: Top Economist

ELI5/TLDR

Keir Starmer resigned as UK PM in June 2026, making him the sixth British prime minister to leave without finishing a term. Economist Steve Keen argues this isn’t a personal failure but a symptom of fifty years of neoliberal economic policy that has systematically crushed real growth while enriching asset owners. The pattern repeats everywhere: growth stagnated, private debt exploded into bubbles, and ordinary people lost faith in institutions. No new prime minister will fix it without abandoning neoliberalism itself.

The Full Story

The Resignation as Symptom

Starmer’s resignation speech blamed his own choices, but Keen pushes past the personality politics. Yes, Starmer was unpopular—the Twitter joke was good: Number 10 Downing Street is “managed by Airbnb” these days, great for short stays. But the churn in prime ministers (six resignations in five decades) signals something deeper than any individual’s incompetence. Every post-war PM, left or right, has applied the same neoliberal playbook.

What Neoliberalism Promised

The theory was seductive. Remove regulations on markets. Cut government spending. Free the private sector. The textbook promised that growth would accelerate so much that you’d need no welfare state, no public health, no public education—private income would make the state obsolete.

Reagan made it explicit: “Our children will thank us” for fiscal responsibility and higher growth.

What Actually Happened

The data tells a different story. From 1960 to 1975, before neoliberalism, average per capita growth across developed nations was roughly 4% per year. After the shift, it collapsed to 1.8%. If Britain had maintained that earlier growth rate, it would be 35% wealthier today. The US would be 50% richer. The promise of neoliberalism was growth. On that measure alone, it failed.

The Debt Pivot

While mainstream economists obsess over government deficits, private debt quietly tripled. Britain: from under 60% of GDP in 1880-1980, then overnight to 180% by 2008. America: from under 100% in the 1970s to 170% by the financial crisis. This debt didn’t fund real investment. It funded speculation.

What really rose under their reign was the level of private debt.

Margin debt (borrowing to buy stocks) exploded from 0.5% of GDP in the 1950s-60s to 4% under neoliberalism. The correlation with stock valuations is almost perfect. Housing saw the same pattern: mortgage debt acceleration drove house price bubbles in every developed nation. Asset prices went up. Real productive economy stagnated.

Money Velocity and the Household Trap

Here’s a subtle trap that works against the entire economy. Individual households, drowning in debt, rationally decide to save more to meet interest payments. But when everyone tries to save at once, money moves through the economy slower. Velocity of money fell from 2.2 rotations per year in 1997 to 1.2 by 2020. Same amount of money creates less economic activity. The rational individual choice becomes irrational at scale—a paradox of thrift.

Neoliberals never understood (or acknowledged) how money is actually created. Government deficits create fiat money—cash backed only by the state’s authority, no debt attached. Private credit creates debt-backed money—each dollar comes with a liability. When neoliberals cut government spending to reduce deficits, they don’t reduce money creation; they just shift it from fiat to credit. Since 1975, nearly all new money has come from private lending, fueling bubbles rather than sustainable growth.

The Winners and Losers

Asset owners and the wealthy benefited tremendously. Politicians who rely on private sector funding never see the pain because they talk to the beneficiaries. Working and middle-class people got squeezed: stagnant wages, rising debt burdens, decaying public services. This inequality fueled the rise of right-wing populism—ironically, against the left-wing parties that introduced these policies in the first place. Political instability followed.

The Textbook Trap

Keen quotes Paul Samuelson: “I don’t care who writes a nation’s laws if I can write its economic textbooks.” Every politician at university learned neoclassical economics. They absorbed the model. They applied it without questioning whether reality matched the theory. Unless economists overturn the textbook consensus—moving to models that include debt, money, and actual banking—the next PM will repeat the exact same failures.

Key Takeaways

Neoliberalism (since ~1975) promised rapid growth; real per capita growth actually halved to 1.8% annually
Private debt tripled in developed nations while neoliberals obsessed over government debt
Debt funded speculation in assets (stocks, housing) not investment in the real economy
Margin debt and mortgage debt drove asset prices and bubbles, not genuine economic expansion
Money velocity fell as households tried to save more to pay debt—a collective drag on growth
Government deficits are actually how fiat money enters the economy; cutting them just shifted creation to private credit
Asset owners thrived; working people got squeezed, fueling political instability globally
Paul Samuelson’s observation: whoever controls the economics textbook controls policy decades later
The next PM will likely repeat these mistakes unless heterodox economics challenges the mainstream model

Claude’s Take

Keen is a legitimate heterodox economist who called the 2008 crisis while mainstream finance missed it entirely. His data on growth rates, debt levels, and asset correlations is real. The macro story—that private debt built asset bubbles instead of productive capacity—is well-reasoned and shows up empirically across multiple countries. The framing of Starmer’s resignation as a symptom of systemic economic failure rather than personal incompetence is refreshing and probably closer to truth than most takes.

Where it softens: the prescriptions are vague. “We need a new economics” and “study my courses” aren’t blueprints. The video spends most of its length diagnosing the disease (well) but offers little on how an alternative would actually work in practice. There’s also a whiff of determinism—the implication that the next PM, Andy Burnham, will fail for identical structural reasons, with no agency to choose differently. That may be true, but it reads a bit like a prediction that can’t be falsified.

Still, this is one of the rare mainstream-adjacent takes that actually follows the data instead of protecting the consensus. For anyone curious why democracies are destabilizing despite material affluence, Keen’s angle is worth sitting with.

Claude score: 7/10. Solid diagnosis, real data, intellectual honesty—undermined by vague remedy and some fatalism. Best value for those already skeptical of neoliberalism; less likely to convince textbook believers.