This is in part a follow-up to my post two weeks ago, which argued that parties of the centre-right that adopt unpopular right wing economic policies are attracted to high profile socially conservative policies like cutting immigration or Brexit. Unfortunately that strategy over time legitimises political parties that are more socially conservative and authoritarian, so the centre-right can end up fighting on two fronts, or itself become more socially conservative and authoritarian.
I received some interesting comments on that post. One was that some of Thatcher’s and Reagan’s economic policies were quite popular, so how did that fit into my assumption that Conservative economic policies were unpopular? Others wanted to explore the role of the main centre-left party in this dynamic process. This post tries to answer both questions by widening the time frame, but restricting my attention to (mainly) the UK.
I increasingly see the core of neoliberalism in practice as being about economic power, rather than some abstract idea about the benefits of markets and the dangers of government interference in them. Before Thatcher, both the main political parties in the UK operated within a social democratic framework where the state held considerable economic power through the ownership of key industries, and workers had considerable power through the growing influence of trade unions. Economic issues were often discussed and resolved in a tripartite framework involving the state, trade unions and business.
Neoliberalism was about changing this radically, with trade unions losing almost all their power at a national level and significant power in the workplace, and the state largely deferring to business and corporate interests on key economic issues. Nationalised industries could be turned into profitable private sector businesses, and state functions could be out-sourced to the private sector. Increasingly the state was seen as enacting the interests of corporations and businesses. As these interests were whatever CEOs and shareholders told the government they wanted, it also meant that top tax rates were cut to supposedly improve firm performance, and the Conservative government put cutting taxes ahead of improving the provision of public services..
None of this happened overnight with the election of the 1979 Thatcher government, and some of the changes to a more neoliberal regime were (at least initially) popular. In the 1970s the public increasingly saw an association between trade union influence, a high level of strikes and high inflation, and so curtailing trade union power under Thatcher was popular among many. Selling off state assets, including council houses, often at discounted prices was also popular among many, although it was popularity with a clear shelf life as the government ran out of assets to sell and instead felt the consequences of a reduction in revenue. Tax cuts were initially popular, particularly when they were funded by North Sea Oil rather than spending cuts.
For all these reasons it is not surprising that gradually moving the economic compass from the left to the right might be popular at first. This of course was reflected within the centre-left party, with New Labour replacing more traditional Labour because the latter was associated with the less popular pre-Thatcher economic regime, and trade unions in particular. Many have serious misgivings about the extent to which New Labour accepted key aspects of neoliberalism, and of course popularity was influenced by a right leaning media landscape, but it seems clear to me that Labour were playing follower here, with Thatcher and the Conservatives taking the lead. (The response of the Democrats to Reagan’s success was similar in some ways.)
Yet one area where neoliberalism was not popular was in allowing public services to deteriorate in order to cut taxes. (This is often called ‘shrinking the state’, but privatisation aside in practice shrinking the state doesn’t so much mean the state does less things but rather doing the same things badly.) The substantial additional money the Blair/Brown government put into the NHS in particular was sufficiently popular (despite the higher taxes that came with it) that the Conservative party felt compelled to pledge that they would match Labour’s spending until the Global Financial Crisis gave them an excuse to do otherwise.
There can be no doubt that Conservative MPs, party members, the right wing press and party donors wanted more tax cuts and therefore to reduce public spending. On the ‘size of the state’, therefore, the Conservatives in opposition wanted to be well to the right of where public opinion was. I want to focus on this aspect of being economically right wing for the moment, and suggest later why other aspects also fit this pattern.
Cuts in public spending dominated the Conservative led Coalition government from 2010. It was justified by scare stories involving higher government debt after the Global Financial Crisis, stories that the media and enough of the public completely fell for. This deception was critical to the Conservative 2015 election victory, but the deception had an expiry date. Boris Johnson understood this, and he conducted a partial and selective reversal of these cuts when he became Prime Minister. This combination, of social conservatism but moving away from very right wing economic policies, seemed for a moment quite powerful.
However even under Johnson the associated tax increases proved too much for Tory MPs. Although partygate sealed his fate, it is far from clear whether Johnson would have wanted or been able to continue to undo the impact of Osborne’s austerity. We have now returned to a Conservative party intent on cutting taxes whatever the consequences for public services. On economic issues Conservative MPs are now well to the right of their members and voters, let alone the public as a whole
If we think about the one issue of the size of the state and the level of taxes, it is not surprising that Thatcher started as popular but over time the Conservative party became more and more out of touch. Lower taxes and a smaller state were not achieved overnight, but gradually over decades. Lowing taxes from 1970 levels (particularly if they were paid for by North Sea Oil) might have started off as popular, but as taxes and the quality of public spending were reduced further and further by Conservative led administrations that policy became more extreme and more unpopular.
To what extent has the Labour party allowed or facilitated tax cutting and shrinking the state? In government New Labour reversed it, but this didn’t stop the Conservative press writing endlessly about government waste and the Conservative opposition calling for cuts once they had the excuse to do so. Subsequently as the opposition, Labour found criticising the Coalition government’s actions increasingly futile as the media bought into austerity, so largely gave up. Conceding the argument may have helped lose the 2015 election, but it seems a stretch to suggest that had any influence on what Conservative politicians wanted to do. Perhaps pressure from Corbyn (after 2017) had something to do with Johnson’s limited and partial reversal of austerity, but I suspect it had more to do with needing to sell Brexit. I still think Labour has played a minor part at most in the Conservative party’s journey to the political right.
Other aspects of neoliberalism that might at first have been popular were always inherently at risk of losing that popularity. Privatised utilities could easily become natural monopolies that ripped off customers in favour of shareholders. Regulators were meant to prevent this, but if the government is not careful or is indifferent regulators can be captured, and we get the kind of situation we are now in with the water industry. There is currently widespread support, with caveats noted here, for renationalising many industries privatised under Thatcher.
Just as the Conservative party wanted to move further on cutting taxes and ‘shrinking the state’ than Thatcher, they also wanted to go further in outsourcing public sector provision. In particular, they increasingly saw the NHS as becoming a purchaser of health services from the private sector companies. While this might have gone under the radar for most people using the NHS, introducing the profit element with little evidence of compensating efficiency gains would mean the deteriorating services we are now seeing.
All this leaves one remaining puzzle. How did MPs from the UK’s most successful political party find themselves so divorced from public opinion on these critical economic issues? While in the past it has been claimed that the UK is a naturally Conservative country, such claims now cannot be true with Conservative politicians so far away from public opinion on economic issues. The answer isn’t just attachment to an ideology. In addition there is another dynamic that has been a theme of my posts for some time, which is how a party representing neoliberalism can easily become captured by monied interests to become a party representing the very wealthy.
The key moment in this transformation in the UK was of course Brexit. Although it is just about possible to rationalise Brexit in neoliberal terms, if we think about power, Brexit was far from neoliberal. The overwhelming majority of businesses and corporations selling to and from the UK suffered serious damage at the hands of newspaper owners and a few very wealthy individuals. This kind of capture of a neoliberal party by monied interests is not really surprising, because once a politician sees themselves as representing the interests of corporations and businesses generally rather than society, it is a small step to start representing the interests of particular and potentially unrepresentative corporations and businesses (and their ‘think tanks’), especially if those businesses happen to be newspapers or party donors or future employers. Corruption inevitably follows.
Which is why the Conservative party is stuck. If politicians in practice represent a selection of the very wealthy rather than the public then of course they prefer tax cuts to improving public services. It is why they believe the only hope of staying in power is to lead on socially conservative issues. As so often over the last few decades, many Conservatives will look to the US and the Republicans for how to get themselves out of this hole. All they will need, some (but not all) will suggest, is a leader with the charisma of Johnson (at first) or even, as Tim Bale suggests, Farage to sell what has truly become the nasty party. This is just one more reason why Trump’s fate in this year’s election for President will matter for the UK.