Theresa May was rash to lump the libertarian right in with the socialist left in her conference speech last week. In the context of also embracing “the good that government can do”, she thereby offended not only the Party’s libertarian purists (admittedly, there are not many of them) but also its market liberals (of whom there are a lot more: probably a majority of party members). Belief in shrinking the size of the state has been a cornerstone of Conservative politics for the better part of the last 25 years. The Prime Minister will need Tory activists to campaign vigorously in 2020 and long before. At a stroke, she made them less willing to – or, rather, she would have done, were it not for her commitment, in the same week, to move Article 50 by the end of next March. She has thus raised the internal stakes on delivering the hard Brexit that most of them want. This presumably was not her intention.
So much for the narrow party politics of her words. But what about the content of the claim itself? Was May right to suggest that free markets, the small state, low taxes and light regulation – the Anglo-Saxon model of capitalism itself – doesn’t always work? I believe she was, for three main reasons.
The first can be found by looking at post-war history. The fastest period of western economic growth was during the 1950s and 1960s, when Keynesianism was the norm, rather than in the 1980s and 1990s, by which time monetarism had replaced it. This is not to say that the former – especially in the vulgar form to which it had degenerated by the 1970s – is better than the latter, but rather to make a wider point. Post-war capitalism produced a mass of good blue and white collar jobs. These were well-paid enough to fund a “family wage”. Many men were earning wages high enough for many women not to need to work in the labour market at all. Living standards rose across the board.
In short, what was most decisive was not just economics, but culture. New technology, innovation, products and invention were producing these jobs – in oil, cars, agriculture, consumer goods. Free market enthusiasts will claim that it was the market itself that produced the culture. But if true, this raises an uncomfortable follow-up question. Why are similar jobs not being created now in the West on the same scale, despite the fact that the Keynsian consensus was overthrown long ago? Here in Britain, nationalised industries are fewer, there are no prices and incomes policies, tripartite planning is no more, and so on.
And yet, despite the triumph of the market and the collapse of communism – not to mention Britain’s own “jobs miracle” – those kind of well-remunerated blue collar and even white collar jobs are harder to come by. It isn’t difficult to work out why. The capitalist system simply isn’t producing them on the same scale in Western Europe. Many of the blue collar ones went during the 1980s and 1990s. White collar ones are going as new technology comes in. Hence, in part, the revolt against the elites: Trump, Farage, Le Pen, the Five Star Movement, AfD, Podemos. Scaling back the state, slashing taxes and removing regulations will not change this trend.
The second reason can be gleaned from recent history, too. The breakdown of the old Keynesian order helped to drive and was itself driven by rapid changes in the way people live. Family structures were transformed. More women moved into the workforce and fewer of those substantially-paid jobs for men were created. The “marriageable pool” of men shrank. At more or less the same time, old social problems returned in new forms: what Iain Duncan Smith has described on this site and elsewhere as five pathways to poverty: worklessness, educational attainment, drug and alcohol addiction, family breakdown, and problem debt.
The state may make these problems worse. But the market alone will not make them better. If a man is mired in debt, he won’t gain from less regulation. If his alcohol or drug dependency leaves him unable to work, cutting his taxes won’t help him. If there is no history of well-paid work in his family, scaling back the state will not automatically lead to him gaining it. In a nutshell, a rising tide does not lift all boats, since it won’t lift those holed below the water-line. For people struggling with these conditions, the familar free market nostrums are not so much wrong as simply irrelevant – about as much use as trying to cut through mist with a sword.
The traditional Tory answer to such problems is to turn to that which lies between the individual and the state – civil society, mediating institutions, those Burkean platoons. This is where David Cameron’s Big Society came in. And it is true that May’s speech, by focusing on individuals and government alone, was weak on this One Nation aspect of Conservative thinking. But civil society and the state are meshed together – and will remain so. Government spending as a proportion of GDP got down to 34 per cent under Margaret Thatcher and to much the same level under Tony Blair. Given the propensity of western liberal democracies to demand public services, it isn’t likely to fall much lower.
This isn’t to say that the state must necessarily provide them directly. But it will be involved in their provision. Managing bids, drawing up contracts, setting standards, assessing perfomance: government will always be involved in all this, even if at one remove. The charity that teaches a badly-educated man new skills; the faith institution that can get him off drugs; the voluntary organisation that helps to tend people with mental health problems. All these are unlikely to be able to fund the scaling-up of what they do, or see it widely replicated, by means of private philanthrophy alone in modern countries like our own. The state will have a transactional role. It will be the middleman.
This leads to the third point. Capitalism is prone to crises – big bumps in the road. It gets over them, and moves on, or at least has done so to date. (The wagons of socialism, by contrast, simply collapse into the tarmac.) But the state has a part to play in getting the vehicle over the bumps. Most supporters of free markets accept this: that government is responsible for, say, keeping infrastructure up to speed, sometimes literally, particularly during economic downturns. Adam Smith is frequently quoted: he wrote that a “duty of the…commonwealth is that of erecting and maintaining…public institutions and…public works”.
This implies that the state has a bigger role to play than simply keeping the rules – removing abuses of the system which enable crony capitalists to thrive. Namely, to invest in human capital as well as transport capital – in vocational training as well as better railways; in good apprenticeships as well as new roads, or at least incentivise others to do so.
It may be that those who say that the free market produces a thriving culture have it the wrong way round – or, rather, that the action of the one on the other is mutally reinforcing. It grew up within a framework of strong families, independent judges, free elections, healthy civic institutions and, yes, Judeo-Christian ethics. Whether it can flourish without them is uncertain. Either way, May was right as well as rash to call out those on the Right who hate the state. In Britain, the relationship between the state and the individual is peculiarly vulnerable to family analogies. It is sometimes compared to a parent or a nanny. A better comparison is with a brother since, like the state, people are the products of the country in which they are raised. Not Big Brother, to be sure, but Little Brother – to be treated with a fraternal mix of sibling rivalry and understated love.