Liz Truss and his likely Chancellor of the Exchequer, Kwasi Kwarteng, belong to a peculiar generation, many of whom once asked their parents, “Can a man be Prime Minister?” Not even four years old when Margaret Thatcher took power, 15 when she lost it and well into adulthood before the Tories were finally defeated, their first political awakenings would have taken place against the long backdrop of Thatcherism. .
This biographical background is acknowledged in the notorious political tract Truss and Kwarteng co-wrote with Priti Patel, Dominic Raab and Chris Skidmore, Britannia Unchained, published in 2012. “The five authors grew up at a time when Britain was improving its relative performance. to the rest of the world,” he says. “The 1980s, contrary to the beliefs of many on the left, were a successful decade for Britain.” Their goal is to resurrect the political dreams of their own childhood.
As anyone who’s followed Truss-managed photoshoots and fashion choices knows, she’s never been shy about her Thatcher fandom. What is potentially more alarming is the extent to which she seems determined to revive a set of Thatcherite policies and ideas that barely worked 40 years ago and can now be considered bigoted. This includes a restoration of the long-discredited economic thinkers of the early Thatcher era – Patrick Minford of Cardiff University and John Redwood – to positions of influence on public policy. Since the mid-1970s, Minford has been a devotee of conservative American economics.. More recently, he suggested that interest rates should rise to 7% (from their current rate of 1.75%) to offset the inflationary effects of the tax cuts proposed by Truss.
How can we make sense of this disturbing revivalism? At the heart of Thatcherite economic policy was the belief, often referred to as “supply-side economics,” that collective prosperity is only an effect of the efforts and ingenuity of corporations, investors, and workers. If the economy is stagnating, it must be because something is holding these institutions and individuals back – most likely government, but also unions and collectivist values. The job of the state, from this point of view, is to ensure that entrepreneurs, investors and employees all have clear incentives to spend as much as possible.
From this, many others flow. Taxation (particularly on the wealthy) emerges as a barrier to innovation and productivity, as it reduces the incentive for the wealthy and big business to put their money to work. The welfare state is accused of fostering ‘dependency’, of reducing the incentive for people to go to work and to take responsibility for themselves and their families. Above a certain level, income tax makes it unnecessary for workers to increase their hours or efforts, as they will not be fully rewarded. Regulations and “bureaucracy” deter entrepreneurs from setting up businesses in the first place. By devaluing people’s savings, inflation punishes people for their success and reduces confidence in the system in general.
But the implications are as much moral as they are economic, and this is where supply players encounter a paradox. On the one hand, this ideology presupposes the existence of an invisible army of entrepreneurs and grafters, bubbling with ideas and determination, who are contained by socialists and regulators. This explains the bold patriotic optimism of neo-Thatcherites such as Truss. On the other hand, he despises the populace as it presents itself, made up of lazy, poorly educated petty criminals with no capacity for delayed gratification or a hard day’s work. Sometimes it’s a mixture of both: a society of people who want all the pleasures of capitalism, without the pain.
Orthodox economists have always been suspicious of the supply-side worldview, which is troublingly immune to the evidence against it. Rooted in Protestant beliefs about just merits and individual responsibility, it might best be considered an economic theology. George HW Bush famously described it as “voodoo economics”. In 1981, a famous letter to The Times signed by 364 economists urged Thatcher to change course from the inflation-fighting strategy that was dragging Britain into recession. One economist who came to Thatcher’s defense was Patrick Minford.
By the late 1990s, with New Labor steeped in the latest economic thinking and evidence, and the economy booming, Thatcher’s reactionary, anti-state legacy seemed dead and buried. Or maybe his fans had simply found a new “state” to blame for everything: the European Union. The nascent Euroscepticism, which found an intellectual home in think tanks such as the Bruges group and became the focus of Thatcherites such as Redwood, bubbled up in the background, until its eventual eruption in 2016, retargeting the supply-side argument against regulation originating in Brussels. . Minford was virtually alone among economists in backing Brexit and was once again dismantled by the rest of the economics profession.
Truss may have campaigned to stay in 2016, but Britannia Unchained owes much more to the nationalist, anti-state ethos of Tory Eurosceptics than to the austere technocracy of the Cameron administration. A strange book, whose research consists largely of anecdotes gleaned from Internet sources and Daily Mail articles, it zigzags between deep cultural pessimism and delirious economic optimism. Many villains are named – from Tuggy Tug, a 15-year-old drug dealer from Brixton, to working parents who live on benefits – but the prize scalp is Tony Blair. The resentment and disorientation that must have grown, as a Labor government oversaw one of the UK’s most prosperous economic decades since 1945, must have been deep. It is therefore not surprising that Truss, Kwarteng et al blame the financial crisis of 2008 on excessive labor spending, again at odds with the economic evidence.
How will these ideas be deployed in the ongoing economic crisis? So far, we’ve heard the standard answers from Truss’ side, all focused on supply-side reforms. There will be no “distribution”. Unions hold back the economy. Tax cuts will make people richer. Drilling and fracking will lower the cost of energy. Brussels East still hamper business. And that’s before we get to the cultural attacks on universities, wokeism, and the public service. But all this as part of a leadership campaign to benefit 180,000 members of the Conservative Party.
In government, Truss may continue to preach the gospel of the offer to the ears of his backbenchers and favorable newspapers, but it’s hard to imagine Minford and Redwood dictating actual policy, given the extent and nature of this crisis. The impact of Thatcherite dogma in the early 1980s was to drive unemployment up to three million and destroy entire industrial regions. The social consequences were horrific and have shaped Britain to this day. But the consequences of such a political program in 2022-23 would be even worse. In all likelihood, Truss will soon turn out to be a hypocrite. The supply-side zombies will then themselves have a new scapegoat to blame for Britannia’s woes.
William Davies is a sociologist and political economist. His most recent book is Unprecedented? How Covid-19 revealed the politics of our economy
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