On 17 November a Conservative government will raise taxes by tens of billions of pounds and give itself permission to run budget deficits for the next five years. The national debt, which was scheduled to fall from 95 per cent of GDP to 83 per cent will instead probably nudge 100 per cent. Tight fiscal rules rammed through parliament in January will be broken.
Yet in the land of the think tanks cognitive dissonance prevails. The Institute for Economic Affairs (IEA) is urging Rishi Sunak to reject “high-tax, low-growth, cheap money economics”. On the Centre for Policy Studies’ website there is research urging the Treasury to hand businesses billions of pounds worth of tax reliefs. The Adam Smith Institute is still banging the drum for the 19 per cent corporation tax.
The think tanks that urged Liz Truss on to disaster are, in short, left sitting on a pile of expensively produced theoretical garbage. The Conservative Party in parliament, meanwhile, has broken irrevocably into factions. The One Nation wing, the libertarians, the neo-Thatcherites and the anti-woke brigade each possess a coherent core idea, but their relationship to a core conservative project is cloudy.
So while the immediate task for the Tories is to kludge together a government of rival factions, the thornier question is where conservatism itself goes now. Because, in common with socialism, it has to face a series of existential challenges.
The first is the need for carbon neutrality by the middle of the century. This is a legally-binding commitment that, in current conditions, cannot be achieved by a night-watchman state. We are going to need state direction, state subsidy, state price controls and – in conditions of deep energy insecurity – state ownership and control of the energy industry. For this reason alone, the size and influence of the state within British capitalism has to rise.
And then there are the shocks. The 2008 financial crisis – when an over-indebted private sector had to be bailed out by the state – saw the national debt rise from 40 per cent of GDP to 80 per cent. The Covid-19 shock pushed it to 95 per cent. The long-term impact of Vladimir Putin’s war in Ukraine, and the energy shock it has triggered across the globe, will only further increase debt. And while debt-to-GDP ratios of 100 per cent are sustainable in a period of low bond yields, simple arithmetic shows that – as with the infection rate in a pandemic – higher interest can lead government debt to explode.
You don’t have to be a Marxist to observe the probable interconnectedness of the shocks. Any theory of complex systems would demonstrate the connection between unrestrained financial speculation, globalised trade, a warming planet and the collapsing biological barrier between humans and animal-borne viruses. But again these systemic crises trigger only cognitive dissonance among conservatives. Each requires the state to save the market; or for geopolitical imperatives to supersede trade. We are a long way from the triumph of liberal individualism and a friction-free globe.
So what are the potential sources for a conservatism reconciled to the big state? It was in the inter-war period that British conservatives first began to think through the emergence of an expensive, military-industrial state with powers of economic direction. The earliest and most consistent statist was Harold Macmillan, who in the late 1920s dragged an old debate about tariffs onto new territory.
Macmillan developed, more consciously than any of his conservative peers, a critique of capitalism. Unrestrained competition, he wrote in The Middle Way, had inevitably created “poverty and insecurity in the basic necessities of life”. It was the state’s job to promote “a wide extension of social enterprise in the sphere of minimum needs”. It should do so through “large scale co-operative enterprise” – ie non-private sector corporations – because the state had a duty to ensure minimum basic living standards.
To the young people floating around the free-market think tanks today, Macmillan’s ideas may seem to have nothing in common with the ideology they call conservatism. But his political evolution is a classic conservative story. It follows the historian Ewen Green’s observation that the logic of Conservative ideology usually follows the “logic of the situation”. Inter-war capitalism was becoming statist and welfarist; Macmillan worked out how to manage it in a conservative way.
But where will the new Macmillans come from? The rising Conservative stars are anti-woke cabinet ministers, such as Kemi Badenoch and Suella Braverman. Behind them – for the next two years if we’re unlucky – sit people such as the Blackpool MP Scott Benton, who advocates the return of the death penalty.
One Nation Toryism is effectively a mitigation strategy for neoliberalism, resigned to rising inequality but determined to use charity and redistributive taxation to soften its effects. And in a political culture used to drawing its new ideas from the US, the semi-fascist populism of Donald Trump and Ron DeSantis, the governor of Florida, is bound to resonate more strongly if the Republicans win the mid-term elections.
The question Tory thinkers need to answer is no longer “how do we shrink the state”, but “why does the state keep growing against our will”. The answer is that the neoliberal economic model no longer works, just as the Attlee-Macmillan-Keynes model ground to a halt during the oil shock of the 1970s.
By neoliberalism I mean a regime where market norms of behaviour are coercively imposed on all forms of social life, by the state, on behalf of a global rentier class of financial, fossil fuel and technology owners. The resultant mass poverty requires the workforce to live on credit, driving asset-price inflation and boom-bust cycles alongside wage stagnation. This regime of accumulation is unsustainable in its own right and has triggered a rush to the exits from globalisation.
As a result, we face several decades of insecurity: war, energy conflict, the breakup of trading blocs and ultimately systemic conflict are part of the knowable future. Paradoxically, some of the most acute insights into this emerge from traditionally conservative think tanks such as the Royal United Services Institute and Chatham House. But as regards its economic, fiscal and social policies, conservatism hasn’t got the memo.
So it’s time for Tories to stop obsessing about wokeness and cancel culture. Stop transferring your anxiety about the size of the state into objections to the rules of university debating clubs. Instead, start thinking about the entrepreneurial state. Start modelling the potential multiplier effects of public spending, even if your favourite think tanks say they don’t exist. Understand that the net-zero target is a mandatory human goal. By all means keep your objections to utopian thinking, but accept that carbon neutrality is a task dictated by the “logic of the situation”, just as rearming in the 1930s to defeat fascism was.
British capitalism’s direction of travel is either to chaotic isolationist bankruptcy or to a carbon-neutral welfare state, strongly aligned to the European Union. It could take a liberal form or a collectivist form, but it will not have a conservative form until some actual Tories start imagining it.
[See also: Rishi Sunak cannot save the housing market]