Rishi Sunak is flailing, Boris Johnson is manoeuvering and Liz Truss is planning to relaunch her growth agenda. The future of British conservatism is up for grabs. What seems odd, or even irrelevant, to the country now will perhaps be much more important for understanding what British politics will look like after a term or two of Keir Starmer.
It is Truss, not Johnson or Sunak, who we should watch most closely. Far from abandoning her agenda, Truss is doubling down. Last month she visited the United States to take inspiration from tax-cutting Republican legislators. With that visit, and her hopes for a new tax-cutting caucus in Westminster, she is continuing her evolution into a Barry Goldwater figure: a fringe member of current political debate thanks to outlandish ideas, but who will later be seen as the first spark of a new movement.
The International Monetary Fund predicted this week that the UK would be the only major economy not to grow in 2023, giving tight fiscal policy (which means higher taxes and lower spending) as one explanation. There are other factors: the energy shock and rising interest rates add plenty of drag. The IMF’s prediction may well be wrong. But it is striking that an organisation that criticised Truss’s proposed tax cuts is now citing high taxes as one of the things holding the economy back.
At some point Britain has to face up to the fact that there is little room to raise taxes, spending, or borrowing without trade-offs on economic growth. We are fiscally constrained. When we do finally admit our situation, Truss’s reputation will be revised. Hence, Goldwater. He was the Republican nominee for US president in 1964 and though he lost his platform inspired the Republican policies of the 1980s. He was later seen as a harbinger of Ronald Reagan. As Noah Smith has written, a lot of the credit we give to Reagan should go to Jimmy Carter, but the point is the same. Goldwater (and Truss) had the right ideas at the wrong time.
Truss is reported by Politico to have told Republicans there is a risk of the Conservative Party being wiped out at the next election, saying that “Britain’s volatile electorate has a way of obliterating political parties in a manner that seldom happens in the United States”. Truss is perhaps thinking of the Liberal Party, which won a Boris-sized majority in 1906 only to become the stuff of faint memory by the 1920s. Its ideas were later revived, but not by the Social Democrats or Liberal Democrats, which lurked in the shadow of the grand old party’s reputation. No, Liberalism was revived by that most unlikely of people: Margaret Thatcher.
To her detractors Thatcher was starchy, snobbish and socially conservative. To her disciples she was the new incarnation of Gladstone, Mill and the Manchester School. She stood either for the crushing of the state through atomised individualism, or she was the reviver of free trade, free markets and free people. In reality she was nothing so simple. The three volumes of Charles Moore’s biography of Thatcher are a study in what is now called state capacity libertarianism.
State capacity is the government’s ability to achieve two things: revenue raising and market enablement. State capacity is interested in whether the government could achieve those things, not whether it should. If the state wanted to raise more revenue, implement market-supporting regulations, or resolve some external issue like air pollution, could they achieve it? This is not an ideological question about how big the state should be but a practical one about how well the state could work. Thatcher is often thought of as a politician who wanted to diminish state bureaucracy when in fact she wanted to make it more effective within smaller limits. Even the former Observer editor Will Hutton admits that she re-established the British state’s capacity to govern.
This blend of ideas, or something like it, is the future of libertarian politics. Britain is not going to implement a genuinely state-slashing agenda. We spend more than 20 per cent of national income on state-provided welfare and health services. A night-watchman state this isn’t. And the appetite for slashing government isn’t huge. Even under Thatcher the size of government was adjusted within fairly normal boundaries; it didn’t “shrink”.
Truss’s agenda sounded too much like unreconstructed libertarianism. State capacity libertarians do think the government should be smaller, as Truss did, but they are also concerned that it will become better. There was recently a state capacity libertarian in Downing Street, and he was one of Truss’ biggest critics: Dominic Cummings. Cummings sees the importance of economic growth and realises that stagnant productivity is one of Britain’s biggest challenges. He also prioritises science funding, nuclear power, the ability to avert nuclear war, and a workable immigration system, among other things. Where Truss talked about supply side reform, Cummings talks about effectiveness reforms. The new Tory liberalism will need both.
When the realisation comes, we will not see a resurgence of Trussism, but an extension of it. Think about Covid. Libertarian-ish people like the economist Sam Bowman supported state intervention as part of a long-term plan to get through the crisis. Another libertarian economist, Tyler Cowen, posted a statistic showing that high vaccination rates in Denmark led to a reopening after lockdown. The title of the post was “State Capacity Libertarianism in a Nutshell.” There are other ways in which old-style libertarianism is being softened. Bowman’s 2016 essay about neoliberalism shows a belief in markets and capitalism joined with a concern for redistribution.
As well as productivity and growth and taxes, a future liberalism will be concerned with whether the state can actually provide the services it sets out to. Supply-side reforms are necessary but as part of a wider agenda to make the British state more effective. We must all agree by now that the NHS isn’t working very well and that we ought to be producing more of our own energy, for example. Paradoxically then, when the Truss revolution finally comes, it might result in a smaller but stronger government. And if that does happen, expect Truss to be hailed as the Conservative Party’s very own Barry Goldwater.