For a period this summer, it was popular to dismiss Liz Truss as a flip-flopper. The argument went something like this: she was a Liberal Democrat, then a Conservative; a Remainer then a die-hard Brexiteer; a modernising Cameroon then a darling of the Thatcherite hard right. In this reading, her free-market overtures during the party leadership campaign were merely the latest act of opportunism, a calculated but hollow pitch to a Tory membership still pining for a new Iron Lady.
This line was never very persuasive, as nothing in Truss’s past was fundamentally incompatible with her proclaimed ideological commitment to a small-state, free-market model. And now, just three weeks into her tenure in No 10, it has been comprehensively buried. The unofficial Budget from her like-minded Chancellor, Kwasi Kwarteng, on 23 September removed any remaining doubt by ushering in the biggest package of tax cuts since the Conservative chancellor Anthony Barber’s expansionary “dash for growth” in 1972, and by targeting the benefit of those cuts overwhelmingly on the richest.
Far from popularity-chasing opportunism, this amounts to a huge experiment that, as the Conservative commentator Tim Montgomerie has put it, effectively treats Britain as a giant “laboratory” for economically libertarian ideas. The success or failure of that experiment will make or break Truss’s government. Say what you like about the wisdom of this approach – and the markets have had their say – but it is absolutely not the method of a flip-flopper. Rather, it is that of a convinced member of a deep-rooted network of ideas, institutions and thinkers born on the shores of Lake Geneva over 75 years ago. It is impossible to understand the ideological zeal with which Truss and Kwarteng are pushing Britain towards the economic brink without understanding that network.
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In 1947 the economist Friedrich Hayek convened the Mont Pelerin Society, named after the bucolic location of the Swiss hotel where this grouping of free-market thinkers gathered. Inspired by Hayek’s warnings of a “road to serfdom” – as set forth in his 1944 book of that name – they were united in concern at the apparent march of international collectivism, in both its totalitarian (Soviet) and democratic (social democrat and New Deal) forms.
Over the subsequent decades members and associates of this group established successive generations of influential think tanks advancing anti-collectivist economics. In 1955, Antony Fisher founded the Institute of Economic Affairs in London (IEA). This would help inspire a second wave in the 1970s, including the Cato Institute and the Heritage Foundation in Washington DC and, in London, the Centre for Policy Studies (CPS) and the Adam Smith Institute (ASI). As the historian Daniel Stedman Jones puts it in his book Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics, these transatlantic “ideological entrepreneurs” provided both a long-term incubator for such ideas and a bridge from high economic theory to applied policy practice. Both Reaganomics and Thatcherism would have been unthinkable without them.
From the 1980s to the early 2000s came the next wave of more public-facing bodies such as Americans for Tax Reform and the TaxPayers’ Alliance (TPA). Matthew Elliott, who worked at the former before returning to his native UK to found the latter in 2004, would also go on to help establish and lead the Vote Leave campaign in the run-up to the 2016 Brexit referendum.
These bodies are not homogeneous. Cato, for example, is classically libertarian on social issues like LGBT+ rights, whereas Heritage is hard-line conservative. There are also differences of approach. Mark Littlewood, the director of the IEA, who has known Truss since their student days – they both attended Oxford in the 1990s – differentiates between more “upstream” think tanks like his own, which are closer to academia and concentrate on disseminating ideas among opinion-forming elites, and more “downstream” organisations, which are focused on government policymaking (like the CPS) and shaping debate in the mass media (like the TPA).
Marc Stears tutored Truss when she was a PPE student at Oxford and today leads the Policy Lab at University College London. He notes that the more theoretical “upstream” parts of the libertarian think-tank spectrum have grown in significance as academia has tilted leftwards. “There are fewer centres in the big universities where these thinkers cluster,” he told me. “So that makes the role of think tanks more important.”
Yet certain traits are common to the Mont Pelerin think-tank family. One is philosophical. Stears says: “Hayek’s ideas are really important because of the underlying spirit that animates them: that there is no such thing as collective intelligence; the state does not know things and only individuals can really know things. That faith in the wisdom of the crowd, as expressed in price mechanisms, is very deeply ingrained.”
He also points to a shared tendency to be patient, citing the Marxist philosopher GA Cohen’s observation that the supply-side right has succeeded at “keeping the fires burning” even through periods in the political wilderness. Littlewood agrees that the greatest strength of organisations like his is to invest in the long-term dissemination of their ideas.
There is also geographical communality. The majority of these think tanks are clustered around Tufton Street, a Georgian terrace in Westminster, and Massachusetts Avenue, a long boulevard in Washington DC (a distinction being that “Mass Ave” is also home to think tanks of various other intellectual outlooks).
These two worlds have long been linked by transatlantic personalities criss-crossing between them. Prominent examples include Fisher (who founded the Atlas Network, a Washington-based umbrella organisation of international free-market think tanks), Edwin Feulner (a former IEA intern who co-founded Heritage) and Eamonn Butler (an ally of Feulner’s who co-founded the ASI in London). Today they number Ryan Bourne – a Truss ally, formerly of the IEA and now at Cato; Daniel Hannan – a Brexiteer former MEP and founder of the Initiative for Free Trade (IFT); and Nile Gardiner – head of the Margaret Thatcher Center for Freedom at Heritage.
Ideologically, the institutions and thinkers of this world share a common commitment to a low-tax, low-regulation, Anglo-Saxon social model, distinct from the social democratic “European” one. They tend to favour certain mechanisms for advancing that model, such as free-trade deals levelling down state intervention and demarcated zones pioneering extremely limited government (variously referred to as “freeports”, “investment zones” or “charter cities”). They instinctively prefer market-led solutions to collective problems, such as climate change, over state-led ones. Perhaps not unrelatedly, many of them draw on opaque funding from big private-sector interests. Cato, for instance, has received backing from corporations such as FedEx and Google, and, in the past, from the tobacco industry – which has also been a source of funding for both the IEA and ASI.
In the Britain of 2022 these instincts express themselves in a particular analysis of the state of the country. This, as Truss-ite thinkers explain, starts from the argument that British governments since Margaret Thatcher – Conservative as well as Labour – have become much too sentimental about the distribution and moral character of growth, and too little focused on raising the overall growth level. As Bourne puts it: “Liz Truss would not consider it a failure if she got the growth rate up significantly but not equally across regions.”
It is not a politics of pursuing what is popular per se, but of letting “what works” (defined as whatever lifts the growth rate) speak for itself. “They won’t be transactional about policies,” Bourne says of Truss and Kwarteng. “It’s the whole string of things. Incrementally, the patient might not like the medicine, but overall they will feel healthier and revived.”
Even during her student years in Oxford, recalls Marc Stears, Truss prided herself on defying intellectual convention. “Her primary characteristic was a love of controversy, quirkiness and idiosyncrasy… Her thinking was always intriguing and contrarian, if not always fully worked through.” A brief flirtation with the Lib Dems is not entirely inconsistent with right-wing libertarianism (the party’s Orange Book tendency has links with this world too, and as a student Truss was also a member of the Hayek Society). “She definitely sat outside the prevailing social democratic orthodoxy even then,” Stears says.
Truss worked in think-tank land herself before her election to parliament, serving as deputy director of Reform from 2008 to 2010, a period when the organisation was laying some of the intellectual foundations of the spending cuts and market-led approach to public services that would be introduced under David Cameron and George Osborne. “Cameron and Osborne may have been more Thatcherite where Truss is more Reaganite,” notes Tim Bale of Queen Mary University of London, a historian of the Conservative Party. “But they shared the basic belief that the market should be the main force in economic life, the state as small as possible and the individual as large as possible.”
Shared beliefs, yes, but with different degrees of intensity. In 2010, Truss typified a romantically Thatcherite intake of new Tory MPs who thought Cameron and Osborne were being too cautious about slashing the state. “When you think that people’s politicisation tends to take place in their teens and early twenties, it is perfectly understandable that MPs who had come of age around 1997 would equate past Conservative election victories with what they saw as Margaret Thatcher’s uncompromising free-market ideology, rather than her more compromising reality,” Bale says.
Truss rapidly became a figurehead for this generation. “Liz was the first convenor of the Free Enterprise Group,” recalls Littlewood, referring to the establishment in 2011 of a cluster of like-minded Conservative MPs that effectively served as the IEA’s parliamentary branch. “And Kwasi Kwarteng was the second.” Along with two other free-marketeers from the Tory 2010 intake, Priti Patel and Dominic Raab, the duo co-authored After the Coalition (2011), and then the more radical Britannia Unchained (2012), both small-statist screeds drawing heavily on Tufton Street thinking.
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If there is a moment when Truss appears to have been genuinely opportunistic, it was probably not her supposed conversion to the Brexit cause after the 2016 referendum but her initial support for Remain. That would explain the speed and conviction with which she emerged as a “born again” Brexiteer afterwards, a political rebirth that accelerated in a succession of speeches following her appointment as chief secretary to the Treasury in 2017.
A particularly notable speech was delivered at the Cato Institute in Washington in 2018. In it, Truss called for a new, small-state “Anglo-American dream” driven by an emergent generation of “market millennials” used to the freedoms of the app economy – “Uber-riding, Airbnb-ing, Deliveroo-eating freedom fighters”, as she put it elsewhere. “Free enterprise is a hymn to individuality and non-conformity,” she proclaimed to her Cato audience. “It’s what allows the young to flower and the anti-establishment to flourish.”
Bourne helped set up the speech. I put it to him that her argument ignores strong youth support for the likes of Jeremy Corbyn and Bernie Sanders. “It’s a case of stated preference versus revealed preference,” he said. “Liz’s essential argument is that, in their actions, young people in both countries are very entrepreneurial, independent, and enjoy the fruits of a liberal, dynamic economy. She thinks there is a latent enthusiasm for markets if we can reform things in a direction that enables these people to fulfil their wants and needs, like starting companies and buying homes.”
During that September 2018 visit to Washington, Truss held off-the-record meetings on “regulatory reform” with representatives of Heritage as well as discussions with Americans for Tax Reform. Her visit was immediately followed by Cato and Hannan’s IFT publishing an “ideal” UK-US free trade deal that included input from the IEA and Heritage. It promoted a greater role for private firms in British education and healthcare, an end to the “precautionary principle” in British food regulation as well as watered-down environmental rules. (In her next role, as trade secretary, Truss would even appoint Hannan to the Board of Trade.)
It was around this time that she became engrossed in books by the American historian Rick Perlstein on the making of the Reagan revolution. These tell of how the Gipper adopted advice given to Richard Nixon by, of all people, the Soviet leader Nikita Khrushchev: “If the people believe there’s an imaginary river out there, you don’t tell them there’s no river there. You build an imaginary bridge over the imaginary river.” In Perlstein’s telling of Reagan’s rise, what came to be known as the “invisible bridge” meant a cocktail of infectious optimism and cynical exploitation of social grievances. The term is common parlance among Truss’s aides.
By the time Truss became foreign secretary in 2021 – and the prospect of a leadership election and the prize of 10 Downing Street came into view – her ideology, rooted in the school of thought founded at Mont Pelerin, was long-established. “Her ideological disposition is towards the likes of Robert Mundell, Alan Reynolds and Arthur Laffer,” says Bourne, “the original supply-side thinkers in the US who influenced the underpinnings of the Reagan administration. The basic idea is that monetary policy deals with inflation and that fiscal and especially tax policy has to deliver incentives for long-run growth.”
Another inspiration is “Rogernomics” in 1980s New Zealand, when the Labour government’s finance minister Roger Douglas slashed trade tariffs and non-tariff barriers and pioneered monetary policy targeting. (The legacy of that neoliberal experiment remains deeply divisive on the New Zealand left.)
So total is Truss’s faith in free-market ideas and the networks that produced them that, now she is Prime Minister, the supposed free-market outriders are finding themselves being outridden by the sitting government. Littlewood of the IEA marvels at the scope of the unofficial Budget. “I have long tried to fine-tune our criticism of Conservative governments for not being radical enough; now they’re being more radical than even we are requesting.” He cites the government’s commitment to scrap all remaining EU law as an example. Even when the IEA and Truss disagreed, the closeness was evident; its criticism of her energy price cap promptly elicited an explanatory call from No 10.
Old Tuftonians hold many of the senior jobs in her government. “Matt Sinclair is the standout example,” says Littlewood of Truss’s chief economic adviser, formerly of the TPA. “He is steeped in this world.” Ruth Porter, deputy chief of staff, is an IEA alumna. Sophie Jarvis, No 10’s political secretary, was formerly at the ASI. “She will have hired and appointed people who are on board with her ideologically,” agrees Bourne. With Kwarteng as Chancellor, as well as James Cleverly as Foreign Secretary and Jacob Rees-Mogg as Business Secretary, the major cabinet roles are held by true believers.
Free-market think tanks, like the IEA, that have long considered themselves to be outside the broad British consensus have often used provocation and controversy to catch attention, shake things up and try to shift debates. Truss, observes Marc Stears of his former student, is now bringing that approach into government. “She loves this idea that the action is in the reaction, prodding and provoking people. The unofficial Budget was like going to a slightly mad libertarian think-tank report launch.”
He draws a contrast between Cameron, who took risks such as the Brexit referendum because he believed things were fundamentally stable, and Truss, who “actually wants to destabilise things. She thinks the prevailing order is wrong and there is a need to break things to rebuild.”
In Tuftonland, and in its US equivalent, the announcements of 23 September are seen as just the beginning, despite the reaction from the markets. Next up, it is hoped and anticipated: spending cuts to balance out the tax cuts.
But where and what to cut? In 2015 Bourne and Kwarteng co-authored a book, A Time for Choosing, that proposed halving the number of Whitehall departments. During her leadership campaign, Truss floated the possibility of regionalising public sector pay (this idea was quickly dropped). In his statement, Kwarteng hinted at coming welfare cuts.
There is also an expectation of more deregulation. “Kwasi’s advisers talk of unveiling a whole series of supply-side reforms in the next six weeks,” says Littlewood, hopefully: “a permanent state of dramatic policy announcements.”
Bourne cites childcare, infrastructure, energy and housing (street votes on city planning decisions, for example) as possible focuses, as well as farming (“where there might be a quid pro quo where they scale back government support but relax regulations”). “And I expect this philosophy to apply to lifestyle freedoms, too,” adds Littlewood. “Deregulating ads for sugary drinks, McDonald’s advertising on the London Underground, that sort of thing.”
Think tanks, of course, do not need to worry about elections. But the Truss-Tufton mentality is that results trump politics. “Her broad view is ‘We have to show, not tell’,” says Bourne. “We have to get on with free-market reforms and when they create results they create a baseline, and that wins hearts and minds.” There are echoes of the Prime Minister’s vision of “market millennials” here: that young people will come to recognise their small-state instincts when they feel the benefit of such politics put into action.
Littlewood acknowledges Truss’s uphill electoral battle, but says it is time to start asking: “What sort of reforms might be considered for the event that she wins the next election and has five more years of power? Given the audacity of the Prime Minister’s first moves in office and the dramatic market response, the mind boggles. The IEA’s director is looking forward to October’s annual conference of the Mont Pelerin Society in Oslo, and Randian discussions on big-picture libertarian topics such as whether cryptocurrencies will make state fiat currency obsolete over the coming decades.
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Some on the left will read this article, note the apocalyptic market numbers and economic forecasts, and wonder whether it gives Truss too much credit to ponder the ideas, thinkers and institutions influencing her policies. But it is precisely the radicalism – in a reckless, negative sense of the term – that makes understanding this world-view so important. Arguably, the influence of institutions such as the IEA and the TPA, and their American cousins, has been too little scrutinised. So too has the intellectual assumptions they have popularised. In one televised debate during the summer’s Conservative leadership contest, Rishi Sunak took direct aim at Truss’s unfunded tax cuts, saying they would drive up inflation; she replied, with total conviction, that responding to inflation was simply a matter of being “tough enough on the monetary supply”. Yet the discussion that ensued was concerned not with the underlying world-view that this revealed, but whether or not Sunak had “mansplained” to her. Substance in politics matters, for better or for worse. It demands engagement and sceptical analysis.
Moreover, for opponents of the Conservatives, studying the heritage of the ideas now being enacted by the most ideologically driven cabinet since the 1980s is key to understanding their political weaknesses. It would be foolish blithely to assume that Truss and her government will self-combust. Bad governments demand more opposition, not less. And opposition requires understanding.
The Mont Pelerin network – and the institutions it manifested in London and Washington – has long contained certain tensions that can be exploited by opponents of the Truss project. One tension is that between a Thatcherite insistence on sound money and a Reaganite debt-funded dash for growth. Why did the Mont Pelerin vision express itself as the former in Britain and the latter in America? Asking that question reveals fundamental differences between the two economies: the American dollar is more formidable than the British pound and the US has more “expansionary” demographics (a younger population with a higher birth rate), making the politics of debt, and how the market views it, different in the two countries.
Related to this are the manifold differences between the Chicago and Austrian schools of free-market economics. The former is associated with Milton Friedman and tends to assert the “efficient market hypothesis” of rational markets and the value of monetary activism; the latter is associated with Hayek and Ludwig von Mises, accepts the notion of boom and bust, argues that the market should be left to set interest rates and generally places less faith in achieving mastery of economic conditions through data.
Another tension within small-state philosophy concerns what should fill the gap that’s left when the state retreats. For some, like Truss, omniscient market forces are the answer, and the goal is a society of empowered individuals – “market millennials” and the like – freed from limitations. For others, the answer is non-market, but also non-state, forms of communal endeavour, like cooperatives. “Think of localist Tory MPs like Neil O’Brien, Michael Gove, Jesse Norman,” urges Stears. “They’re not big state, or big market either, but more believers in bottom-up power.” It is from this Tory cooperative tradition that he reckons some of the most forceful opposition to Truss’s free-market experiment could come.
Finally, there is the tension between the libertarian claim to be on the side of the little guy and the disruptive outsider, and the reality that Tuftonland and the Massachusetts Avenue small-state set are extremely close to big-business insiders. When Ronald Reagan came to power with his Heritage Foundation-approved plan in 1980, the consumer-rights advocate Ralph Nader called it right: “Reagan really is much more of a corporatist than a conservative.” Over the course of his presidency corporate welfare, with subsidies benefiting large market insiders, flourished and the national debt tripled. Margaret Thatcher, though more averse to debt, provided established British firms with a similar boon in the UK in the form of fire-sale privatisations of nationalised utilities and other state-owned assets. Both leaders ultimately served to entrench vested interests and contribute to the awkward reality that America and Britain today have among the lowest rates of social mobility in the rich world.
Truss may wax poetic to rooms of supposedly Hayekian Washingtonians about market forces allowing “the young to flower and the anti-establishment to flourish”, but her actions and policies are recipes to lock in the market and societal power of the already powerful.
On the visit to Washington in 2018, in which she gave that speech, she tellingly met not with small firms or start-ups but the American Legislative Exchange Council (a lobbying body that has been accused of giving big firms influence in American politics). So far, her environment policies seem designed to serve the interests of big polluters rather than market insurgents in the green-energy sector; her deregulation push appears tailored to the interests of existing market insiders with big lobbying budgets; and her proposed tax cuts will certainly benefit the already rich, rather than the worst off. None of this is a “hymn to individuality and non-conformity”. It is corporatism.
The challenge now for Liz Truss’s opponents, both inside the Conservative family and on the left, is to engage with these tensions and use them to expose the contradictions of the great unruly experiment being rolled out from Downing Street. Because to do so is to contest what is really driving it; to have a chance of changing the public debate and building a solid foundation for a different and better national project. Bad ideas make a much more obvious and persuasive target than bad intentions.
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This article appears in the 28 Sep 2022 issue of the New Statesman, The Truss Delusion