The future of conservatism needs liberal economics. Without it we are just fearful reactionaries.

Reagan and Thatcher changed conservatism by giving it a passion for a better, more free world. A wealthier, healthier and happier world. Don’t throw this away because we might lose an election

In 1976 there was a new Young Conservatives branch set up in Eden Park ward of the Beckenham constituency. Since my Dad was the ward councillor he prevailed upon me - it wasn’t a difficult task - to become a member. So began my time as a member of the most successful political party anywhere, a time that ended in December 2019 and which had seen me as a YC, a student activist, a professional party agent, a local councillor and a parliamentary candidate. I set this out not so much to provide credentials for what I’m about to write but rather to give some context to the party I joined and the ideas it has represented, most of the time at least, throughout that period.

I have a question about the debate in modern conservatism, and now courtesy of the think tank Onward among others inside the Conservative Party. What happened to the sunlit uplands? When did we stop seeing the future as positive? And when did we turn our backs on technology, the search for betterment and the optimism of a great future in a free country?

The think tank Onward has published its first report under a programme called “The Future of Conservatism” that opens with what amounts to a rejection of nearly all the ideas and policies that sat at the heart of Conservative governments and leadership throughout my membership of the party. Here from the ‘What we believe” section of Onward’s “The Case for Conservatism” that rejection is set out clearly:

“We are conservatives and we are clear about what it is we want to conserve. We do not seek to conserve the economic consensus that has, over the course of decades, led us to an age of deindustrialisation, trade deficits, high debt, low growth and the ever greater concentration of wealth in the hands of a few. Nor do we seek to conserve an “anything goes” liberalism that has delivered mass immigration, divided communities, diminished social trust, a frayed social fabric and widespread anxiety. We seek to conserve what is good, to revive what can be saved, and to build anew, so that we may restore our sense of local and national community, rediscover the duties of citizenship, and rebuild the shared identity and solidarity that make for a strong society and prosperous economy.”

The central conceit here is that the problem, the thing that conservatives need to tear down (or at least according to the authors of this report), is the ‘economic consensus’ of decades. Quite what the authors mean by decades is carefully dodged in the report but Gavin Rice, one of the authors, has tweeted on several occasions to make a direct parallel between “Thatcherism” and “neoliberalism”. Again the precise meanings of these terms are always avoided but when pushed we are told:

“Laissez-faire economics has led to chronically low private sector investment, executive pay rising exponentially above worker pay, low productivity growth, an enormous trade deficit and flatlining real wages.”

We are clear therefore that the politics my generation of Tories signed up to support - free enterprise, free trade, an open society and a focus on the betterment of ordinary people’s lives - has to be rejected if we are to rescue the Conservative Party from oblivion. And the economic ideology that Rice and his fellow author Nick Timothy want us to embrace is something called “national developmentalism”:

“Unlike global neoliberals, libertarians, and progressive localists, but like national protectionists, national developmentalists see na­tional economies in direct competition with one another for high-value-added production and the well-paid jobs it makes possible. This is of central importance because most citizens in developed nation-states are and will remain wage earners. Unlike in Marxist theory, in national developmentalist thought a strong nation-state can moderate conflicts among workers and capitalists, in the interest of national economic strategy with military security and widespread prosperity as its objectives.”

The enthusiasts for this idea will point to places like South Korea and Singapore as exemplars of this ‘developmentalist’ approach to the economy. But when we look at examples of the policies these enthusiasts espouse they do not look anything like the policies that Lee Kwan Yew would have recognised as features of his successful country. Advocates of ‘national developmentalism’ sit alongside protectionists in the view that the route forward for Britain is to shelter ‘strategic’ industries behind protective barriers so they can develop without being crushed by laissez-faire trade. Advocates of this approach will point to energy, technology and key resources like food and argue that domestic businesses in these sectors need protection from cheap producers elsewhere in the world (in the case of energy this is also the Ed Miliband strategy but that is another story).

There is a world of difference between Singapore’s focus on international trade and export industries and the CHIPS & Science Act in the USA that Rice and others want us to emulate. This Act and related strategies across Europe are classic import substitution strategies. The argument runs that China makes all the chips and we don’t like China, so therefore we need to stop people buying Chinese chips and replace them by chips made in subsidised manufacturing in the UK. Leaving aside that, without subsidy, this approach just makes UK manufacturing industry less competitive and less able to compete in international markets. And this is before we get to the question of whether our obligations under the World Trade Treaties and our membership of the World Trade Organisation (WTO) would survive such an approach.

Moreover, a city state like Singapore is overwhelmingly a service economy and its manufacturing sector is dominated by high service sectors like pharmaceuticals. Even South Korea, seen as a heavy manufacturing heartland, has an economy that is 75% services. And manufacturing in modern economies, while it does generate highly skilled jobs, doesn’t create the large numbers of jobs that it provided prior to the terrible arrival of ‘neoliberalism’.

Not only are Timothy and Rice wrong about the reasons for the success of East Asian economies (not entirely since active government in the form of freeports, low business taxes, good education and a pro-investment regulatory regime all played a part) but their economic ideas are more like Latin American import substitution than the pro-trade, pro-growth approach of East Asian economies. 

So has neoliberalism been such a terrible thing? If we listen to the ‘Future of Conservatism’ team at Onward, the era of neoliberalism from around 1979 to the present day has been an unmitigated disaster with “...deindustrialisation, trade deficits, high debt, low growth and the ever greater concentration of wealth in the hands of a few.” Other than a few plutocrats there is, in this analysis, nobody better off as a result of more open trade, a liberated financial system and competition operating across the world.

The truth is, however, very different. The period from the early 1970s up to 2008 saw an unprecedented acceleration in the reduction of world poverty:

“We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006.”

Taken globally, there is no doubt that the period reviled as ‘neoliberalism’ by Rice and Timothy has been, in terms of bettering the conditions of ordinary men and women across the world, a huge success. Maybe, all this has been at the expense of British workers? Perhaps the success in reducing poverty in China, India, Bangladesh and Indonesia has been brought about by the suffering of British workers in Rotherham or South Shields? 

“GDP per capita increased by £17,500 between 1960 and 2007 (from £7,824 per person to £25,324 per person), and there were only a few years over this period when it failed to grow.”

From the end of the 1970s up to the mid-2000s, British workers got significantly better off. It is therefore hard to point at ‘neoliberalism’ during that period as being anything other than positive. The better question, one Rice and Timothy ignore, is why after the financial crisis of 2007/8 the UK economy (and indeed the economies of other developed nations) stagnated. A suggestion, although I’m not sufficient of an economist to be sure, is that the critical change in economic policy post-2007 was in the use of artificially low interest rates and accelerated government borrowing - quantitative easing - to stimulate the economy. It could be that the economic policy - sound money, supply side liberalisation - that typified the 1980s and 1990s was a better approach than the strategies that preceded  and succeeded this period?

The analysis telling us that Britain's problems lie with Thatcherism and ‘neoliberalism’ is utterly flawed. We should be looking to a 21st century version of the 1980s search for sunlit uplands. And, nothing has changed the fundamentals - sound money and supply side reform make for a more dynamic economy. We should not be pointing at Singapore - or worse Poland and Hungary - without recognising that open trade and a liberal attitude to regulation sit at the heart of economic growth in these nations. If conservatives want to conserve anything it should be the idea of liberal economics, the idea that made more people wealthier, healthier and happier than any idea before or since.

Instead the ‘Future of Conservatism’ crowd wants to turn back from a future based on economic freedom and the embrace of technology. Onward propose a new version of ‘Butskellism’ where Conservative economic policy is ‘slightly left-of-centre’, typified by a managerialist approach involving a focus on ‘strategic’ industries and a elite understanding of what the working classes require:

“Securing strategic industries, supply chain integrity, reducing the UK trade deficit and guaranteeing access to key resources and manufactures are vital goals.”

The attention of this economic approach is directed to the sustaining of large industrial and financial corporations and, rather than thinking about entrepreneurial innovation, investment in science is directed inefficiently via universities and state-funded research bodies. In economic terms Rice and Timothy seem to prefer the economic model of the Chinese Communist Party to the economic model of the much more successful United States - except, of course, where the latter indulges (as Biden has done) in a bit of economic pump-priming.

In the recent Polish elections voters were, in large part, presented with a choice between a welfarist, traditionalist conservatism and a centrist managerialism tinged with modern social liberalism. It seems that, if the future of conservatism in Britain lies in the direction set out by Onward, then we will be getting essentially the same choice. A sclerotic, managerialist, ‘woke’ centre-left political offer from Starmer’s Labour Party or a traditionalist and protectionist programme from the renewed Conservatives. Like so much populist conservatism this programme is fearful - afraid of foreigners, scared by technology and innovation, distrusting of enterprise, and paternalist in its view of the working classes. Worse though these approaches deny workers agency by adopting a big government, welfarist outlook rather than one that says ‘go for it’, embracing the opportunities of technology and the chance to innovate.

I’m sure there will be other voices on the right that want to make the case for an economic programme based on growth with sound money and deregulation but Onward have nailed their colours firmly to a fearful, distrusting view of the things that made us rich - open trade, a free society and the celebration of innovation. If this is conservatism then it is the worst sort of conservatism, a timid outlook that sees the world as its enemy not as its opportunity. We should be yearning for those pretty much final words of the greatest politician of my lifetime, Ronald Reagan:

“I now begin the journey that will lead me into the sunset of my life.  I know that for America there will always be a bright dawn ahead.”

We should not be fearful. We should not close in on ourselves, distrusting the world. We should be heading, well shod and with a pack on our backs up into those sunlit uplands, into a better world for everyone. Reagan and Thatcher changed conservatism by giving it a passion for the future, for growth and for a better, more free world. A wealthier, healthier and happier world. Don’t throw this away because we might lose an election.