The coming crisis of Conservatism


by Chris Dillow    
8:40 am - May 16th 2012

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Tory ministers have told British business to stop whinging and work harder.

These remarks are more significant than generally thought.

I suspect they are the bewildered howls of frustration of men who realize that their god has failed them.

What I mean is that, for at least 40 years the central tenet of Conservative economic thinking has been that if only government could "get out of the way", entrepreneurial spirits would be unleashed and the economy would grow.

This belief has not always been wrong. But it is now. Record-low interest rates, a quiescent labour force and the (prospect of) a public spending squeeze has not boosted the private sector. British businesses' get up and go has got up and gone.

Quite why this is so is a long story, but it involves:

» the dearth of investment opportunities, due to a lack of monetizable innovations and the migration of low-wage industry to Asia.

» the fact that geography is against the UK. It shackles us to the euro area, and men rarely swim strongly when they are tied to a drowning man.Today's figures show that export volumes grew just 0.3% in the last 12 months, quashing hopes that we can export our way out of austerity.

» the absence of credit growth.

These factors don't just mean that Osborne's hopes of expansionary fiscal contraction are misplaced. They bring into question a decades-old Tory ideology of faith in business and smaller government.

The question is: where does this leave Tory economic thinking? The right's answer is to double up, and demand more cuts in taxes and spending – apparently ignorant of balanced budget multipliers. Ministers' answer seems to be just exhortations to business to do better, accompanied, I suspect, by the hope that something will turn up.

But what if it doesn't? I suspect we'll then see a crisis of Conservatism of the sort that afflicted Labour for years after the collapse of social democracy in the 1970s.

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About the author
Chris Dillow is a regular contributor and former City economist, now an economics writer. He is also the author of The End of Politics: New Labour and the Folly of Managerialism. Also at: Stumbling and Mumbling
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Reader comments


1. margin4error

I have to say I read the comments rather differently.

While it may well be born of frustration – I suspect it is a little about the desperate failure of their gods, and more about their resentment and incomprehension at us petty little business people and plebs alike letting our masters down. This government is made up of people who switch quickly to an innevitable assumption that we are all lazy and on the make and trying to take from them what is naturally theirs by birth-right.

Or maybe they are right – Maybe we are all lazy and trying to steal their money and rob them of the power they were born to weild.

I’d have to go with M4e’s analysis here, it’s well known that conservatism cannot fail, only you can fail conservatism. So clearly if conservative measures are not working, it’s because the people are failing in their duty to make them succeed. I’d expect further stick measures from the Tories now, the carrot is an alien concept to them.

3. Planeshift

” see a crisis of Conservatism”

I think we’ve already seen the start of this over the past 10 years ever since Haugue and IDS failed to even reduce new labours majority to less than 3 figures. The only way the tories got back in the game was blair’s iraq war losing labour its activist base, and brown’s incompetence. Even then they had to have a massive PR campaign showing they had changed and understood social and environmental issues, and cared about people on less than 100k, Even this couldn’t get them a majority in the most favourable of circumstances.

But all their work over the past 2 years has shown is that Teresa May’s ‘nasty party’ speech still holds true, and the way in which the coalition has cut spending disproportionately on welfare and social services (as opposed to defence) and reduced the top rate of income tax means it is very easy to portray them as a party for the rich elite and nobody else. This would have worked had the economy been jump started and growth returned – such an event would have probaly rehabilitated the tories. But it hasn’t, and blaming the euro crisis isn’t going to work politically as they’d have to then accept blaming brown for the initial recession was a mistake. They’ve probably got another year to save themselves.

“These factors don’t just mean that Osborne’s hopes of expansionary fiscal contraction are misplaced. They bring into question a decades-old Tory ideology of faith in business and smaller government.”

Why?

Doesn’t the kind of privilege that most of the Tories enjoy (not just the schools but also the families etc) instil a kind of refusal to see that they’re wrong like some kind of cross between Papal infallibility and ‘divine right’? It will *always* be someone else that is doing the failing, even when the evidence is staring them in the face.

That particular kind of self-belief, mixed in with the incompetence and ideology makes for pretty grim results.

6. margin4error

vimothy

As the article explains – because having got the state off their backs, the tories don’t understand why business is not thus thriving.

Of course I’d suggest that the tories are not actually a friend to business as things stand anyway. They are a friend to the rich. If you are running or near the top of a major company – they do what they think works for you as a person and as a business leader. If you are a business, however, and looking to invest, they generate deliberate lack of confidence in the economy and massive uncertainty through legislative incompetence and leave you with no where to go.

Just the example of electricity market reform sums it up better than anything. No review, no announcements, just on hold for a while. If you want to build a power station or invest in new plant to reduce costs at your business – you are stuck, completely unable to work out whether the investment will pay dividends or not.

Conservatives have always supported the economic elite of whatever colour, hence they readily moved their allegiance from the landowners, where the ideological framework of god/nature given, legitimated the system. Instead, they stole the liberal’s fire and embraced the theory of Adam Smith’s market which consisted of rational, self-interested individuals heading small business. So far, so good.

Now the economic elite are the big corporations and multi-nationals with their fingers in every piece of the global pie and facilitated by the creation of mass production. Now there really isn’t any particular philosophy/ideology which can be taken from this to promote as ‘conservatism’. This is where the crisis for conservatives comes from, as it did for liberals at the end of the 19th century and the begininning of the twentieth.

margin4error,

Yes, but the article does not explain how our current situation is generalisable. The GFC is a fairly unique event. It might well be the case that the Conservative Party’s putative strategy of “expansionary austerity” is not optimal, but I don’t see how it follows that its economic philosophy must be thrown out in toto. Why not just shift to a strategy more appropriate for depressions/long recessions?

9. margin4error

Vimothy

Your current situation is generalisable because the party is struggling to offer any grounding (or as Steveb says, philosophy) behind their thinking or behaviour. Whatever the conditions of the day – it is that lack of any conservatism that is the crisis. They are in effect, a lobbying party on behalf of a series of vested interests rather than a cohesive platform with a direction. Historically that never really lasts. There has to be some narrative behind it to win public support and build confidence beyond the vested interests getting their pay-offs (or at least expecting their pay-offs when things improve for them).

Hence why, to me, the “work harder you lowely serfs” attitude rings true to me. It isn’t about an ideological outlook, its about excusing a failure to deliver for their vested interests – coupled with a general disregard for normal businesses and people. When you have a philosophy and are putting it into practice, and it doesn’t work – you start to adjust your thinking in order to make sense of the situation. When you have no philosophy and are just serving an agenda – and it doesn’t work – you need excuses for your own failure to deliver.

10. Richard T

“But what if it doesn’t? ”

There will be decades in the wilderness as their philosophical opponents prove that the solution to being mired in debt is, indeed, to borrow much more money.

11. gastro george

“The GFC is a fairly unique event.”

Or it’s the culmination of “getting government out of the way”.

margin4error,

Then I’m confused. Let’s say that I were to argue, liberals should abandon some aspect of their philosophy or political programme because of X. You might respond by noting that, even if this is good advice, this aspect might still be valid for all those occasions when not-X holds. If I were to respond by asserting that liberals have no philosophy to abandon because of X, wouldn’t that strike you as a rather contrary position to take?

Or it’s the culmination of “getting government out of the way”.

I don’t know whether that makes sense, for two reasons.

Firstly, it’s not obvious that this an accurate characterisation of the policy trend. E.g., here’s a series for public spending as a proportion of GDP: http://www.ukpublicspending.co.uk/spending_chart_1910_2015UKp_11c1li011mcn_F0t

Secondly, the Conservatives came into power after the GFC. So, assuming that this is an accurate characterisation of policy, it’s not something that can be attributed to them in particular. But the whole point of the article is that this is a crisis of Conservatism, and not a crisis of Labour or a crisis of the political establishment in general, so this argument would seem to be a non-starter.

10

I think all of the historical solutions are now obsolete, what is also failing big time is capitalism itself. The state has attempted in several ways to tame it but there is a point where it really cannot do so. Unfortunately, the population are now looking to the state to do something, but there is very little that can be done Put simply, there is also a legitimation crisis.

15. margin4error

vimothy

Thing is – libdems represent something fairly solid. Or at least the Lib part of LibDem does. They have a socially and economically liberal outlook born of a view that people make the best possible rational decisions for themselves, rather than have them made for them.

Labour likewise have a fairly solid core outlook – which is that of equality and the bettering of working people’s lives through common endeavour.

Now at any given time either party might be more explicitly or less explicitly ideological in outlook. And there is always compromise in government that reflects the nature of events and the practicalities of gaining enough support to be in power, without which nothing is achieved.

The trouble is – while the tories would appear to have a core outlook around economic liberalism with a small state and free markets in particular – the results of de-regulation in key sectors have seen the UK plunged into deep recession and fail to return from it. The pragmatic argument for this ideology has thus been hollowed out – and all that’s been left is a desire to be a friend to business, which because of the nature of the leadership (incompetent and almost exclusively from the upper level of society) has translated into “friend of rich men” at the expense of business.

Part of the problem may of course that Labour has pragmatically adopted a more accepting stance towards economic liberalism when compared to 30 years ago – and the lib dems, since the orangebookers took over, are at least as inclined to economic liberty as the tories. This left the tories with no ideological home ground – so they marched to more severe interpretations of the core outlook – and as we know – taken to relative exteme, pretty much every social idealism fails in the real world.

margin4error,

I can agree that the Conservative Party don’t seem to have a very coherent or for that matter very conservative philosophy. A modern conservative is basically a liberal (in the broader sense) who is slightly retrograde on some issues. If he has a distinct set of principles, then they are certainly mysterious to me.

But if there is to be a “crisis of the Conservative Party”, I doubt that it will have much to do with its economic policy, which is a rizla’s width from the other main parties. And if the Conservatives are to be in crisis because of the failure of neoliberal economics, or whatever you’d prefer to call it, logically, so too must the Lib Dems and Labour.

Firstly, it’s not obvious that this an accurate characterisation of the policy trend. E.g., here’s a series for public spending as a proportion of GDP

Well until the Tories can get away with scrapping benefits entirely, looking at public spending as a proportion of GDP tells you little of what you think it does. The ‘government getting out of the way’ usually means ‘sacking people doing useful work and transferring them onto benefits’, which in the round means increased public spending in order for the government to do less. Or alternatively phrased its a deliberate decision by the Tories to piss money down the drain.

I wouldn’t be quite so hopeful if I were you. If the current news coming out of Europe is anything to go by then the Euro really is going down, at least in Greece. When that happens that will cause a vast backlash that could see people turn even deeper into nationalism and blaming imaginary enemies. We could see a truly nasty right-wing backlash like we saw in Europe in the 1930′s.

To be honest, I see no ‘crisis’ of Conservative ideology here. What we are seeing is a pretty obvious use of ‘Labour’s economic mess’ as cover for the dismantling of the post war settlement and a return to the ‘Upstairs Downstairs’ lifestyle for the rich and powerful at the expense of the rest of us.

The cuts have been ideological in nature and specifically aimed at sniping away at the threads of the safety net of the welfare state. Then what are left of the employment and health and safety laws. These are few things that protect working class people that protect working class people from the worse employers in the Country.

We live in a time when the political elite (Labour and Tory) wish us to return to the good old days of Victorian England when the serfs were forced to bow their heads and put up with the despicable acts of the rich. Sacked at a whim, no health and safety, no social housing, access to health care and of course, the main driver of acquiesce; the absolute dread of unemployment. Not the stigma of unemployment, but the actual fear of being unable to find work or even being too old or too ill to work. We are getting to the stage of workhouses, or at least the moral equivalent of workfare.

I suspect they are the bewildered howls of frustration of men who realize that their god has failed them.

Actually I have argued this for a while. I actually think that the right has been in a state of bewilderment and denial ever since the 2008 crash, when the received wisdom of the past 30 years, namely that deregulated markets inevitably deliver the best results, came crashing down.

I think this has had effects on both sides of the Atlantic. Look at the Conservative Party’s ludicrous attempts to pin the blame for the crisis on “Labour’s overspending”, a notion that fails to stand up to even the most basic scrutiny. Anything to avoid facing up to the failure of the ideology they foisted upon us. Instead they seem determined to foist upon us an even more extreme version of the said failed ideology, which brings to mind Albert Einstein’s famous quip; “Insanity is doing the same thing over and over again and expecting different results”!

Oh and look how they no-longer even try to pretend that privatisation and outsourcing and marketisation etc are about “efficiency” like they did in the past. They no-longer even try to justify it, they are just nakedly handing over public assets to their corporate mates. Daylight robbery!

And look at how utterly insane the US right has become over the last few years. Perhaps they’ve lost the plot because the Bush presidency presided over what was probably the most extreme incarnation of neo-liberalism the world has yet seen, and it ended with two disastrous wars and the biggest economic depression since the 30s! The 40 year long ideological experiment came crashing down. All the nuttiness around the Tea Party etc is probably just a reaction of angry and bewildered people, who’s certainties have crumbled.

SMEs are the backbone of the economy. Governments of all stripes have preferred large corporations and rentiers over the course of my political life. The first and biggest hurdle to setting a business up is the huge cost of premises (not that there’s a shortage of empty premises). So it’s not about HMG getting out of the way, so much as HMG refraining from gouging new businesses and not preferentially favouring property owners.

22. Shinsei1967

Where does William Hague ever say businesses need to work “harder” ?

He actually says “There is only one growth strategy – work hard”.

After all, starting in 1929 people just got incredibly lazy. They only started getting off their backsides when WWII started.

There’s no systemic issue there, and people just shouldn’t think about it.

Ooo I hope so.

The damage of 40 years of Conservatism is so deep rooted that the country needs this Party to shrivel away.

@20

Look at the Conservative Party’s ludicrous attempts to pin the blame for the crisis on “Labour’s overspending”, a notion that fails to stand up to even the most basic scrutiny.

It wasn’t supposed to stand up to scrutiny, it was supposed to take hold in the mind of enough voters to get the Tories elected and divert blame for the swingeing cuts they set in motion once elected. Sadly it has to some extent worked.

It’s way past time for Labour to have come up with an effective counter-message, and for better or worse they are now focused on looking to the future. The counter-message they gave addressed the responsibility for the crisis as belonging to the financial sector, which was good. But at no point did they bother explaining that the spending was necessary to counteract nearly two decades of chronic underinvestment in the remaining national infrastructure at the hands of the Tories under Thatcher and Major.

@25 Bluepillnation

It wasn’t supposed to stand up to scrutiny, it was supposed to take hold in the mind of enough voters to get the Tories elected and divert blame for the swingeing cuts they set in motion once elected. Sadly it has to some extent worked.

I know that, and that sort of tells us everything we need to know about the morality and scruples of the Tory party that they would tell such a blatant and deliberate lie in order to get elected and get their banker friends off the hook! Deliberately exploiting the ignorance of the general public!
That alone should have set big warning bells ringing for the Lib Dems as to what sort of party they were dealing with, and it should have come as no surprise to them when the Tories played dirty over the AV referendum!
After all, the Tories would happily sell their own grandmothers to further their interests!

That said, I also think there was probably an element of denial about it as well.

27. Planeshift

“There’s no systemic issue there, and people just shouldn’t think about it.”

Just like the invention of the duvet caused the great depression, historians will look back on this crisis and note the widespread availability of memory foam mattresses.

28. Chaise Guevara

@ 27 Planeshift

“Just like the invention of the duvet caused the great depression”

I just looked that up to see if it was an actual theory, and am now weirdly disappointed that it appears not to be.

Vimothy

New Labour had that crisis. And it basically reverted to being old labour. It took interventionist steps to generate growth – steps like the scrappage scheme, subsidies for stalled housing projects, nationalisation of the banking sector – and so on. Stuff the tories, faced with the crisis but able to kid themselves it was labour’s failures, not that of the market, largely opposed.

labour can do that. it is not wedded to monetarism and free markets. It is perfectly comfortable getting back into bed with keynes. It was also not a party for the rich – partly because of the mentallity of the leadership and because it has more diverse income than the tories (thanks to the unions). Labour sees these things only as a tool for supporting the wider public through jobs and so on, or for securing power with which to do whatever it is they seek to do.

As such – when it suddenly looked like the working stiff wasn’t benefiting from the status quo – labour could stop supporting the status quo and try something else.

The tories can’t do the same. Their belief is that the market is king anchored to their service of the rich, which is about all they have left by way of an agenda. Even while business is struggling, the people the present tory leadership run the country for are still making huge fortunes. So the status quo is all good and well. Trouble is, they might not get to keep doing it because of their ignorant belief that the trickle down theory was a real thing – rather than just an excuse to make us all feel like they do care about us and serve the rich to benefit us.

So since they are doing everything right – and stuff isn’t working – it must be some one else’s fault. It must, in fact, be us useless plebs who are undermining their trickle-down excuse for leaving us to rot. And it must be, because, well, you know what we’re like. All beered up all the time, ranting at football, scruffy and lazy. It’s not their mates who are to blame, obviously. So it must be the proles.


Reactions: Twitter, blogs
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