The Thatcherite wing of the Conservative party desires a restoration of ideas whose time has come and gone
Last modified on Mon 9 Aug 2021 14.20 EDT
The Conservative party hooked British capitalism to the state’s life support system for the past 18 months. So it takes chutzpah to think, as business secretary Kwasi Kwarteng does, of putting the free market at the heart of a post-Covid recovery. Yet lengthening NHS waiting lists, hiking consumer energy bills and welfare cuts when poverty is rising all betray a mindset that regards the re-legitimation of state intervention as threatening a way of life rather than securing it.
What the Thatcherite wing of the Conservative party desires is a restoration. For them this is an opportunity to go back to 1979 and use tried-and-tested ways to stabilise prices, crush labour and discipline poorer nations. These rightwingers yearn for higher interest rates, to prioritise financial returns on assets and the use of creditor power to squeeze the global south.
Such ideologues are likely, in part, to be disappointed. The US president, Joe Biden, does not see the world their way, saying this April that “trickle-down economics”, associated with Ronald Reagan, didn’t work. The president aims to show that the state can do good, and the early results are promising. His Covid-related aid boost will push the share of Americans in poverty to the lowest level on record. Mr Biden’s treasury secretary, Janet Yellen, professes a “free market” scepticism. She has promoted the social benefits of running the economy “hot” by maximising the use of all available resources. Her inspiration is the economist Arthur Okun, who in 1973 argued that governments increasing employment would foster “a process of ladder climbing” in the job market that would reduce inequality and stimulate productivity growth. Ms Yellen has stuck to this playbook in office.
Perhaps the greatest pushback against the return of laissez-faire dominance in economics comes from China. Beijing has surpassed the US in some key technologies. Mr Biden’s economic team is blunt about needing to use the state for more “targeted efforts to try to build domestic industrial strength … when we’re dealing with competitors like China that are not operating on market-based terms”.
The state is, clearly, not powerless against global capital. During Covid it paid for millions of workers without breaking a sweat. Contrary to conventional thinking there was no threat from rising deficits to interest rates. Thatcherism was defined by Nigel Lawson as “increasing freedom for markets to work within a framework of firm monetary and fiscal discipline”. This saw the state put in service of business interests rather than mediating between labour and capital. It also left Britain woefully unprepared, and ill-equipped, for the pandemic. A Thatcherite approach will not produce a fairer distribution of growth. It will militate against support during downturns and plans to “level up” the regions. Ministers ought to outline a new role for the state rather than relying on failed ideas about what the market can do.
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