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The politics of reforming capitalism in Britain: Part II

Two competing and ultimately incompatible visions exist on the right and now sit in tension at the heart of Theresa May’s government

Professor Tony Payne, Professorial Fellow, SPERI

Tony PayneAs I noted last week, there is another side to the debate about reforming capitalism in Britain. It is located on the right of politics, not the left, and, in case you missed it, it’s the right in Britain that currently holds power.  We need therefore to take very seriously its various different ideas about the condition of British capitalism.

Where to start? In a sense, we could go back to Hayek and follow the story through to the revival in Britain in the 1970s of several right-wing think-tanks devoted to political economy and then on to the full flowering of Thatcherism in the 1980s.  But that would take too long and is well known.  So let’s pick up the thread in September 2012 with the publication of a revealing little book called Britannia Unchained: Global Lessons for Growth and Prosperity. Its authors were five Conservative MPs, all elected for the first time in 2010 and members of a new faction in the parliamentary party called the Free Enterprise Group, whose core belief was that Thatcherism remained an unfinished project in Britain.

The book got instant publicity because an extract argued that British workers were amongst the worst idlers in the world. Its core argument, however, was that Britain needed to re-position itself in the global economy in a much more assertively free-market fashion, junking in particular all employment laws that were holding it back in an inevitable ‘race to the bottom’ with the East Asian ‘tiger economies’ – countries which were frequently cited as role models for this new ‘unchained’ version of the British political economy.

Interestingly, the book wasn’t taken entirely seriously by some critics. Jonathan Portes condemned its ‘slipshod research’ and Andy Beckett observed with relief that the authors might ‘have to wait longer than the next election before implementing their vision’. How quickly things have changed!  Brexit has now been chosen as the way forward for Britain and two of the book’s five authors – Priti Patel and Elizabeth Truss – sit in Theresa May’s cabinet and another, Chris Skidmore, is a junior minister.

We can also surely recall from the summer just how directly and with what energy the arguments of Britannia Unchained flowed through what one might call the hyper-liberal case for Leave in the EU referendum.  Patrick Minford, a former economic adviser to Thatcher, headed an ‘Economists for Brexit’ group and argued in classical fashion that Britain should seek to trade ‘freely’ outside the EU under WTO rules, thereby integrating itself fully into the global economy and escaping the regulatory and protectionist tendencies of all regional organisations. It’s unlikely that this sort of argument swung many votes in the referendum (other arguments were more visible and visceral), but it is vitally important now to recognise that this ‘return of market idealism’, to adopt Owen Worth’s phrase, constituted the main intellectual underpinning of the Leave campaign for many of its leading proponents inside the Conservative Party.

Indeed, two such figures, namely, David Davis and Liam Fox, not only sit alongside Patel and Truss in May’s cabinet, but have been appointed to the two ministries responsible for negotiating Brexit in the first instance and then charting Britain’s free-wheeling, swashbuckling, route out to sea in the rough old world of global trade conducted under WTO rules.

In short, a distinctive project for liberating British capitalism and exposing it in raw fashion to the challenges of global competition – for, in effect, finishing off what Thatcher started (but perhaps had the good sense not to seek to complete?) – now sits at the heart of May’s government and is pushing hard for what we might call a ‘liberal Brexit’. It may of course not triumph, because its desire to embed in the mind of the wider world the vision of an open, ‘global’, free-trading Britain (upon which the strategy depends) runs directly against another vision of the future of British capitalism which is also strongly represented in May’s cabinet and possibly reflects more genuinely her own world-view.

This is a much more nationalist vision, ready even to be xenophobic at times; it’s also protectionist to a degree; and it’s unquestionably more statist. We can call it ‘nationalist Brexit’, although I should add that this position is far from being fully worked out and is arguably being made up on the run post-referendum.  As an aside, by the way, I suggest that these terms (hyper-liberal and nationalist) are more useful than the terminology of ‘hard’ and ‘soft’: they connote competing versions of what is commonly described as ‘hard Brexit’.  Indeed, the notion of a ‘soft Brexit’ may just be a mirage.

So where is this second tendency rooted? Nationalist variants of political economy have a long lineage: they are conventionally traced back to the likes of Alexander Hamilton and Friedrich List and have made their appearance in Conservative statecraft in Britain at various points in the party’s long hold on office over the last century and more.  But, unlike the Britannia Unchained vision, there was no strong political case for a more nationalist political economy being built up in Conservative circles before the referendum.  It has been Leave voters who have put this vision on the agenda, especially ‘those just managing’, to use May’s own brilliantly devised phrase, those left behind by neoliberal globalisation and wanting their state to protect them in traditional nationalist fashion.

May has heard these voters and wants them to vote Conservative, not Labour or UKIP, in the next election. She can make plays to them for a time on immigration, promising more British doctors and more British jobs, but she must know that the really big question is whether she can lead Britain towards a form of capitalism that offers the working classes a viable place in British society.  That is why she moved, albeit in vague terms, towards this issue in parts of her recent party conference speech. In truth, it was a strange concoction when read as a whole.  As one Guardian commentator put it, ‘May has not lurched right, or left, or towards the centre ground. She’s done all three.’

The key point, as we saw in my previous post, is that there does exist out there a centre-left vision of how British capitalism needs to be reformed, albeit only partially developed, and it lies in some of the ideas picked up and advanced by Ed Miliband during his period as Labour leader. I am referring here illustratively to plans to shape a proper industrial strategy, to bring in controls over some of the excesses of corporate behaviour, to establish national and regional investment banks and so on.  Shorn of a worked-up Conservative variant of such a strategy, May has perhaps calculated that she has no choice but to raid this emergent agenda and seek to pull it rightwards and locate it within Conservative, rather than Labour, mythology.  This was surely what Ed Miliband was highlighting in his sardonic tweet after the Prime Minister’s conference speech: ‘Marxist, anti-business interventionism in my humble opinion’.

It is inevitably still early days. May was swept into power at frightening speed amidst a chaotic situation.  Arguably, all that she has done on the ‘nationalist Brexit’ front thus far is create a new ministry with industrial strategy in the title – the so-called Department of Business, Energy and Industrial Strategy (BEIS) – and appoint as its head Greg Clark, someone who seems as if he might understand and empathise with its new brief.  I can’t yet judge which way the May government will go in relation to Brexit or the wider political economy, and nor can anybody else, chiefly because it’s very far from decided!  The internal politics is ongoing.

What is apparent, though, is that the two visions of reforming capitalism in Britain being advanced within right-wing politics are essentially incompatible. One or the other may emerge victorious and shape Brexit and the immediate future of the British political economy; or there may be an attempt to fudge the two, which will serve only to undermine both visions; or perhaps in the end the whole enterprise of Brexit will prove too divisive and the May government will become riven by political conflict.

The politics of reforming capitalism in Britain: Part I

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