Liz Truss and her likely chancellor of the exchequer, Kwasi Kwarteng, belong to a particular generation, many of whom once asked their parents: “Can a man be prime minister?” Not even four years old when Margaret Thatcher took power, 15 when she lost it and well into adulthood before the Tories were finally defeated, their earliest political awakenings would have taken place against the long backdrop of Thatcherism.
This biographical context is acknowledged in the notorious political tract that Truss and Kwarteng co-authored with Priti Patel, Dominic Raab and Chris Skidmore, Britannia Unchained, published in 2012. “All five authors grew up in a period where Britain was improving its performance relative to the rest of the world,” it says. “The 1980s, contrary to the beliefs of many on the left, were a successful decade for Britain.” Their objective is to resurrect political dreams from their own childhood.
As anyone who has followed Truss’s expertly managed photo ops and fashion choices will know, she has never been coy about her Thatcher fandom. What is potentially more alarming is the extent to which she seems intent on reviving a set of Thatcherite policies and ideas that scarcely worked 40 years ago, and may now be considered fanatical. This includes a restoration of long-discredited economic thinkers from the early Thatcher era – Patrick Minford of Cardiff University and John Redwood – to positions of public policy influence. Since the mid-1970s, Minford has been a passionate devotee of American conservative economics. Most recently he suggested that interest rates would need to rise to 7% (from their current rate of 1.75%) to offset the inflationary effects of Truss’s proposed tax cuts.
How are we to make sense of this eerie revivalism? At the core of Thatcherite economic policy was the belief, often referred to as “supply-side economics”, that collective prosperity is only an effect of the efforts and ingenuity of businesses, investors and workers. If the economy stagnates, that must be because something is holding these institutions and individuals back – most likely government, but also trade unions and collectivist values. The job of the state, from this perspective, is to ensure that entrepreneurs, investors and employees all have clear incentives to exert themselves as much as possible.
From this, much else follows. Taxation (especially on the wealthy) comes to appear like an obstacle to innovation and productivity, seeing as it reduces the incentive of rich people and big businesses to put their money to work. The welfare state is accused of fostering “dependency”, reducing the incentive for people to go to work and take responsibility for themselves and their families. Above a certain level, income tax makes it pointless for workers to increase their hours or efforts, seeing as they won’t receive the full rewards. Regulation and “red tape” dissuade entrepreneurs from setting up businesses in the first place. By devaluing people’s savings, inflation punishes people for their success and reduces confidence in the system overall.
But the implications are moral as much as economic, and this is where supply-siders encounter a paradox. On the one hand, this ideology assumes the existence of some invisible army of entrepreneurs and grafters, bubbling with ideas and determination, who are being restrained by socialists and regulators. This accounts for the bold patriotic optimism of neo-Thatcherites such as Truss. On the other, it is scornful about the population as it actually presents itself, consisting of lazy, badly educated petty criminals, with no capacity for delayed gratification or a hard day’s work. Sometimes, it is a mixture of the two: a society of people who want all of the pleasures of capitalism, with none of the pain.
Orthodox economists have always been suspicious of the supply-side worldview, which is troublingly immune to evidence against it. Rooted in Protestant beliefs about just deserts and individual responsibility, it might better be viewed as an economic theology. George HW Bush notoriously described it as “voodoo economics”. In 1981, a famous letter to the Times signed by 364 economists urged Thatcher to change course from the inflation-busting strategy that was dragging Britain into recession. One economist who rode to Thatcher’s defence was Patrick Minford.
By the late 1990s, with New Labour steeped in the latest economic thinking and evidence, and the economy booming, Thatcher’s reactionary, anti-statist legacy seemed dead and buried. Or perhaps her fans had simply found a new “state” to blame for everything: the European Union. The burgeoning Euroscepticism, which found an intellectual home in thinktanks such as the Bruges Group and became the focus of Thatcherites such as Redwood, bubbled away in the background, until its eventual eruption in 2016, retargeting the supply-side argument against regulation originating in Brussels. Minford stood virtually alone among economists in supporting Brexit, and was once again taken apart by the rest of the economics profession.
Truss may have campaigned for remain in 2016, but Britannia Unchained owes far more to the nationalistic, anti-state philosophy of the Tory Eurosceptics than to the dour technocracy of the Cameron administration. A weird book, the research for which consists largely of anecdotes gleaned from internet sources and Daily Mail articles, it zigzags between deep cultural pessimism and delusional economic optimism. Plenty of villains are named – from Tuggy Tug, a 15-year-old Brixton drug dealer, to workshy parents who live off benefits – but the prize scalp is that of Tony Blair. The resentment and disorientation that must have brewed, as a Labour government oversaw one of the UK’s most successful economic decades since 1945, must have been profound. It is no surprise, then, that Truss, Kwarteng et al blame the 2008 financial crisis on Labour overspending, again in contradiction of economic evidence.
How will such ideas be deployed in the economic crisis that is now under way? So far, we’ve heard the standard responses from the Truss side, all focused on supply-side reforms. There will be no “hand-outs”. Unions are holding back the economy. Tax cuts will make people richer. Drilling and fracking will bring down the cost of energy. Brussels is still impeding business. And that’s before we get to the cultural attacks on universities, “wokeism” and the civil service. But this was all in the context of a leadership campaign performed for the benefit of 180,000 Tory party members.
In government, Truss may continue to preach the supply-side gospel for the ears of her backbenchers and supportive newspapers, but it is hard to imagine Minford and Redwood dictating actual policy, given the scale and nature of this crisis. The impact of Thatcherite dogma in the early 1980s was to drive unemployment up to three million, and destroy whole industrial regions. The social consequences were horrific and have shaped Britain to this day. But the consequences of such a policy programme in 2022-23 would be even worse. In all likelihood, Truss will soon turn out to be a hypocrite. The supply-side zombies will then have themselves a new scapegoat to blame for the disappointments of Britannia.
William Davies is a sociologist and political economist. His most recent book is Unprecedented? How Covid-19 Revealed the Politics of Our Economy
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