Britain’s chattering classes have reached a new consensus: liberal free market economics is unpopular and a failure.
This is an extraordinary shift. Just 20 years ago, as the Soviet Union collapsed, the prevailing view – brought to the fore by Francis Fukuyama – was that liberal market ideas would dominate from then on. Most of Asia was adopting the market model; Margaret Thatcher and Ronald Reagan had reinvigorated economic liberal ideas; and their successors from rival political backgrounds, such as Tony Blair and Bill Clinton, largely “me-toed” them.
Today, however, we are seeing the extraordinary success of Jeremy Corbyn in Britain, Donald Trump’s protectionism in America, and the rejection of markets by a resurgent European far Right.
The response from much of the centre-Right has been to move to the Left. When Theresa May talks about “the new centre ground”, as she did last year in her keynote address to the Conservative Party Conference, what she really means is a willingness to adopt the Left’s ideas – be it more spending, higher taxes or more regulation – because it is thought to be popular.
This won’t work economically, and hasn’t worked politically. It doesn’t seem genuine or believable. Indeed, all it does is increasingly lead the electorate to choose those who really do passionately believe in spending, taxing and regulating.
So why are those that support economic freedom losing? And what can be done about it?
The simple answer is that it is a victim of its own success.
Liberalised markets have pulled over a billion people out of poverty, delivered the lowest level of global inequality since the Industrial Revolution, and made our lives longer and more satisfying. But by appearing to have won the ideological fight, the Right made a fatal error: political leaders stopped making the case.
This worked for a little while, when voters had a memory of the heinous stagflation – low growth, high unemployment, and high inflation – of the 1970s.
Today, it doesn’t. The young, who turned out at Britain’s general election in higher numbers than at any time in the last two decades, have never had to experience the reality of Corbyn’s policies.
The standard explanation is that the youth are attracted to so-called “freebies” – like free university education. The truth is far more scary: young people have been genuinely persuaded by socialism, partly because so few people have bothered to debunk the myths that underpin that cause.
This failure to make the case became paramount after the financial crisis – which was falsely blamed on liberal markets rather than a toxic cocktail of bad government policy.
The Conservative election campaign failed to make the case for economic freedom. May completely lacked the philosophical basis to respond to Corbyn’s policies – and it certainly didn’t help that her policies, such as an energy price cap, were so ideologically similar. How can you criticise bigger government when that’s what you are proposing as well?
Conservatives like to talk a lot about “compassionate conservatism”. The reality is that the most compassionate policies are those that make everyone better off by making the pie bigger – not just the chosen few by redistributing the pie.
They’re the policies that help people experience the dignity of work and give them more choice over their lives. They’re the policies that allow people to start up their own enterprises without the relentless stranglehold of red tape. They’re the policies that let people keep a bit more of their own money through lower taxes.
Recently, the two most successful centre-Right leaders who have made this case are probably John Key, the former prime minister of New Zealand, and the UK’s own David Cameron.
Key left on his own terms after lowering taxes, reducing the size of the state, and winning majorities in a proportional system. Cameron pulled the UK economy out of the dustbin, reduced tax, helped create millions of jobs, reformed welfare, won the first Conservative majority for decades and – perhaps to his own regret – gave the people a democratic choice on the European Union.
The case for prosperity and choice is never easy to make. But adopting the rhetoric and policies of the Left just won’t work either – as May found out last month. That’s why we must be willing to stand steadfast behind what has made the world richer and more successful – namely empowering individuals to succeed, not burdening them with ever more government.