5 January 2024

Why Britain needs a social market economy


To mark the 50th anniversary of the foundation of the Centre for Policy Studies and the 10th anniversary of CapX, we have delved into the archive to uncover the foundations of modern conservative thought. From our founders Margaret Thatcher and Sir Keith Joseph, to Peregrine Worsthorne, Kingsley Amis, T.E. Utley, Charles Moore, Shirley Letwin, Ferdinand Mount, Janet Daly, Michael Gove and many more – so many cultural and political luminaries have written for the CPS over the past five decades. Every week this year CapX will republish one of these historic pieces.

The series kicks off with the CPS’ inaugural publication from 1975, and arguably the first ever report from a modern, Conservative think tank. In it, Nigel Vinson, then Treasurer of the CPS, and Martin Wassell articulated the organisation’s animating philosophy: namely that ‘economic freedom is a necessary condition for political freedom’. They called this ‘social market economy’ – though there is some suggestion that the term was designed to lull Edward Heath into a false sense of security. Instead of advocating for something along the lines of the West German economic model, the CPS launched a wholesale critique of the Heath years, and indeed the entire post-war political consensus, which soon became the intellectual underpinning of the Thatcher revolution. In ‘Why Britain needs a Social Market Economy’, they argue for radical decentralisation, competition and the profit motive as the surest guarantors of individual liberty.

Below is the foreword, written by Sir Keith Joseph – you can read the full report here.

We may have blown the dust off the pamphlet, but the principles and ideas it contains remain as fresh – and necessary – as ever.

In 1974, Mrs Thatcher and I founded the Centre for Policy Studies to compare our own experiences and those of our European neighbours – who have been doing rather better than we – and to survey the scope for replacing increasingly interventionist government by social market policies, and to seek to change the climate of opinion in order to gain acceptance for them.

In the course of this work, particularly in my talks with large university audiences, I have been struck by the fact that the new generation knows little of the market economy and its potential. It stands in contrast to the collectivist concepts that have been the pervading fashion in British politics; it rejects the drift towards state socialism and centralisation that has been gathering pace through crisis after crisis for twenty years. But bitter experience of our own trammelled economy’s performance and the growth of social conflict pari passu with intervention seems – in my own experience at least – to have generated in many a readiness to consider the virtues of the market.

The term market needs some explanation and qualification. We favour social market policies which work with and through the market to achieve wider social aims. The Centre has elaborated the concept of a social market economy at greater length. The restatement should be of particular interest now that the Conservative Party is reconsidering its strategies and social policies along market-oriented lines.

Experience has taught us that the only real alternative to a market economy is a command economy, in which narrow short-term expedients reflecting conflicting party-political considerations dominate government economic behaviour.

We are also learning – or re-learning – that a command economy means a command society; that the state, in order to secure its uncontested domination over economic life, must increasingly dominate people’s livelihoods, and limit their freedom of choice in education, health, housing, jobs, careers, savings, their access to the media of expression and later their access to information. In short, a command economy means increasing dependence for the citizen. Hence our reiterated conviction that a market economy with freedom to own property and engage in production of goods and services is an essential condition for all other freedoms.

Whatever views may be imputed to us we claim no perfection for the market mechanisms; no social order can be better than the imperfect humanity which constitutes it. But we do claim on grounds of logic and history that the market economy within a humane framework of laws and social services gives freest scope for material, social and cultural development and the quest for happiness.

I hope that this exposition will lead some readers to reconsider conventional wisdom and to approach our social market philosophy with fresh eyes.

Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.

CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.

Sir Keith Joseph (1918-1994) was co-founder of the Centre for Policy Studies.