Mistaken lessons: faulty understandings of the 'success' of the free-market right and the dangers for the left.
| Author | Davies, Steve |
| Position | Essay |
As the financial crisis of the last three years seems to be coming to a close, the history of the previous thirty years comes to be seen in a new light. A narrative is taking shape on parts of the left (and also among certain sections of the right) that combines a highly critical account of the politics of those three decades with a particular view of how those policies came about. In this emerging way of thinking the last thirty years saw the domination of public discourse and policy debate by a body of ideas, usually described as 'neo-liberal' or the 'free-market right', that gained predominance through their adherents and advocates taking advantage of an earlier moment of crisis, which was used to discredit the prior broadly social-democratic consensus (Cockett, 1995).
The openly expressed hope is that this was simply a contingent episode and that normal service will now be resumed. The current crisis, it is thought, will discredit the once dominant neo-liberal ideas in the same way that the earlier crisis of the 1970s undermined the Keynesian and social democratic hegemony of the years after World War II. If they learn from the way the free-market right took advantage of that earlier crisis, the left will be able to seize their current opportunity and bring about a sharp tack to a more social democratic model of politics.
In fact these hopes will almost certainly be dashed, not least because they rest upon a mistaken view of what actually happened in the period when the free-market right gained influence and what followed thereafter. This mistaken view of history also leads to a faulty understanding of what is happening now and a misapprehension as to the most likely outcome in the future.
The dominant historical narrative
The dominant historical narrative, which is widely shared on both left and right, goes something like this. The economic and political traumas of the inter-war years brought about an intellectual and political reaction against the free market policies pursued, in particular, during the 1930s. At some point (historians disagree as to whether this was during the war-time Coalition or after Labour's crushing victory in 1945), a broad consensus came into being regarding the general outlines of economic policy and the relationship between the state and both economic affairs and civil society (Addison, 1994; Hennessy, 2006, 2007). Important elements of this consensus included a central role for government in macro-economic management; extensive direct state intervention in the economy, not least through public ownership of significant industrial sectors; relatively high levels of taxation; an extensive redistributive welfare state; and tax-funded public services (see however Marlow, 1996).
This consensus involved a rejection of both more radical socialism, associated with the left of the labour movement, and the individualist approach taken by now almost forgotten figures such as Sir Ernest Benn (Abel, 1960; Powell, 1998). The defeated individualists, despite being driven from the field even in the Conservative and Liberal parties, did not simply withdraw to private life in some modern version of the Cave of Adullam. Rather they retreated to private institutes, notably the Institute of Economic Affairs (IEA), set up in 1954 by Sir Anthony Fisher. Here the flame of market principle was kept alight and an intellectual critique of the policies of post-war administrations was cultured and developed. Part of this process involved working out alternative policies, particularly in the increasingly vexed areas of employment and monetary policy. The few remaining economic liberals remained sure that the policies they abhorred would fail in the end and that when this happened not only would they be vindicated, but they would have a ready and prepared alternative to hand (Cockett, 1995).
Eventually two things happened. First, a number of politicians in the Conservative Party came to support and articulate the views of the free-market remnant, partly from political expediency but more from genuine conviction. The best known initially was Enoch Powell but John Biffen was another early convert, along with figures such as Jock Bruce-Gardyne and Sir John Biggs-Davidson (Roy and Clarke, 2006). Margaret Thatcher and Sir Keith Joseph, while privately sympathetic from an earlier date, were only openly persuaded after 1974 (Young, 1989; Heffer, 2008; Powell, 1969, 1973).
Second, macro-economic policy was mired in increasingly intractable difficulties from the early 1960s onwards. These difficulties centred on the problem of simultaneously combining price stability, full employment, and economic growth. Peter Jay argued, in an influential work, that it was not possible to achieve more than two of these at any one time and many authors came to agree with Milton Friedman that there was no real trade-off between inflation and unemployment (Beckett, 2009). Rather, monetary stimulus simply had less and less pay-off in employment terms until eventually all it produced was higher inflation, while unemployment persisted or even went up, so producing the supposedly impossible phenomenon of stagflation.
All this came to a head in the 1970s when successive governments faced a combination of declining growth rates, rising unemployment, and accelerating inflation, plus a sharp rise in public spending as a share of GDP. Following the appeal to the IMF in 1976 and the wave of labour unrest in 1978-9 the post war consensus was discredited. The free market right took advantage of this, firstly in capturing the Conservative Party via what was effectively a coup with the election of Margaret Thatcher as leader in 1975, then by bringing about a sharp break in policy from the post-war consensus, most notably through the abolition of exchange controls in 1979 and the deflationary budget of 1981 (Roy and Clarke, 2006). This was then consolidated during a long period of Conservative government via a series of policies and eventually the Labour Party came to terms with this and accepted most of the changes. Thus a new consensus was created, one based on a reduced role for government and an enhanced one for markets and private enterprise (Roy and Clarke, 2006; Kavanagh, 1983).
The success of the free-market right is typically explained in a number of ways. One is the crucial role of individuals who happened to be in the right place at the right time, notably Margaret Thatcher but also Enoch Powell and Sir Keith Joseph. Another is divisions among opponents and a lack of effective leadership at critical moments. However, the main focus is typically on the combination of politicians interested in ideas, wider social movements, and a small but dedicated group of ideologues. This kind of argument was made initially by Stuart Hall and was later elaborated by a number of authors in the pages of Marxism Today, under the editorship of...
To continue reading
Request your trialCOPYRIGHT GALE, Cengage Learning. All rights reserved.
