Economic Theory

The ‘libertarian right’, Mrs May? What ‘libertarian right’?

Theresa May is an accidental Prime Minister. She is in Downing Street because David Cameron broke his word to the electorate and ducked out, while her rivals totally misjudged the situation. But she is certainly making the most of her position to attempt to reengineer the Conservative brand.

Yesterday’s conference speech set out the stall. A repeated refrain was “the good that government can do” and Mrs May made a strong rhetorical case for renewed activism to “repair free markets”.

She has a point: governments can do good. We need them to provide defence, maintain law and order, and administer justice. Without this we have no freedom, whether economic or any other variety. Sound fiscal and monetary policies are also pretty essential.

Britain is no basket case, but there is much room for improvement in the government’s conduct of these core functions.

Our defence policy looks inadequate in a frightening world: fudging-the-books adherence to the Nato two per cent target offers no grounds for complacency. Our justice system is slow, expensive and uncertain, while our irrational taste for huge long-lasting quasi-judicial enquiries needs ditching. Our prisons? Overcrowded cesspits which disgrace a modern society while doing little to deter crime or reform criminals. Don’t get me started on an absurdly overcomplicated tax system, continuing (now worryingly downplayed) budget deficits, and pass-the-parcel quantitative easing which is impoverishing savers with no end in sight.

But it’s the private sector that got it in the neck yesterday. Repeating the ever-popular “markets are broken” trope, the Prime Minister laid out a substantial agenda for enhancing workers’ rights and piling new obligations on businesses, including compulsory worker and consumer representation on company boards, and a bizarre requirement to publish the proportion of foreign staff (to add to the crazy gender pay gap league tables).

We apparently need an industrial strategy, but were assured this is no old-style “picking winners” thing. However in the next sentence we learnt that it will somehow identify sectors of strategic importance to be supported by government. Examples were mentioned – aerospace, financial services, cars, life sciences – though none seem particularly in need of help.

Brexit was touched on – surely the Big One? – but we are still no nearer to understanding what exactly Mrs May wants. We will activate Article 50 by March next year, but what then? Fair enough, we can’t ask for a “running commentary” on negotiations, but some hints might be kind. We have learned that there will be a “Great Repeal Bill”. However, this will simply transform the EU acquis into domestic law. When Iain Mansfield coined the term in his entry for the IEA’s Brexit prize, the Great Repeal Bill was intended to “sunset” EU laws, which would have to be reviewed by Parliament and scrapped or confirmed within three years. No such conditions with Mrs May’s plan.

In bidding for the centre ground, the Prime Minister linked Corbynite socialism with the “libertarian right”, which she seemed to imply – news to me – had been too influential within the Cameron administration. She had unkind words for the metropolitan elite, though she has just appointed an epitome of the type to find new ways to regulate employment contracts. She endlessly repeated that she was for “ordinary working people”. There was the usual waffle about the brilliance of the NHS, glossing over its manifold problems, presumably also a pitch for centrist voters.

This classic pre-Thatcher Conservative electoral game plan, revived by Cameron and George Osborne but taken much further now that the Labour Party is in such a dreadful state, remains a gamble. The concessions to the left of the postwar Churchill, Eden and Macmillan governments did much to create the corporatist mess that ended in the disasters of the 1970s. The danger is that shifting to the left may win temporary support from voters but encourage more of the same in the long run.

We’ve already seen this, with John McDonnell pushing for a £10 National Living Wage as a counter to George Osborne’s £9. We will see it with proposals for workers on boards, laws on zero-hours contracts and other controls on business. When the electoral tide turns – it always does – we will be stuck with bad policies, impossible to reverse when their faults become obvious.

New Prime Ministers, like teenagers, think they are immortal. In fact their lifespan is very short – like a Mayfly? Most do little good. They can all do a lot of harm. I hope this PM does some good, but I’m a pessimist.


This article was first published in City AM.

2 thoughts on “The ‘libertarian right’, Mrs May? What ‘libertarian right’?”

  1. Posted 06/10/2016 at 10:42 | Permalink

    It is the job of Government to foster an environment which causes the Private Sector to innovate, grow, create jobs and make a profit. It is not the job of Government to create jobs.

    It is the misinterpretation of this responsibility, on the part of some well-meaning people that has persuaded them to resuscitate the idea of an Industrial Strategy, which entails the Government intervening in the market with public funds, to stimulate economic activity and boost export-led growth.

    However, this means that people in the pay of the State get to choose which industry sector receives the subsidy, and which does not – leaving them exposed to the charge of favouring the privileged few at the expense of the many, and also skewing the market in favour of the same selected few, for decades to come.

    Additionally, there exists an extremely high risk that public funds committed in this way will not deliver the return on investment as advertised, or worse still, squandered altogether because:

    (a) Civil servants in Whitehall who are charged with negotiating the contract details are ill-equipped to deal with the Private Sector, which means that they will be duped into spending taxpayers’ money on poorly conceived projects – only for this to come to light years later, when some Select Committee of the House of Commons produces a report on its findings.

    (b) The internal business process used to select recipients for State aid is susceptible to manipulation and distortion by parliamentary lobbyists in the pay of those who can afford to spend the most.

    (c) It is certain that the final decision on the choice of recipients, which is in the hands of the governing elite, will be made in the interests of professional politicians, not the national interest.

    So until these fundamental problems are addressed and dealt with, the Government should be wary about resuscitating an Industrial Strategy.
    @JagPatel3 on twitter

  2. Posted 09/10/2016 at 20:38 | Permalink

    Phelps in his MASS FLOURISHING reminded us that corporatism survived World War II Germany and Italy to take firm root on both sides of the Atlantic, and it seems that Mrs May is determined to see that the doctrine continues to prevail in post Brexit Britain. If “right wing” means I tend to favour a strong state, “right libertarian” sounds self-contradictory since libertarians typically favour the minimal or night-watchman state, if they even favour that much. The reason many like me favour even less than that is that the state has trouble refraining from all those interventions Mises long ago explained were economically disastrous.

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