The new Conservative administration, a little over two weeks old, is already reeling. Its “mini-budget,” a cocktail of substantial tax cuts with high borrowing and state spending, has helped tank the pound sterling and discredit Britain in the eyes of traders.
The International Monetary Fund (IMF) has issued stern warnings about the direction of British policy, a finger-wagging more commonly directed at much weaker economies in the Global South. Unusually detached from Treasury policy, the Bank of England (BoE) has had to step in to buy up £65 billion of government debt in a bid to stabilize markets. Commercial banks have withdrawn mortgage products.
To make matters worse for the ruling party, its private economic farce coincided with a Labour conference where Keir Starmer presented himself as the natural figure of stability, to the evident pleasure of establishment message carriers like the BBC. As the Tory party continues to suffer infighting and alienate swathes of its traditional capitalist backers, pressure is growing for a government U-turn.
Labour’s pitch to replace the Conservatives as the first party of British capitalism will be considered later. First we must ask how and why the Tories committed this unforced error.
David Cameron formed a coalition government with the Liberal Democrats in 2010, after a mostly superficial process of “modernization” in his party. This saw him jettison some residual socially conservative attitudes, left over from an earlier phase of neoliberal reform in which conservative and nationalistic rhetoric proved useful in carrying out economic liberalization and European integration. Crucially, Cameron also embraced the European Union, and would eventually hold the 2016 referendum in a bid to end the dispute over British membership in the EU.
This project meant sidelining the Tory membership, famously derided by a close Cameron ally as “all mad, swivel-eyed loons” in 2013. Parts of the membership, mostly middle-class men from the Thatcher generation, were beginning to defect to Nigel Farage’s UK Independence Party and placing pressure on Tory backbenchers over the EU.
This was the manifestation of a classic division in many right-wing parties between a leadership of state managers closely allied to big capitalist interests and a membership of small-business owners and professionals, often aggrieved by unfavorable conditions of competition in a market dominated by monopolies and attracted to nationalist, free-market, socially conservative, or other ideological remedies.
However, the Tory divisions were also agitated by modern problems of capitalist governance — the related phenomena of the growth of transnationalism, the hollowing out of traditional political parties, and the antagonism between different factions of business produced by these processes.
As with the 2014 independence referendum in Scotland, Cameron failed to understand that the animus promoted by the contradictions of globalization would concentrate around the 2016 vote on EU membership. The Leave vote confirmed his miscalculation, and the next three years became a public exhibition of the strategic tensions tearing the party to pieces.
Worst of all, Brexit upset the Tory Party’s relationship with the capitalist class. The majority of the latter resented quitting the EU and its single market, from which they had benefited so handsomely for decades. They were also horrified that such a significant issue had been left to the public to decide — the very opposite of the sub-democratic form of rule that the EU had provided.
Boris Johnson was the figure ideally placed to pave over the splits in the party. He was seen as an anti-political figure who could take advantage of public anger against the political class — not least over the failure to implement the Leave vote by a clearly recalcitrant Tory party and big-business elite (and a Labour party increasingly steered in front of the popular vote by the establishment “People’s Vote” initiative).
Johnson has always been an ambiguous Brexiteer, famously coming late to the cause in what was widely seen as an act of personal ambition. His bid to “Get Brexit Done” appealed to Leave and Remain supporters alike, who recognized the need to end the Tory drama. His leadership submerged the rift that had opened up between the party membership and its leadership, and between the leadership and the capitalist class.
Johnson’s victories in 2019 should not be underestimated: he drove out hard-line Tory Europhiles, reshaping the party in his image; invaded Labour seats in the English North and Midlands; crushed Corbynism; and delivered a hefty Tory majority after a decade of unstable rule. Perhaps most importantly of all, he moved past the dogmatic preoccupations of the Cameron era: the obsessions with deficit reduction and austerity.
Johnson adopted a more pragmatic approach that, although pursued in the interests of British capitalism and adopted unevenly and in a confused fashion, at least had an eye to the vulnerabilities produced by decades of economic liberalism. Less neurosis over borrowing and spending, experiments in state support for private industry, and the “levelling up” agenda were all signs of this new pragmatism.
The Johnson Defenestration
Today, many Tory politicians from various wings of the party will be full of regret for any role they played in removing Johnson. The scale of disorder in the British economy makes concerns over Johnson’s electability following the “Partygate” scandal look utterly trivial.
An effort of imagination is required to understand why senior Tories pressed for Johnson’s dismissal. First, it must be borne in mind that those who pushed Johnson out might not have foreseen the ascension of Liz Truss, or the erratic budget she would promote within weeks of her election by Tory members. Second, many Tory MPs will have genuinely feared for their own careers in a forthcoming election with Johnson as leader. Third, there was a lingering sense that Johnson somehow represented, or simply reminded people of, the hated Brexit interregnum that drove such a wedge into the Tory party at its class joints.
Still, from today’s vantage point, it seems like an absurd decision. In an obvious blunder, the party establishment used its prospective leader — Johnson’s chancellor Rishi Sunak — to pull the trigger on Johnson, a move which could not have helped him win an election among the party membership.
Party members have now voted three times for their leader since 2016 — sidestepping the electorate. In each vote, they chose a candidate further from Cameron and his legacy. Historians might conclude that his program of reform, and his association with neoliberal globalization in its period of decline, may have been a driving factor in the party’s move by increments to the current chaotic juncture.
That said, members chose Liz Truss by a fairly slim margin, who won 81,326 votes from a membership of 172,437, and by 57 percent against 43 percent for Sunak. Throughout the internal election, Sunak — the candidate of the “Treasury Party” of deficit hawks eager to return to the old orthodoxies on state finances — warned of the dangers posed by simultaneous tax cuts and borrowing for state spending.
The Big Mini-Budget
Truss and her new chancellor, Kwasi Kwarteng, clearly intended to launch a shock budget as soon as they got into Downing Street. It was probably delayed by the death of Queen Elizabeth, and they used the hangover from her funeral to drive it through.
It landed like a bombshell in currency markets. Truss, Kwarteng, and other economic libertarians are wont to think of sudden “shocks” to a complacent status quo as a kind of magic remedy for whatever ails the economic system. But they were obviously taken off guard by just how vociferous the response has been from traders, the IMF, the BoE, and Tory backbenchers — some of whom say the new administration has just weeks to turn the present mess around.
That would mean reversing policies that are unambiguous in their fidelity to supply-side miracles. “Trussonomics” cannot be meaningfully described as “small state,” combining as it does a raft of tax cuts aimed at top earners and big business with a massive splurge of public money to protect consumers from runaway energy prices.
At an estimated £187 billion, the energy bailout is the largest British peacetime intervention, with the single exception of COVID spending (when all taken together). Measures to ward off the worst of energy price inflation are greater than the furlough scheme, and much bigger than the bank bailout of 2008.
As James Meadway has pointed out, this approach resembles Ronald Reagan’s approach to economic liberalization more than Margaret Thatcher’s, with “the US deficit under President Reagan ballooning to unprecedented levels thanks to tax cuts for the rich and vast increases in military spending.”
Of course, the problem with this approach is that — as Truss and Kwarteng have found out — the UK is not the US. It is not the behemoth at the center of the entire system of world trade, debt, and military power, whose credibility on the markets is beyond question.
Socially Determined Stupidity
The late Scottish Marxist historian and sociologist Neil Davidson used to argue that the Conservatives, though generally a strategic force that acted rationally in the interests of the ruling layers of British society, were sometimes prone to “socially determined stupidity” — forms of radical misjudgment and ideological confusion conditioned by the very class relationships their rule rests upon.
The delusions of the libertarian Tory right are stupidities of this kind. Truss, Kwarteng, and their fellow travelers around the Free Enterprise Group have expressed a belief that radical liberal economic cures will sweep away the protracted period of low growth, weak productivity, and investment strikes that have blighted British capitalism.
Some of them — though not Truss, giving the lie to the idea that her short reign of confusion is part of some shadowy Brexiteer conspiracy — believed that Brexit would form part of this therapy. This was always a quixotic attitude, since Brexit involved the UK quitting one of the most successful and radical “free market” experiments in modern history, and one that the British state had a significant hand in creating — the EU single market.
This faction has been driven to self-destructive delusions by broad socioeconomic and class-related political factors. The first relates to the long shadow cast by Margaret Thatcher and her reforms.
Thatcher’s restructuring of British capitalism hammered working-class organization along with traditional industry, paving the way (after the agony of mass unemployment for workers) for a medium-term recovery for a Britain that had been referred to as “the sick man of Europe” in the 1970s. But it also set the limits to that recovery and baked in new contradictions that would emerge in later decades.
Like an addict forever chasing the last hit, acolytes and students of Thatcher (including Blair’s New Labour) would drive subsequent rounds of market reforms, none of them meeting with the same successes. Especially since 2007–8, when bloated financialization, encouraged by decades of deregulation, finally caught up with British capitalism, arch economic liberals have been driven mad by the failure of their project.
The failure of austerity and continued flatlining economic growth, with total stagnation or retreat for the incomes of tens of millions of workers (if this weighs heavily on them), have only intensified their desperation. Met with the limits of their creed, they have refused surrender for another big whack of liberalization — more aggressive this time than past “half measures.”
Class Conflict as Teacher
There is another ingredient to this derangement: changes in the pitch of class conflict. The Thatcher administration enjoyed years as understudies, not so much to the generation of Tory leaders who came before them — who they saw as failures and derided as “wets” for their weakness — but to the working class. Over years, Thatcher, a figure from the party base of small-business holders, watched as a powerful trade union movement defeated attempts to impose income policies on workers, felled a Tory government, and even faced down state institutions like the courts and the police.
She and her co-thinkers shared this time of tutelage with shadowy business lobbies and state conspirators, and with the authors of the Ridley Plan, which she would eventually deploy to take on the unions. “Shock therapy” last time had a sociological function — not a baldly economic one. Heightened class conflict turned crude economics into political economy: an understanding that economic relations are also essentially social relations between classes.
Truss and Kwarteng have none of this education. Truss wasn’t even born until the trade unions were already in decline. Instead, their brand of neoliberalism treats economic categories as separate and prior to class relations.
Consider just one class antagonism, completely missed by the new administration. With elitist foreign institutions like the IMF and World Bank threatening and humiliating Britain, there could be ample scope for a populist administration to arouse public anger against this intrusion. Except that the government has already foreclosed this possibility by orienting their government’s tax-and-spend policies toward other parts of the unaccountable, remote elite (most of whom will now be deeply unhappy with the government).
The sensitivity to class relations so apparent in the Thatcher and Reagan administrations, which bought off groups of workers as they attacked others, and systematically brought in small businesses and big capital to their projects, is nowhere in evidence.
During the Brexit interregnum, big business was alienated from the Tories, but they also lacked an alternative. Labour, so long the second party of British capitalism, had been briefly captured by an unreliable populist insurgency. Now that Starmer has made Labour a safe vehicle again, there is a clear pivot toward the party.
Media coverage of the Labour conference has been nothing short of euphoric. Tory media outriders and even former politicians have publicly pivoted to the party’s loudly centrist, statal program.
This raises the specter of a process of “Bidenization,” with ruling elements transferring the mantle of the chief business party to the onetime opposition, just as Wall Street walked away from Donald Trump’s Republicans to the Democratic Party in 2020. Labour’s newly announced policy prospectus is conspicuously conservative. The most radical proposals include a return to the top rate of tax under Boris Johnson (with no promises to reverse Truss’s wider package of cuts), the establishment of a state energy firm with a limited remit, and funding for a “green transition,” which everyone paying attention should know will be a creature of the corporate lobby.
This has implications that extend beyond Labour into the wider realm of left-wing and anti-Tory sentiment. Just as during the Brexit impasse, anti-Toryism is being channeled into pro-establishment attitudes and positions. Many who oppose the Tories have uncritically welcomed the statements from the IMF, the action of the BoE, and the lectures of former BoE governor Mark Carney.
Even in more critical layers that remember the record of these institutions, the temptation will be to use this as an energizing force for Labour. Indeed, some on the Left are already claiming victories in the form of unfulfilled Labour policy proposals that, as we have already noted, are perfectly in line with the needs and desires of big business and the establishment.
Breaking politics out of this circuit of establishment infighting means aiming instead at the class conflicts clearly opening up in the wider economy and society. These conflicts are not a tributary to some future Labour victory or part of a parallel strategy of “parliament and streets,” where strikes and protests compliment an electoral strategy.
Labour becoming the party of market stability will mean conflict with workers. No matter what party is in power, the pressure for austerity measures to reduce government debt will grow. The object should be an escalating fight against both wings of the establishment.