By throwing an already weak economy into chaos, the Tories have simultaneously damaged their authority with the ruling elite and pushed Labour closer to power. Why have they made this unforced error? David Jamieson looks at the class antagonisms behind the car crash.
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’) and, unusually detached from Treasury policy, the Bank of England (BoE) has had to stepped in to buy-up £65 billion of government debt in a bid to stabilise markets. Commercial banks have withdrawn mortgage products.
To make matters worse for the ruling party, their 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 the question: how and why could the Tories commit this unforced error?
The backdrop: Tory Contradictions
David Cameron formed a coalition government with the Liberal Democrats in 2010, after a mostly superficial process of ‘modernisation’ 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 had proved useful in economic liberalisation and European integration. Crucially, Cameron also embraced the EU, and would eventually hold the 2016 referendum in a bid to end the dispute over British membership.
This project meant side-lining the Tory membership, famously derided by a close Cameron ally as “all mad, swivel eyed loons” in 2013. The membership, mostly middle-class men from the Thatcher generation, were defecting in drabs to Nigel Farage’s UKIP, 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 unfavourable conditions of competition in a market dominated by monopolies, and attracted to nationalist, free market, socially conservative or other ideological remedies. But 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 in 2014 in Scotland, Cameron failed to understand that the animus promoted by the contradictions of globalisation 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 them 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 recognised the need to end the Tory drama. His leadership submerged the rift which had opened-up between the party membership and its leadership, and the leadership and the capitalist class.
Johnson’s victories in 2019 should not be under-estimated: 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 which – though 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 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 which 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 programme of reform, and his association with neoliberal globalisation 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, winning 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 which are unambiguous in their fidelity to supply-side miracles. Trussenomics 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 and estimated £187 billion, the energy bailout is the largest British peacetime intervention, with the single exception of Covid spending when taken together. Measures to ward-off the worst of energy-price inflation are greater than furlough, and much bigger than the eponymous bank ‘bailout’ of 2008.
As James Meadway has pointed out, this approach resembles more Ronald Reagan’s approach to economic liberalisation 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; not the behemoth at the centre of the entire system of world trade, debt and military power, whose ‘credibility’ on the markets is beyond question.
The late Scottish Marxist historian and sociologist Neil Davidson used to argue that the Conservatives, though generally a strategic force which acted rationally in the interests of the ruling layers of British society, were sometimes prone to “socially-determined stupidity” – forms of radical mis-judgement 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 travellers 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 strike which 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 social-economic and class political factors. The first relate to the long shadow cast by Thatcher and her reforms.
Thatcher’s re-organisation of British capitalism hammered working class organisation along with traditional industry, paving the way (after the agony of mass unemployment for workers) for a medium term recovery for a Britain 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 (including New Labour) would drive subsequent rounds of market reforms – none of them meeting with the same successes. Especially since 2007-8, when bloated financialisation, encouraged by decades of de-regulation, 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 (and 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 liberalisation – 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 who they derided as ‘wets’ for their weakness – but of 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 incomes policies on workers, felled a Tory government and even faced-down state institutions like the courts and 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 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 towards other parts of the unaccountable, remote elite (most of whom will now be deeply unhappy with the government).
The sensitivities 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 towards 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 its loudly centrist, statal programme.
This raises the spectre of a process of ‘Bidenisation’, with ruling elements transferring the mantle of chief business party to the one-time opposition, just as Wall Street walked away from Trump’s Republican’s 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’ wider package of cuts), 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 channelled 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 who remember the record of these institutions, the temptation will be to act as a ginger group on Labour. Indeed, some on the left are already claiming ‘victories’ in the form of unfulfilled Labour policy proposals which, as indicated, are perfectly in line with the needs and desires of big business and the establishment.
Breaking politics out of this circuit of intra-establishment infighting means aiming instead at the class conflicts clearly opening-up in the wider economy and society. These 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 austerian measures to reduce government debt will grow. The object should be an escalating fight against both wings of the establishment.