Anthony Seldon - The Ideas That Shaped Post-War Britain

The counter-arguments which gave the New Right its victory in the struggle for intellectual and moral leadership in the late 1970s and early 1980s must be seen against this background. Their most striking feature is that they were not new at all: they consisted of more or less ingenious re-statements of very old arguments, which the rising liberal collectivists of the late nineteenth and early twentieth centuries thought they had refuted. Inequality, said the New Right, is desirable; social justice is a chimera. So are the positive freedoms embodied in social-citizenship rights and the notion of a public domain, separate from the market domain. So far from erecting boundaries between the market and other domains, market relations should be given as free a rein as possible. The invisible hand of free competition does produce opulence, state intervention in the market-place does misallocate resources and the principles that govern the finances of a private household do apply to the public finances. From this, it followed that Keynesian pump priming was inherently inflationary and state planning, even of the modest kind attempted by the governments of the 1960s and 1970s, inherently wasteful. The role of the state was to enforce contracts, to supply sound money and to ensure that market forces were not distorted. To attempt more than this was to embark on a slippery slope to inflationary crisis and collectivist oppression.

To be sure, that was only the beginning of the story. If the New Right had confined itself to a re-statement of nineteenth-century economics, no one would have listened. The originality and power of its critique of the Keynesian social-democratic system came from its politics, not from its economics. Above all, they came from its answer to the Keynesian social-democratic argument from market failure. The New Right did not, on the whole, deny that markets can fail. But it added that market failure was balanced – and more – by government failure. It followed that attempts to correct market failure through government action did more harm than good.

One reason, derived from the pessimistic Austrian anti-rationalism of Hayek, was epistemological. 20No government or planning board, the argument ran, not even one equipped with the most sophisticated technology, can know enough to second-guess the ‘spontaneous order’ of the market-place. If it tries, it will fail; if it tries to compensate for its failure with further interventions (as it is inherently likely to do), it will make matters even worse. That leads on to the second reason, derived from the public-choice theorists of the so-called Virginia School. Excessive government intervention, according to this argument, is not the product of intellectual hubris alone. It springs from the inescapable pressures of party competition in conditions of mass democracy, and from the equally inescapable pressures of bureaucratic empire-building in the conditions created by an extended modern state. Behind all this lies the simple, not to say simplistic, premise that political processes can be reduced to economic ones: voters are like shoppers without a personal budget constraint; politicians seeking votes are like salesmen competing for custom; bureaucrats strive to maximise their bureaux as entrepreneurs strive to maximise their profits. On that key assumption rest the conclusions that politicians will always promise more than they can perform, voters will always vote for exaggerated promises, officials will ceaselessly seek to extend the scope of their activities and the extended democratic state is therefore, of necessity, a prey to self-stultifying overload. 21

Yet even these arguments were not as new as they were sometimes thought to be. They were the latest manifestations of a long line of speculation and rhetoric, going back to the earliest apologists of the capitalist market economy and of the unconditional rights of private property. 22The notion that markets are, in some mysterious sense, more ‘spontaneous’ than governments goes back to Adam Smith’s famous claim that a propensity to ‘truck, barter and exchange’ is fundamental to human nature. The proposition that deliberate government planning cannot out-perform market spontaneity goes back to his doctrine of the invisible hand, and perhaps even to Mandeville’s Fable of the Bees , with its sardonic claim that ‘private vices’ unintentionally produce ‘publick benefits’. The claim that democratic party competition is bound to engender inflationary overload is a modern version of the fears that disturbed the sleep of a long line of nineteenth-century economic liberals, alarmed by the thought that a democratic suffrage would endanger the market order. On a deeper level, the assumptions behind it can be traced back to the rhetoric of the eighteenth-century Court whigs who dismissed the ideal of civic activism on the grounds that, as J. G. A. Pocock puts it, men were ‘interested beings’, to be policed ‘by a strong central executive’. 23

This does not prove that the arguments concerned are false, of course: old arguments may well be better than new ones. But it does raise an obvious question. Why should a set of arguments, which had seemed intellectually discredited and politically irrelevant for the first three decades after the Second World War, suddenly experience a miraculous rebirth in the fourth and fifth? Granted that the history of social thought provides plenty of examples of recycled ideas masquerading as new ones, what was it about these particular theories that made it possible to recycle them to such effect?

For many New Right sympathisers, the answer lies in a kind of inverted historicism, as deterministic as the historicism of the Keynesian social democrats and their precursors in the first part of the century. The inexorable tides of economic and social change which the Keynesian social democrats once rode, the argument runs, have changed direction. They are still there, and they are still inexorable; but they no longer run from the small to the big, from the disorganised to the organised, or from the individual to the collective. Now they run in the opposite direction. Like a de-coagulant dissolving a blood clot, the micro-electronic revolution has dissolved the great power blocks that impeded the free flow of market forces. Large organisations have broken up and social classes have merged. As a result, the state has been disempowered. For in the fluid, dynamic, rapidly-changing economy created by modern technology, the techniques of Keynesian social-democratic regulation have no purchase. Planning, corporatism, even demand management have become unnecessary, and in any case impossible. As David Howell put it during the high noon of the New Right,

The unplanners have defeated the planners completely. There has to be less government because more government is becoming unnecessary and unworkable. The corporatists, who rested their thinking on big unionism, big government, big finance and big industry, are seeing their edifice collapse not because they have lost some temporary political power struggle (or because some other clique has won it) but because this degree of centralism has simply become outdated. The computer and micro-electronic communications disperse power and knowledge, and therefore traditional political formations, just as they disperse and alter industrial and commercial activity. So a new business landscape has emerged, and therefore a new political landscape as well. 24

Unfortunately, there are at least two weaknesses in this answer. In the first place, its claims are too universal. The information revolution and its accompanying economic fluidity have affected the entire globe. The moral and intellectual victory of the British New Right was peculiar to Britain, or at most to the English-speaking world. If the demise of Keynesian social democracy and the rise of the New Right were the products of some inexorable technological imperative, continental Europe and Japan would have seen something similar. But although the forms of economic regulation and the rhetoric of political and intellectual leaders have changed in both, neither has experienced anything remotely comparable to the New Right ascendancy in Britain. Technological imperatives that manage to produce Margaret Thatcher in Britain, but François Mitterrand in France and Helmut Kohl in Germany, cannot be as imperious as all that.