Saturday 5 November 2022

The Tory Politics of Small Statism

"The state can't fix all your problems". With this statement, Rishi Sunak has declared the Tories are returning entirely to type. The brief experiment with Tory modernisation is over, and the clock is wound back to 22nd June 2016. Another round of cuts are coming, and a contrived fiscal crisis of state is being used to push politics back to the right. The contradiction at the heart of Boris Johnson's administration was exploded by Liz Truss and is now getting consolidated by Sunak.

A trip down memory lane. Politics has been a traumatic experience and especially so for our establishments. In 2014 the UK state sailed close to the wind of breaking up. In 2015, the official party of liberalism imploded and socialism, having been asleep as a mass force since the Poll Tax rebellion, surged. In 2016 the double disasters of Brexit and Trump struck. 2017 saw the impossible and Labour surge in votes and seats when so-called professional opinion had written it off. 2018 and 2019 were endless engagements in the Brexit wars, with the Tories emerging triumphant at the end. And just as we were hoping for a respite in 2020, Covid hit and the purview of the state expanded massively to keep the economy and people's livelihoods going. This tumultuous period, which we haven't left yet, were and are characterised by big ideas and high stakes. In Scotland the SNP and in England and Wales Corbynism showed political alternatives were possible, and the Tories adapted to the mood. Outside Number 10, Theresa May talked about her one nation Toryism. And when Johnson won his Brexit election, his levelling up wheeze was the logical heir to what went before - with Dominic Cummings brought in to drive an authoritarian modernisation of the state.

This is not natural territory for modern Tories. For the Margaret Thatcher and John Major governments, their objective was putting socialism in a box and keeping the lid closed. Their party had not adapted itself to a popular Labour agenda since Winston Churchill signed them up to the post-war compromise in the late 1940s. Markets, privatisation, and law and order was all Tory governments could and should offer. Jeremy Corbyn's two leadership elections and the unexpected (and unwelcome) 2017 result tore a hole in this reality. It could not be ignored and had to be headed off. Arguably, the peak of Corbyn's impact on the Tories was felt after Johnson had administered the electoral coup de grace when they unceremoniously and without credit lifted the left's programme for mitigating Covid. Seeing a Tory government abolish homelessness, increase social security above inflation, and paying people to stay at home wasn't on anyone's 2020 bingo card. It definitely wasn't on Sunak's, and Johnson - despite being chill about state intervention - was very uncomfortable with this level of support. As soon as they felt they could get away with it, return to work messages were pushed out, the formal end of the Job Guarantee Scheme announced, the homeless were put back on the streets, benefits were cut back and the sanctions regime returned. The emergency could not be allowed to undermine the economic compulsion to work.

This is where the agreement between Johnson and Sunak ended. As noted here many times, the levelling programme such as it was got watered down repeatedly, becoming little more than pork barrelling at best and vapour at worse. And at the heart of the resistance to Johnson, those responsible for this incoherence, was Sunak and the Treasury. How they justified their opposition is largely immaterial. The consequence was a concerted Tory effort at reducing the capacity of the state just as Johnson, Michael Gove and before his departure, Cummings, were repairing and remodelling it. The outcome has been the ongoing decrepitude of the public realm and the ability of the state to do things. Especially simple things, like tax collecting, ordering a passport, and expecting an ambulance to turn up were significantly eroded while Johnson got on his modernisation shtick.

This had political effects too. It's quite simple. If the state can't deliver basic functions, then no one is going to place demands on it. What you might call nice things but are routine in equivalent countries, like cheap but good quality public transport and decent state pensions, can never be delivered because the state can't be trusted to do anything. If this becomes the common sense, even the mildly social democratic gruel offered by Keir Starmer is a banquet government can neither afford nor organise, and is fantastical to the point of it can never happening. Again, whether Sunak thinks of it likes this or clings to dreams of a small state, the effect is the same. A closure of political space and the attempted founding a new status quo on state incompetence.

As it happens, Truss was fully signed up to this view as well. Except her mistake was to go all in, believing public opinion was behind her own prejudices against the state (which, by complete coincidence, were shared by the hedge funds she was closely aligned to). Unfortunately for Truss, she forgot that crashing the economy upset just about every other section of Tory party support. When a Conservative leader becomes dysfunctional for almost the entirety of British capital, as happened in this case, their political life is not destined to be a long one. For his part, while Sunak is politically clumsy and prone to mistakes, on this he has been consistent and patient. He chipped away at the furlough scheme to which he owes any positive regard he has left, and subsequently only offering support - as per his earlier energy price freeze - when it was absolutely politically necessary to do something. Truss didn't want the state to offer anything, and was completely open about it. Sunak wants to be in the same position, but it is something to be achieved more gradually and with a bit more craft.

Which brings us up to date. In his Times interview, the Prime Minister alluded to some limited help for mortgage holders caught in the backwash from Trussonomics. But by being "honest" about how the state is suffering a budgetary shortfall, Sunak and Jeremy Hunt are looking at cutting the public sector more devaluing benefits and the state pension under the guise of necessity and hoping enough will swallow it as per the Tory messaging before and after the 2010 election. But none of this is regretful, done with a heavy heart or, heaven forfend, is a tough choice. Shutting down the capacity of the state undermines the faith in politics to do good, useful things. If that is eroded, Labour are likely to cleave to this "common sense" and keep to the new rules of the game. Sunak isn't likely to lead the Tories to victory, but if his opponents' room for manoeuvre can be circumscribed in advance he will, as far as the Tories' ruling class support is concerned, have rendered them a useful service.


Blissex said...

«In his Times interview, the Prime Minister alluded to some limited help for mortgage holders caught in the backwash from Trussonomics.»

What's the need? Inflation is shrinking fast the real value of their mortgages, and nominal mortgage interest rates are still way below the rate of inflation. Here are two obvious titles from the "Financial Times":
Andrew Bailey: I ‘would never’ stage a coup
Bank of England: The dovest hawk you ever did see

«Shutting down the capacity of the state undermines the faith in politics to do good, useful things.»

Here again I disagree with the "conventional wisdom" of our blogger:

* Framing the discussion in terms of the amount of money spent by the state, rather than on where it is spent and other policies that rig "the markets", that is "predistribution" policy.

* Even so, failing to recognize that state intervention includes both fiscal and credit policy, and the Conservatives use the state to intervene massively in the economy in favour of their sponsors and voters, mostly through credit policy.

If the "neo" in neoliberalism means something specific, something different from classic liberalism, it is that neoliberals do intervene massively in the markets in favour of their vested interests; it is big and generous state and favourable rules for their own (especially property owners and finance operators), and a small and mean state and harsh rules for everybody else.

Old Trot said...

Blissex keeps repeatedly claiming the entirely mistaken claim that " inflation is shrinking fast the real value of their mortgages". This is entirely untrue for real wage earners in today's reality of a rocketing inflation in PRICES which is totally unmatched by a corresponding increase in WAGES ! In the huge inflation of the 1970's the increase in prices was matched for most people by a corresponding or near corresponding increase in wages , ie, a classic 'wage/price spiral'. Today the driver of inflation has been a 'profit/price spiral'(as the TUC has researched and explained) , driven by commodity speculation and interlinked business superprofits . Whilst wages have been extraordinarily stagnant (in fact often falling in many sectors relative to prices) for over a decade, particularly in the public sector and the 'gig economy'. Thus most working mortgage holders today are not only much more indebted generally than their 1970's counterparts , but are today faced with rampant 10% + annual inflation but no wage increases to match the unaffordable doubling of their monthly mortgage or food or energy costs.

Anonymous said...

You’ve got it slightly wrong. Wage inflation would bring down the real cost of mortgages. What’s happening here is consumer inflation that brings all goods up to the unaffordable level of mortgages.

Anonymous said...

Old Trot’s got it right. I’ve said for a long time that inflation was the best way out of the mess the housing markets got itself in. But Trots right that if wages don’t keep up with consumer inflation then all we’re doing is making people poorer. Of course, that might be what all this is telling us, except I suspect that all this is really just making the poor and middle income earners poorer. So far, this isn’t a rerun of my parents generation- unless those threatened public sector strikes succeed in achieving fair and reasonable wage increases.