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Saturday, March 27, 2010

Rise of the red Tories

The crisis is an opportunity to sweep away the rotten postwar settlement of British politics. Labour is moribund. But David Cameron has a chance to develop a "red Tory" communitarianism, socially conservative but sceptical of neoliberal economics

by Phillip Blond (February 28 2009)

We live in a time of crisis. In such times humans retreat to safety, and build bulwarks against the future. The financial emergency is having this effect on Britain's governing class. Labour has withdrawn to the safety of the sheltering state, and the comforts of its first income tax rise since the mid-1970s. Meanwhile, the Conservatives appear to be proposing a repeat of Thatcherite austerity in the face of economic catastrophe. But this crisis is more than an ordinary recession. It represents a disintegration of the idea of the "market state" and makes obsolete the political consensus of the last thirty years. A fresh analysis of the ruling ideological orthodoxy is required. Certainly, this new thinking isn't going to come from the left. New Labour is intellectually dead, while Gordon Brown promises an indebted return to a now-defunct status quo. But, in truth, Brown's reconversion from post-socialist free marketeer to state interventionist is only plausible because the Conservatives have failed to develop an alternative political economy that explains the crisis, and charts a different future free of the now bankrupt orthodoxies. Until this is achieved, Brown's claim that the Conservatives are the "do nothing" party has real traction, and makes the result of the next election far from assured.

On a deeper level, the present moment is a challenge to conservatism itself. The Conservatives are still viewed as the party of the free market, an idea that has collapsed into monopoly finance, big business and deregulated global capitalism. Tory social thinking has genuinely evolved, but the party's economic thinking is still poised between repetition and renewal. As late as August 2008 David Cameron said: "I'm going to be as radical a social reformer as Margaret Thatcher was an economic reformer", and that "radical social reform is what this country needs right now". He is right about society, but against the backdrop of collapsing markets and without a macro-economic alternative, Thatcherite economics has been wrongfooted by events.

Thankfully, conservatism is a rich and varied tradition, and re-examinating its history can provide the answers Cameron needs. These ideas are grounded in a conservatism with deeper roots than 1979, and whose branches extend into the tradition of communitarian civic conservatism - or red Toryism. This is more radical than anything emerging from today's left and should be the way forward for the right. The opportunity to restore a radical, and progressive, Toryism must not be lost to the economic downturn.

To date, neither political party has offered a plausible analysis of the origins of the meltdown. Brown denies all responsibility while George Osborne and Cameron hold him wholly and uniquely culpable. Given that no reasonable person can think either position is tenable, both parties have surrendered the intellectual high ground. But the financial crash does provide an opportunity to think through a renewed "one nation" conservatism. Cameron says that Disraeli is his favourite Tory. Disraeli attempted to ameliorate a society destroyed by the rampant industrialisation of nineteenth-century capitalism, whereas Cameron's chief target (until now, at least) has been a twentieth century creation: a disempowering, dysfunctional state. Nineteenth-century Tories criticised liberal capitalism, while twentieth century conservatives condemned the illiberal consequences of statism. But 21st-century Tories, especially against the backdrop of the current crisis, must inveigh against both in favour of the very thing that suffers most at the hands of the unrestrained market and the unlimited state: society itself. And conservatism, so imagined, could reject the politics of class - of "our people" - and the interests of the already wealthy in favour of a national politics that serves the needs of all.

It was Edmund Burke who famously spoke of conservative radicalism being founded on the little platoons of family and civic association. "To love the little platoon we belong to in society is the first principle of public affections. It is the first link in the series by which we proceed towards a love to our country and to mankind." This is the true spirit of Cameroonian conservatism and, taken seriously, it represents a break with the monopoly logic of the market state. But to recognise this innovation for what it is we have to contrast the potential of Cameron's civic communitarian conservatism with what it aims to transcend: the corrupt and rotten postwar settlement of British politics.

Since 1945 Britain has experienced two governing paradigms. The first - state sponsored Keynesianism - extended from 1945 through the oil shocks of 1973 to its death in 1979. The second - neoliberalism - ran from then until the global debt crisis of 2007 and 2008. It is often assumed that these models represent genuinely different and mutually exclusive worldviews - yet, in spite of very real distinctions, they share important philosophical and economic assumptions, and both attracted cross-party support. Look at the society we have become: we are a bi-polar nation, a bureaucratic, centralised state that presides dysfunctionally over an increasingly fragmented, disempowered and isolated citizenry. The intermediary structures of a civilised life have been eliminated, and with them the Burkean ideal of a civic, religious, political or social middle, as the state and the market accrue power at the expense of ordinary people. But if both twentieth-century socialism and conservatism have converged on the market state, they have done so by obeying the insistent dictates of modernity itself. And modernity is nothing if not liberal.

To understand why the legacy of liberalism produces both state authoritarianism and atomised individualism, we must first note that philosophical liberalism was born out of an eighteenth-century critique of absolute monarchies. It sought to protect the rights of the individual from arbitrary abuse by the king. But so extreme did the defence of individual liberty become that each man was obliged to refuse the dictates of any other - for that would be simply to replace rule by one man's will (the king) with rule by another. As such, the most extreme form of liberal autonomy requires the repudiation of society - for human community influences and shapes the individual before any sovereign capacity to choose has taken shape. The liberal idea of man is then, first of all, an idea of nothing: not family, not ethnicity, not society or nation. But real people are formed by the society of others. For liberals, autonomy must precede everything else, but such a "self" is a fiction. A society so constituted would be one that required a powerful central authority to manage the perpetual conflict between self-interested individuals. So the unanticipated bequest of an unlimited liberalism is that most illiberal of entities: the controlling state. Even the most "communitarian" liberals - from philosophers like Michael Sandel to politicians like Ed Miliband - cannot promote community without big government. They see the state as the answer, when it usually makes the problem worse. The legacy of liberal individualism is the restoration of the very absolutism that it originally sought to overthrow - a philosophical tragedy that can be summed up as: "the king is dead, long live the king".

Conservatives who believe in value, culture and truth should therefore think twice before calling themselves liberal. Liberalism can only be a virtue when linked to a politics of the common good, a problem which the best liberals - Mill, Adam Smith and Gladstone - recognised but could never resolve. A vision of the good life cannot come from liberal principles. Unlimited liberalism produces atomised relativism and state absolutism. Insofar as both the Tories and Labour have been contaminated by liberalism, the true left-right legacy of the postwar period is, unsurprisingly, a centralised authoritarian state and a fragmented and disassociative society.

In respect of liberalism, the left has twice sinned. It has produced a managerial state that has destroyed the old mutualism of the working class. And it has destroyed both middle and working class morality; in the name of permissiveness, it commodified sex and the body, creating the licentious empty pleasure-seeking drones of the late 1960s. This left-libertarianism repudiated all ties of kith and kin and, though it was utopian in aspiration, its true legacy has been the dystopia of divided families, unparented children and the lazy moral relativism of the liberal professional elite. In this sense, the left was right wing years before the right, and it created the conditions for universal self-interest under Thatcher. The current political consensus is left-liberal in culture and right-liberal in economics. And this is precisely the wrong place to be.

In addition to this liberal legacy in Britain, two further pejorative factors persist: class and monopoly. After the second world war, the need for massive reconstruction enabled European countries to pool the interests of state, capital and waged workers. But in Britain few parties saw the need to abandon their sectional interests. The unions were unwilling to discard free collective bargaining and British postwar industrial relations were frozen in a state of unresolved class conflict. When Keynesianism began to break down, the workers responded simply by asking for more and more of less and less. Thatcher's anti-union legislation did eventually curtail union power. But British management was shortsighted too - as Tony Benn once put it, if they made a profit they thought there was no need to invest, and if they didn't there was no money available to invest anyway.

Thatcher, in turn, declared this bankrupt British variant of corporatism dead. But she overshot in the other direction. Instead of holding the middle ground, the state was deployed in favour of the owner and entrepreneur. The benefits of Conservative liberalisation in the late 1980s accrued mainly to the top. The middle class saw its rise in income partly offset by more debt, while the poor sank relatively lower. New Labour did little to reverse these trends. In short, Britain remains stuck with a contested, class-based capitalism that has done great damage to British life.

The final feature of postwar British politics is the maintenance and escalation of monopoly. The fact that the state has established monopolies is self-evident. Nationalisation was a failure on its own terms, even more so because working people were never enfranchised by it. It created remote new behemoths, with popular disengagement from the levers of power. J B Priestley, socialist doyen of the intellectual class, wrote in 1949 that "the area of our lives under our own control is shrinking rapidly ... politicians and senior civil servants are beginning to decide how the rest of us shall live".

Thatcherite neoliberalism was determined to terminate all these state monopolies. Instead, markets would become the vehicle by which efficiency was maximised and prosperity attained. But the free market fundamentalists often did little more than create new monopolies of capital to replace those of the state. It was not until New Labour enacted the 1998 Competition Act that Britain obtained its first effective anti-monopoly, pro-competition regime. And, gallingly for Conservatives, the most effective protection the British economy gained against restrictive practices during the Thatcher and Major years came from Brussels competition legislation.

The financial crisis is just the latest example of the collapse of markets into what I call "modal monopoly". By this I mean a model of monopoly that extends beyond whether an individual company has undue market influence to whether a certain mode or way of doing business constitutes a cartel. For example, the great housing crash is primarily the result of the absorption of all local, regional and national systems of credit into one form of global credit. The world's financial system lacked the firewalls needed to separate local from national and international capital. Unduly reliant on one source of credit supply, the residential asset market collapsed when this supply was compromised. The housing bubble was just the last and most notable piece of neoliberal speculation to burst. In the meantime, the big banks were dedicated to generating price fluctuations and asset bubbles and then exiting before their demise. This strategy of market manipulation deployed enormous amounts of capital in speculative arbitrage (just five US banks had control of over $4 trillion of assets in 2007). This market was far from the thousands of small investors envisaged by classical free-market liberals.

Whether by private or public means, the mark of recent decades has been defined by this three-part story: the liberal consensus, the persistence of class, and the triumph of monopoly and speculation in the name of free trade and modernisation. Against this, Cameron's nascent civic conservatism would be the first radical break with all of the aforementioned ills. It is the fulcrum around which the renewal of Britain could turn. But he has his work cut out. The erosion of our society extends way beyond the dysfunction of the underclass. A study last year by Danny Dorling showed how normal anomie has become, concluding that "even the weakest communities in 1971 were stronger than any community now". This is, indeed, a broken society.

British conservatism must not, however, repeat the American error of preaching "morals plus the market" while ignoring the fact that economic liberalism has often been a cover for monopoly capitalism and is therefore just as socially damaging as left-wing statism. Equally, if Conservatives are to take power from the market state and give it to the people, they must develop a full-blooded "new localism" which works to empower communities and builds new, vibrant local economies that can uphold the party's civic vision.

How will this happen? What must Cameron's priorities be, and how can he begin to build a new communitarian Tory settlement? He could start with four tasks: relocalising our banking system, developing local capital, helping normal people gain new assets and breaking up big business monopolies. The first priority must be a banking system that works. Britain's banks no longer provide credit because they are crippled by GBP 150 billion of constantly devaluing mortgage securities. To fix this, we need a new, parallel banking system. To get one, Cameron should announce a reconfiguration of the Post Office to extend its currently limited retail banking function, and reverse Peter Mandelson's privatisation plan. The Post Office is universally popular, national, tied to the local community and, crucially, entirely free of bad debt secured on declining assets. Other banks would lend to it but, more importantly with interest rates approaching zero, the Bank of England could use at minimal cost "quantitative easing" (printing money) to underwrite both business and mortgage credit. Using the Post Office would introduce some public sector competition. Yes, the state's balance sheet would expand, but at nominal cost. If it helps to arrest the fall in asset prices (as a restoration of lending would) any public money spent would secure money already invested in Brown's bailout, and be far more effective than any fiscal stimulus. This new Post Office could genuinely restimulate the economy by lending at small margins, and by being involved in local investment rather than global speculation. It could even be localised rather than privatised, giving it back to communities, to extend investment and increase prosperity in every neighbourhood.

Having announced this plan, Cameron should move forward by helping local communities to take ownership of their assets too. He should set up a new class of local investment trusts, dedicated to investing in the cities and villages that they serve. These trusts could become new centres of local finance; rather than investing in Iceland, local councils and other bodies should be compelled to deposit public funds with them, increasing the local capital base. Likewise the Tory's proposed new "social fund" could act within the trusts in deprived areas to offer micro-finance to people without assets. This would create a new, but distinctly conservative form of asset based welfare leading eventually to claimant independence. The trusts would own the local Post Office network, and each trust could work to invest and develop local economies. Instead of the wasteful regional development agencies (RDAs), which spend over a third of their ten to twelve billion GBP budget on administration and help less than one per cent of all small businesses, this could create a genuinely local form of venture capital. The regional trust network, meanwhile, could facilitate new guilds and cooperatives. With a common finance centre, and the use of modern technology, these could do anything from research and development to export drives to running local schools and hospitals. It would put real energy behind the "conservative co-operative movement" that David Cameron launched in 2007.

The next step would be to ensure local government procurement is devolved to local bodies. A 2005 study by the New Economics Foundation showed that every pound spent with a local supplier generated GBP 1.76 locally, while every pound spent with outside suppliers generated only 36p. A ten per cent increase in the amount of council money spent locally would mean an injection of GBP 5.6 billion into local economies. And if the trusts were also able to issue bonds, this could restore something like the power of the nineteenth century municipalities. (Residents could even participate in mass versions of Dragon's Den to decide on the investments to be made.) So conceived, the localities could help to reverse the dreadful centralising pull of London - which sucks all the talent and money from the rest of the country into the overheated south east, leaving everywhere else a mere backwater.

The next step for conservatism is to reverse the old politics of class, by restoring capital to labour. Cameron should reject the Marxist narrative that paints Tories as wedded to a disenfranchised proletariat. On the contrary: conservatives believe in the extension of wealth and prosperity to all. Yet the great disaster of the last thirty years is the destruction of the capital, assets and savings of the poor: in Britain, the share of wealth (excluding property) enjoyed by the bottom fifty per cent of the population fell from twelve per cent in 1976 to just one per cent in 2003. A radical communitarian civic conservatism must be committed to reversing this trend. This requires a considered rejection of social mobility, meritocracy and the statist and neoliberal language of opportunity, education and choice. Why? Because this language says that unless you are in the golden circle of the top ten to fifteen per cent of top-rate taxpayers you are essentially insecure, unsuccessful and without merit or value. The Tories should leave this bankrupt ideology to New Labour and embrace instead an organic communitarianism that graces every level of society with merit, security, wealth and worth.

Such ideas are not without a past. The idea of a Tory distributist state is not new; indeed the phrase "property owning democracy" was first coined in 1923 by the Conservative MP Noel Skelton. Anthony Eden used it too in his celebrated speech to the 1946 party conference, and the philosophy enthused both Churchill and Thatcher. Recent Tory proposals to exempt the savings of the low paid and pensioners from tax are exactly the path to follow. They should go further, arguing for far-reaching extensions to employee share ownership, workers' buyouts and the promotion of equity guilds and asset co-operatives. This would bypass the trade unions as institutions permanently wedded to welfare serfdom, and wed ownership to the earning of wages.

The final piece of the puzzle is for Conservatives to break with big business. We must end a model in which competition is reduced to a cartel of vast corporations maximising profits by discouraging competitors and minimising wages by joining with the liberal left to encourage mass immigration. A covert alliance between the liberal left and liberal right has destroyed incomes and identity at the bottom of the scale.

The Tories must take on the unrecognised private sector monopolies that hide on every British high street. According to figures from IGD research in May 2008, the British grocery market was worth GBP 134.8 billion. Of this, the big four supermarkets took GBP 98.6 billion, a 73 per cent market share. In the name of competition we have happily handed over our high streets to Tesco, strangling local commerce. The more that price is our only measure of competition, the bigger the economies of scale required to compete, and the higher the barriers to entry for small local competitors. Our fishmongers, butchers, and bakers are driven out - converting a whole class of owner occupiers into low wage earners, employed by supermarkets. And, once you have a monopoly, it demands that other monopolies serve it, just as Tesco demands economies of scale from its suppliers, driving out small and medium-size farms. It is perfectly clear that the Office of Fair Trading and the Competition Commission are not up to the job. Cameron should revamp them and announce his intention to break up all the big-box retailers. And, when he is finished, he should take a hard look at mobile phone companies. Breaking up supermarkets won't change the world: but, as they say, every little helps.

Taken together, such policies will help conservatives create a transformative red Tory manifesto. They would build a new economic and capital base that decentralises power and extends wealth and also makes a final break with the logic of monopoly and debt-financed capitalism. In doing so, Cameron can finally bring together the Tory tradition of Disraeli's reform of capitalism with his own entirely justified desire to be a "social radical". It would render the left superfluous and redefine Marx as just another dispossessor of the poor. Moreover it would recover the insights of 19th-century conservatives like Cobbett, Ruskin and Carlyle, ally them with Tawney and the distributism of Chesterton, Belloc and Skelton - all of who knew that, without something to trade, one cannot enter a market. Making markets truly free prevents corporate domination, but also extends ownership, prosperity and innovation across the whole of society. The task of recapitalising the poor is, therefore, the task of making the market work for the many, not the few. David Cameron doesn't need to do any of this to win the next election. But, to be a great prime minister, he does.


Phillip Blond is the director of the progressive conservatism project at the think tank Demos

Bill Totten


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