As spring began, the biggest political story in the United Kingdom was the shock resignation of Iain Duncan Smith, a former Conservative Party leader who had served as David Cameron’s work and pensions secretary since May 2010. Given the Conservative Party’s increasingly bitter internal divisions over Europe and the June referendum, this would seem unsurprising. Duncan Smith (also known as IDS) was part of a minority in the government that oppose continued EU membership, and had already complained that the “Brexit” camp was suffering “smears” from its opponents.
But, at least officially, IDS did not resign over Europe. (Some disagree.) Officially, he resigned because he objected to the injustice of the 2016 Budget, unveiled on March 16th by Chancellor of the Exchequer George Osborne. That budget called for more than £4 billion in welfare savings by cutting supplements aimed at people with disabilities (known as Personal Independence Payments (PIP). The budget also effectively reduced income taxes, including for higher earners (by redefining the income thresholds) and cut corporation tax. IDS said that the cuts were “not defensible in the way they were placed with a budget that benefits higher-earning taxpayers.” He added that Osborne’s budget seemed more concerned with appealing to the Conservatives’ middle- and upper-class electorate than in serving the “national interest.” He went through with the resignation even as the Treasury announced plans to reverse the PIP cuts, after widespread outrage within the Conservative parliamentary party.
This sort of Conservative opposition to unnecessarily hurting the poor in the name of deficit reduction is not new. We saw it late last year with the rebellion against cuts to tax credits for low-salaried workers. However, these revolts raise some interesting questions about what the Conservative Party believes, what we think it believes, and perhaps about whether its greatest recent leader is still as influential as once thought.
The Conservative Party is still often described as Margaret Thatcher’s party, beholden to her economic, social and foreign policy thinking. Thatcherism, in turn, can be defined as a form of neoliberalism – Thatcher openly praised and associated with neoliberal icons like Freidrich Hayek and Milton Friedman. And what is neoliberalism? In Never Let a Serious Crisis Go to Waste, Philip Mirowski argued that it was a belief that the market was endowed with awesome capacities to process information; thus, its decisions about the allocation of economic resources were not to be questioned. To my mind, it is a belief that the market is the most efficient and the most ethical distributor of resources. Alongside that is a belief that those the markets have given resources must be worthy of those resources, and those who have little have failed the markets (rather than the other way around).
Because neoliberals are so wedded to the market, they are intensely hostile to state-directed redistribution; Wolfgang Streeck described this as the preference for market justice over social justice. At most, neoliberalism seeks to reinforce the distributive patterns of the market, which means that the state tends to provide support to market winners and punish, or reduce transfers to, market losers. Thus, Osborne’s focus on aiding those with capital by reducing welfare spending on those without makes perfect neoliberal sense. His tax relief for savings accounts and government assistance for savers also tends to reinforce neoliberal thinking – as Florian Schui has noted, economic liberals tend to see personal savings as the main source of capital, and saving as reflective of a superior moral, and market-friendly, character. (Osborne does omit high-income savers from such relief, though.) Although Cameron often justifies Conservative austerity policies on the grounds of needing to cut the deficit inherited from Labour, many commentators have suggested that his real goal is limiting the state’s redistributive capacity.
This market-based ethics also marks Conservative political discourse. There is a strand in right-wing populist discourse which tends to identify “the people” with taxpayers, and “the other” with anyone who draws on state funds. Cameron and Osborne both espouse a discourse which identifies the Conservatives with “working people” and Labour with those on welfare. Put another way, the Tories are for those who do what’s expected of them by the free market, and Labour is for those who want to cheat by drawing in the state. This might be compared with Foucault’s observation about neoliberalism and its impetus to transform individuals into “entrepreneurs of oneself.” New Labour’s social policies often followed a similar logic,
So why the uproar over the 2016 Budget, and over in-work tax credits the year before? Osborne’s neoliberal project, with its attacks on welfare and its benefits for the wealthy, fit neoliberal discourse; they benefit those the market has decided to benefit and reduce the state’s role in redistributing income, while giving more income to the capital-generating classes and corporations that, in neoliberalism, drive all economic growth. What’s wrong with that?
It seems that the Conservatives’ Thatcherite project, or at least the government’s implementation of it, is running up against three major problems. The first may be elements of neoliberal ideology itself. As I noted above, there is a suggestion embedded in neoliberal thought that those who obey market discipline do deserve a degree of state help – hence Osborne’s help for savers or Help to Buy. This logic also applies to in-work tax credits; Milton Friedman helped inspire the American equivalent of the policy. In that case, the neoliberal concern for reinforcing market ethics collided with the neoliberal commitment to fiscal austerity, and the first won out. Similarly, the payments for the disabled are supposed to make them more independent and thus potentially more employable – thus, one could also justify them under a neoliberal logic. The Americans with Disabilities Act, a major piece of civil-rights legislation passed during the term of the first president Bush, was justified in part as a means to get people with disabilities off welfare and into work. New Labour argued for public spending as supporting employability as well.
The second problem is tactical. The Conservative Party has made a deliberate effort to occupy the centre ground, in what one might call an application of a “median-voter” logic. I argued that Osborne’s 2015 Budget was designed in large part to capture centrist votes from the flailing Lib Dems, and perhaps some Labour voters as well. Osborne’s embrace of a “living wage” is part of this strategy – he is seeking moderate or social-liberal voters – social liberal in the economic sense, in that they believe in state assistance to ensure equality of opportunity and at least a residual welfare state. Such manoeuvring has a long history on the right, going back to Bismarck; sticking with the German theme, it echoes Angela Merkel’s centrism, which includes adopting a minimum wage. In attacking in-work credits and PIP, Osborne may simply have alarmed Conservatives by making such a pronounced tactical error (similar to the objections posed to his “omnishambles Budget” of 2012).
The third problem may simply be that neoliberalism is not quite as hegemonic as we thought – or, perhaps, that it is retreating amidst the new conditions and distortions of the contemporary economy. No government implements an ideology in its pure form. David Harvey called neoliberalism a “utopian project” to restructure capitalism and “restore the power of economic elites,” but no utopia ever comes completely to fruition. Even Pinochet, who had no elections to win, backtracked and increased bank regulation after a crisis. Thatcher did not wholly abolish older ideas of social solidarity or social justice, even within her own party. Thatcher did not attempt to abolish Britain’s largest universal welfare institution, the NHS. The Conservative Party retains a “One Nation” tradition concerned about social welfare – one that David Cameron claims to be defending.
It may also be that neoliberalism no longer responds to the challenges of our time. Every dominant political and macroeconomic ideology reflects the events of its times. Keynesian demand management and state-led investment reflected the highly successful statist economies that won World War II. Neoliberalism grew out of increased export competition (which put downward pressure on wages), pronounced class conflict, falling returns on investment and the oil shocks of the 1970s. Increasingly, the main problems cited in public discourse about the economy are income inequality and social exclusion. Neoliberalism, of course, has nothing to say about this except that this is the market’s doing, and it is marvellous in our eyes. Unfortunately, increasingly large parts of various Western electorates no longer accept market justice. In some cases, the challenge comes from the left (Bernie Sanders, Jeremy Corbyn, Podemos), in others, from a radical right populism demanding a return to the closed borders and statist economy that benefitted many working and lower-middle class people. These social forces cannot be willed away by citing the moral superiority of free markets, and the widespread Conservative concern about the social justice of Osborne’s budgets may reflect the growing power of these anti-neoliberal alternatives.
The 2016 Budget crisis is not the death knell of neoliberalism, which has proven a remarkably resilient philosophy. What it does tell us is that its victory was never total, and perhaps cannot be total in a democracy under conditions of universal suffrage. It also tells us that, even where it is total, even the neoliberally inclined will retain some sense of responsibility to those who, like them, worship at the market’s altar.
Ben Margulies is a Postdoctoral Research Fellow on the ERC Diasporas Project at the University of Warwick.
Image: Steve Punter
