Conservative Party Economic Policy

From Heath in Opposition to Cameron in Coalition

R. Wade

• Publisher: Palgrave Macmillan
• Year: 2013
• ISBN:
  9781137295248
• Topic: Politics & International Relations
• Subtopic: Trade & Tariffs
• Index: Politics & International Relations

Covering the period from Ted Heath's assumption of the leadership of the Conservative Party through to the early years of the Coalition, this volume provides a detailed analysis of the Tory Party's Macroeconomic and Microeconomic Policy-Making over the past 50 years providing an historical context for the political and economic events of today.

1

Conservatism, the Conservative Party, and Its Political Economy

Any study of the Conservative Party’s making of economic policy this past half century needs to be placed in the context of the nature of conservatism and the implications for political economy that stem from such a body of political thought. Indeed, such is the importance of these issues that they require some exploration prior to the undertaking of a substantial empirical analysis. To navigate an area of public administration as complex and demanding as economic management, it is unsurprising that political parties of all hues have tended to rely on some sort of basic economic world view. The main thesis of this chapter is that the Conservative Party has, throughout its history, tended to rely on one of two general economic outlooks when making and implementing its economic policies.

It should be noted that throughout the chapter conservative in the intellectual sense of the word is given a lower-case c so as to distinguish it from the by no means perennially synonymous Conservative Party. The chapter first outlines some of the key insights which have tended to underpin all forms of recognisably conservative thought. The focus then moves to how most conservative economic thought can be categorised into one of two major strands: libertarianism and paternalism. I then explore the implications of these two outlooks for both microeconomic and macroeconomic policy making.

The fundamentals of British conservatism

An obvious problem with trying to set out the fundamentals of British conservatism (referred to simply as ‘conservatism’ from this point on) is the difficulty of espousing a set of firm principles to which conservatives at all times hold. Although thinkers of a conservative disposition can be traced back at least as far as Richard Hooker and the Elizabethan era (Quinton, 1978: 9–10), the intellectual origins of much post-Enlightenment conservative thought, with some justification, have been credited to Edmund Burke and in particular his epic denunciation of the French Revolution (Burke, 2009). But people looking for a distinct political programme in Burke’s writings will find themselves disappointed; indeed, the central message of his work was that distinct political programmes should be met with considerable scepticism.

Even contemporary conservatives who revere his legacy would certainly not seek to advocate for many of the causes championed by Burke. But he himself observed that a state without the means of change was without the means of its preservation, when he defended himself against charges of hypocrisy from those who noted his admiration for the 1688 Glorious Revolution and the American Revolution of 1775–83 (Burke, 2009: 21). Conservatives and conservatism have therefore tended to adapt themselves to changed circumstances, and it should not be taken as a sign of intellectual weakness or political opportunism that they frequently reassess their position as society evolves.

To the present-day conservative, the value of Burke’s work lies less in the specific causes he espoused (which are often archaic by today’s standards), than in the mind-set from which he considered the political problems of his day. As Michael Oakeshott (another luminary in the conservative canon) observed, conservatism is better considered as a disposition as opposed to a formal creed or doctrine (Oakeshott, 1991: 407). Rather than attempt to draw out a list of principles or policies that should be pursued under all circumstances, the conservative generally prefers to adapt his principles and proposals to circumstances. Conservatives also tend to claim that abstract ideas with metaphysical appeal may prove to have unexpected and often disastrous results if developed by reason alone into a political programme for implementation.

Oakeshott condemned those who sought to impose ideological blueprints on society with no consideration of how they might come unstuck in practice, pejoratively regarding such an undertaking as ‘rationalism in politics’ (Oakeshott, 1991). But this essentially pragmatic disposition does not, in isolation, get us far when considering the main tenets of conservatism. One can argue, however, that the unifying theme running through the works of Burke, Oakeshott, and numerous other conservative thinkers is a distinct conception of human nature. Frequently regarded as a pessimistic or realistic outlook depending on taste, the idea that human nature is both flawed and imperfectible is a near constant in conservative thought, whether religious or, as is now almost universally the case, secular.

A number of devout Christians have led the Conservative Party, including Lord Salisbury, Bonar Law, and Stanley Baldwin, and in the eighteenth century, the Anglican Church was described by one anonymous wit as ‘the Tory Party at prayer’. Christian thought has also played a role in conservative thinking and, as noted above, Hooker has been cited as an early conservative thinker. The Christian doctrine of original sin and the biblical tale of the fall of man have provided a religious foundation for many conservative thinkers to view mankind as flawed by its very nature, and this has no doubt influenced the conservative outlook. Conservatives, however, have tended to avoid using religious arguments to justify their economic views, with only occasional exceptions to this, such as the arguments contained in Hugh Cecil’s Conservatism (1912). The religious strand of conservatism is therefore of limited interest in the context of this chapter, and it is the secular tradition of conservative thought that is henceforth its focus.

In part reflecting the decline of religion in British society, most contemporary conservative thought is secular in any case. It has nevertheless maintained a pessimistic outlook on human nature without invoking Christian theology. The introduction of a conservative thinker who focuses specifically on the intellectual dimension of human imperfectability is helpful at this point. Anthony Quinton (1978: 16) highlights the proposition of intellectual imperfection as a foundation on which much conservative thought is erected. The basic insight is that the complexity of social relations are such that the rational faculties of the human mind are too weak to fully comprehend them, and that abstract reasoning should therefore not be relied on in the sphere of political activity. Quinton therefore shares a common position with Oakeshott (1991: 5–42) and his critique of political rationalism.

Quinton is also of some interest as he is one of the few political philosophers to have attempted to define specific conservative principles. The first of these, political scepticism, asserts that political wisdom is to be found in the accumulated experiences of the community as a whole rather than in the abstract speculations of isolated thinkers. The second, traditionalism, ensures that the conservative is hostile to sudden change and sympathetic to established customs and institutions. The third, organicism, leads conservatives to view society as an organic whole, defined by inherited customs and institutions, rather than as a mere amalgamation of individuals that only constitute the sum of their parts (Quinton, 1978: 16–17).

It can be argued that Quinton’s attempt to expound a set of conservative principles is inherently misguided, since by its very nature conservatism cannot be reduced in such a manner. But it can also be seen as a valiant attempt, whether flawed or otherwise, to abstract the essence from the conservative ‘disposition,’ as defined by Oakeshott. It does not seek to prescribe any specific political agenda and it is probable that any individual who regarded himself or herself as a ‘Quintonian’ conservative would come to radically different policy positions when considering societies that differ substantially.

As befits a political disposition that values the wisdom of knowledge accumulated across time, the conservative canon is extensive and the number of important contributors is large. This section has barely scratched at the surface of conservative thought, a subject that could easily fill a multivolume work. But it has nevertheless laid down some of the key foundations that usually underlie the thought processes of conservatives and it has made some important points that will prove significant as this chapter progresses.

These include Oakeshott’s claim that conservatism in its British form can generally be regarded as a disposition rather than a fixed programme or doctrine. Its epistemology can be regarded as a form of scepticism, and this helps to explain why conservatives have tended to regard David Hume as a philosopher worthy of admiration (Gilmour, 1978: 53–8). This scepticism is usually derived from a pessimistic view of man’s capacity for reasoning and, needless to say, conservatives tend to be hostile towards attempts to apply schemes to society based on abstract reasoning alone. This also makes conservatives sceptical of excessive change, although some willingness to accept and adapt to gradual change distinguishes the conservative from the pure reactionary.

The ongoing debate as to whether conservatism should be regarded as an ideology need not concern us here. What is certainly true, however, is that, partly due to the adaptive nature of conservatism, the policies advocated by conservatives (and, indeed, Conservatives) have varied hugely across time. This chapter is focused principally on the political economy of the Conservative Party; with this in mind, the next section considers a vitally important question concerning conservative thought and political economy.

Are there two conservatisms?

If one takes as given the claim that conservatism is better described as a disposition than a prescriptive political programme, is it possible that two individuals, both of a conservative outlook, can arrive at two radically different policy positions on a single issue? Furthermore, can two conservatives come to radically different policy programmes? These are difficult propositions to test empirically, given the problems of satisfactorily measuring an innate conservative disposition, but the issue is certainly worth exploring.

The point relating to how conservatives can come to separate conclusions on an individual matter due to differences in their past experiences has particular resonance to the Conservative Party and to the evolution of the thinking of its members on economic policy. Green (2002: 237) highlights this when considering why those Conservatives who entered Parliament in 1950 tended to be reluctant to challenge the political economy established by the Attlee government, whereas those first elected in 1959 were, generally speaking, more enthusiastic about revising the post-war settlement. Whereas those first elected in 1950 had vivid recollections of the 1945 electoral defeat and the alleged explanation for this in the ‘hungry thirties’ period of Conservative Party–dominated government, those who entered Parliament in 1959 did so in a climate that questioned the achievements of post-war British governments and in which grass-roots Conservatives were increasingly frustrated with the post-war settlement. Given this, we should be unsurprised that two distinct traditions of political economy have tended to coexist in the Conservative Party.

The classic exposition of this ‘dual inheritance’ was provided by W. H. Greenleaf (1983: 187–346). His distinction between libertarian and paternalist conservatives is useful, although its limitations must be acknowledged given the tendency of the two positions to overlap, with most Tories simultaneously holding libertarian views on some matters and paternalist ones on others. Greenleaf’s (1983: 196–262) outlining of paternalist conservatism highlights how those who subscribe to it have tended to find inspiration in the politics of Benjamin Disraeli and the association of his name with reforming measures designed to ensure that Britain did not fracture irreversibly into the ‘two nations’ of rich and poor.

Disraelian ‘one nation conservatism’ was best expressed intellectually and emotionally through Disraeli’s novels, most notably Sybil (Disraeli, 1927) and Coningsby (Disraeli, 1901). Its practical expression came through the reforming measures of the 1874–80 Conservative government in which Disraeli was prime minister. These measures included the Sale of Food and Drugs Act, the Public Health Act, the Artisans’ Dwellings Act, the Rivers’ Pollution Act, and a series of Factory Acts (O’Hara, 2005: 75). It should be noted that the practical realisation of Disraeli’s commitment to social reform has sometimes been exaggerated by his paternalist admirers and that the political economy pursued by his governments did not differ markedly from that established by earlier ministries, most notably the 1841–46 Peel government and Liberal administration under Gladstone that held office between 1868 and 1874 (Smith, 1967). In any case, it was Disraeli’s Home Secretary, R. A. Cross, who was principally responsible for much of this legislation, rather than Disraeli himself (Blake, 1966: 555–6).

By contrast, those conservatives in the libertarian tradition have tended to be far less sceptical of the consequences of a market-based economy and more reluctant to interfere in its basic mechanisms. Just as the paternalist strand of conservatism enjoys a distinct ‘hall of fame’ of twentieth-century thinkers and practitioners, including Joseph Chamberlain, F. E. Smith, Arthur Steel-Maitland, Neville Chamberlain, Quintion Hogg, and Harold Macmillan, so the libertarian strand of thought has been represented by luminaries including Hugh Cecil, Ernest Benn, Enoch Powell, Angus Maude, and Keith Joseph. Indeed, with his effusive praise of Adam Smith’s economic theories, it can be argued that the libertarian strand of conservatism dates back at least as far as Edmund Burke (Greenleaf, 1983: 266).

Green (2002: 241) claims that Greenleaf’s distinction between libertarian and paternalist conservatism focuses excessively on conservative attitudes to the state and goes on to offer an alternative model in which the primary emphasis is on conservative attitudes towards the effectiveness or otherwise of the basic agencies of civil society. These non-state agencies, whether sports clubs, charities, churches, trade unions, or otherwise, play the role of Burke’s famous ‘little platoons’ and, through their activities and interactions, allow civil society as a whole to properly function. From this perspective, the determining factor as to whether a conservative will take a libertarian or paternalist stance on a particular matter is his or her perception of how effectively the existing agencies of civil society are performing their social roles.

Although this framework can be applied to any part of civil society, it is the economic dimension that most concerns us, given the focus of this book; we nevertheless accept that the economic dimension overlaps considerably with other aspects of civil society. The basic civil society agents in a market economy are synonymous with the basic economic agents defined in standard microeconomic theory. The first of these is the individual, whether as a consumer, capital owner, or wage earner. Alongside individuals are various collectives, most notably firms and trade unions. The extent to which a conservative is sympathetic to state intervention in market activity is likely to depend on how he or she views these agents in relation to their intended role of securing the economic and social good.

The value of Green’s model is that it can potentially explain how conservatives come to radically different conclusions as to the scope for state intervention within civil society as a whole and in the market economy in particular. It also largely renders redundant allegations by libertarian conservatives that paternalists are in some way quasi-socialists, as well as rendering redundant the counter-accusation that libertarian conservatives are little more than nineteenth-century liberals. If a conservative’s attitude to state intervention is based on his or her perception of the social effectiveness of civil society’s institutions, then neither strongly libertarian nor strongly paternalist views on the role of the state can necessarily be dismissed as unconservative.

The trade unions provide an illuminating example (Green, 2002: 270–2). Free societies usually allow labour collectivisation to at least some extent, and the outright banning of trade unions tends to be a feature of authoritarian or totalitarian states such as Nazi Germany and the Soviet Union. A well-functioning labour movement is therefore a common feature of a healthy civil society, and it would be difficult to identify a genuine conservative who advocated the outright banning of collectivised labour.

In the early post-war period, the Conservative Party’s policy makers argued that the greater prominence of the trade union movement should be respected (Conservative Central Office, 1947: 9); the legal framework in which the unions operated remained largely unchanged under the 1951–64 Tory governments. But as industrial relations became increasingly fraught from the 1950s onwards, many conservatives began to advocate reform of trade union law. Such advocates were not, however, limited to those in the party who could be regarded as strongly libertarian and therefore likely to be hostile to trade union activity, as was indicated by the support of the usually paternalistic Edward Heath for trade union reform (Heath, 1998: 279–81). By the 1970s, even those who were regarded as ultra-paternalist Tories had spoken damningly of trade union conduct (Gilmour, 1978: 236–8).

Conservative disapproval of trade union activity from the 1950s onwards can be interpreted as being based on a view that the trade unions had ceased to play their appropriate role within civil society and had instead become an active threat to it. Reform of industrial relations therefore became a Conservative Party priority. The issues surrounding Tory policy towards the trade unions are dealt with more extensively in Chapter 3, but this example indicates the value of Green’s framework.

The main drawback of the Green model is that it hinges on the definition of the ‘social good’ that civil society’s agencies are supposed to facilitate. Such a concept is inherently subjective. Just what constitutes a conservative definition of the social good is never made clear by Green, and it is difficult to confront this issue without reverting to the sort of abstract reasoning that conservatives instinctively distrust. The issue becomes even more complicated when one considers the fact that within the context of a market economy, the economic good and the social good may conflict for those of an outlook that might be conservative. An obvious example of this is worker migration, where the economic good may demand the free movement of labour, but the social good may demand a limit to it so as to preserve the continuity, stability, and the traditions of the community.

There is another way to consider how conservatives come to conclusions about the economic and social good along the lines suggested by Greenleaf’s distinction between paternalist and libertarian conservatism. This comes through consideration of the conservative attitude to inequality. Both libertarian conservatives such as Keith Joseph (Joseph and Sumption, 1979) and pate...

Table of contents

• Cover
• Title
• Introduction
• 1  Conservatism, the Conservative Party, and Its Political Economy
• 2  The Conservative Party and Its Microeconomic Policies, 196497
• 3  The Conservative Party and the Labour Market, 196497
• 4  The Conservative Party and Its Macroeconomic Policies, 196497
• 5  The Conservative Party and the Economy since 1997
• 6  Conclusions
• List of Sources
• Index