Is it time for free-marketeers to abandon the Conservative coalition?

You can call this government a lot of things: tax-grabbing, dirigiste, profligate. What you can’t call it is unconservative. Boris Johnson professes a remarkably conventional Tory creed: patriotic and paternalistic; pro-business and pro-spending. His approach would have been immediately recognisable to Disraeli, Baldwin, Churchill, Macmillan or Heath.

Margaret Thatcher was and remains the outlier. The idea that loyalty to her memory would one day be regarded as a measure of Tory orthodoxy would have surprised her every bit as much as her One Nation detractors. To the end, she saw herself as, in a sense, an opponent of her own government, a lonely radical struggling to get her reforms past a pessimistic and statist establishment. And she had a point. Her MPs put up with her while she was winning, but turned on her the moment she stumbled.

By then, of course, her remedies had been shown to work. Britain, which had had the slowest-growing economy in Western Europe in the 1970s, had the second-fastest in the 1980s (only Spain, coming back from a still lower place, grew faster). Even Labour had to accept that freer competition, lighter regulation and lower taxes made people better off. But neither Labour nor the Tory wets ever really grasped why Thatcherism worked. Their attitude to the lady’s economic legacy was like that of savage tribesmen towards an artefact bequeathed by a higher civilisation – respectful but uncomprehending.

Thatcher’s brand of Manchester liberalism never colonised the Conservative Party. At best, it formed a contingent alliance with mainstream Toryism – an unequal alliance, it should be added, for the free-marketeers were always the minority. Thatcher was like a mahout on the back of a massive elephant. The beast was moved by its own instincts – patriotism, religious faith, respect for hierarchy, distaste for indecency, unease about social change. A skilled rider could coax it, whisper in its vast ear, nudge it this way or that. But only up to a point. Thatcher knew better than to jab her goad too harshly. In every year that she was prime minister, for example, there was a net rise in public expenditure – although, overall, the economy grew faster than the government.

How did she come to scramble onto the shoulders of that great beast in the first place? After all, conservatism and liberalism had traditionally been the two opposed poles of our party system, mutually repellent down the centuries, whether as the Conservative and Liberal Parties, the Tories and the Whigs or even, in some ways, the Cavaliers and the Roundheads.

What pushed them together after three antagonistic centuries was the rise of socialism. Confronted at home with a Labour Party bent on expropriation, and abroad by the Red Army, conservatives and liberals buried their differences. In Western Europe, where there were proportional voting systems, they generally remained in separate and competing parties, though often as coalition partners. But in the Anglosphere, where first-past-the-post encouraged a two-party system, they had to find ways to combine.

In the United States, party identities had been as much about regional loyalties as anything else, but a more coherent Right began to take shape in the 1950s. The realignment was driven by William F Buckley, the brilliant, handsome, charismatic editor of the National Review, who believed that constitutionalists, patriots, libertarians, Christians and others must stand together against the Soviet menace. This notion became known as “fusionism” and, though it had its critics (the mighty conservative intellectual Russell Kirk used to argue that he had even less in common with libertarians than he had with socialists), it worked, paving the way for Ronald Reagan’s ascendancy.

Something similar happened in Britain at the same time. Ralph Harris, the founder of the Institute of Economic Affairs, told me shortly before he died that he and his fellow free-marketeers had faced a momentous decision after the obliteration of the Liberal Party in the 1950 election. Some had wanted to withdraw from politics, reading papers to each other at the Mont Pelerin Society and preserving the purity of their doctrines, like Irish monks painstakingly copying illuminated manuscripts through the Dark Ages. But Harris was not interested in ideas that could not be implemented. The cheerful pipe-smoker argued that freedom-lovers must seek to capture at least one of the two potential parties of government.

The Conservative Party of that era was patrician, imperialist and acquiescent in the creation of Attlee’s state monoliths. So Harris and his colleagues set to work convincing some of its up-and-coming MPs: Enoch Powell, Geoffrey Howe, Nick Ridley and, most consequentially, Keith Joseph, who became Thatcher’s John the Baptist. The British version of fusionism, mixing economic liberalism with cultural conservatism, proved every bit as electorally successful as the American. The Conservatives governed for 18 years.

Today, on both sides of the Atlantic, that alliance is fraying. Without the Red Menace to hold it in place, the compound is separating out into its constituent elements – and, as before, the liberals are by far the smaller. The speed with which US Republicans have moved from Reaganism to Trumpery, from laissez-faire to aggressive populism, from free trade to tariffs, is staggering.

We classical liberals were few enough before 2020. The median voter was always to our Left on economic issues and to our Right on cultural ones. As is often pointed out, the political centre of gravity in Britain is “fund the NHS, hang the paedos”.

The epidemic has made us even more of a minority. Around the world, people are more frightened and therefore more authoritarian. Week after week, as I railed on this page against the severity of the lockdown, I sensed that I was swimming against the current. I now have the same feeling when I argue for private enterprise and lower taxes.

Almost all the interventions now being decreed are popular. More money for the NHS and social care, fewer immigrants and higher wages, subsidies to keep us heated through the winter, nationalised railways, taxes on business – all poll well. It is only when their consequences become clear that the mood will turn; and even then, it will turn against the government as a whole rather than against the individual policies that caused the mess.

Higher expenditure means slower growth and therefore, in the long term, lower revenues. Higher wages without commensurate increases in productivity mean more inflation. More fuel subsidies mean a worse deficit and a slower recovery. Nationalised railways (have we already forgotten?) mean dirtier and less reliable trains. Taxes on business mean fewer jobs.

Even two years ago, I would have felt silly writing that last paragraph. Why repeat such obvious truths? But we have moved, in a stunningly short time, to a media climate in which it is considered good economics to decree higher wages, in the manner of some 1920s Latin American caudillo ordering double salaries for everyone.

Do we truly not understand where prices and incomes policies will lead? Some of us are old enough to remember the 1970s, but we seem relaxed about going through it all again – rising inflation, an energy crisis, nationalisations, even Abba. Perhaps we need, as before, to hit rock bottom before we reach for the right remedies.

Understandably, in the circumstances, some free-marketeers are wondering whether they should step aside and stop pretending to have anything in common with big government conservatives. Why implicate themselves in a crisis being caused by policies they fundamentally oppose?

The answer is that the logic of fusionism has not gone away. In the middle years of the twentieth century, conservatives and liberals were alike menaced by revolutionary socialism; today, they are alike menaced by the fanaticism of identity politics.

Then, the threat came from Soviet MiGs; today it comes from Chinese cyberattacks. In both cases, the Western civilisation that incubated the conservative and liberal traditions is in peril. For classical liberals to give up on the conservative coalition would be fundamentally self-indulgent. It would mean removing the last constraints on government, and ensuring that the debt and inflation crises are needlessly exacerbated. It would mean withdrawing into electoral irrelevance.

Perhaps voters are not yet in the mood for liberty. Perhaps we small government types are still at the Keith Joseph rather than the Margaret Thatcher stage. But when we do eventually turn things around, it will be as part of a broad alliance capable of winning and exercising power. We have no right to walk away now.