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Where did it all go wrong for Conservative economics?

We must look back before we can look forwards

Artillery Row

Where did it all go wrong for the Conservative Party?

Some say it was 23 January 2013, when David Cameron promised an in/out referendum on the European Union. Whilst leaving the European Union has created divisions, the UK’s relatively poor economic performance significantly pre-dates Brexit. Take your pick of statistics. Here is probably the one that matters most for working people: according to the World Bank, UK GDP per capita grew by just 25 per cent in real terms between 1993 and 2020, compared to 108 per cent in the twenty-seven years preceding the creation of the European Union. 

Others point to 3 May 1979 and the election of Margaret Thatcher. Again, we can debate the merits and flaws of Thatcher’s economic programme, but as respected economic historian Nicholas Crafts has pointed out, the UK went from GDP per capita (in real terms) 38 per cent higher than Germany and 25 per cent higher than France in 1950, to GDP per capita 16 per cent lower than Germany and 11 per cent lower than France by 1979. The weaknesses in the UK economy were there long before Thatcher took office.

For my money, the problems really began on 5 October 1951. This was when Clement Attlee called an early general election, partly to assuage concerns about a change of government whilst the King was away on a Commonwealth Tour (a tour, in the end, he was destined not to go on). In this election, Winston Churchill ran a manifesto to “Set the People Free”. It was a manifesto which inspired a certain Margaret Roberts to run for Parliament for the first time. 

Economic policy was not Churchill’s strong point

Churchill was an incredible war leader and a great international statesman. Economic policy was not his strong point, however. Churchill had led Britain back to the Gold Standard with disastrous results. He was also an unrepentant free trader, despite the fact the whole world had put up protectionist tariffs against imports, leaving Britain dangerously out of line with global trading conditions. Fundamentally, on the economy, Churchill was an orthodox liberal. It is his outlook which has shaped the Conservative Party’s economic philosophy ever since. 

As writer Edmund Fawcett noted in his recent book on conservatism, conservatives have “coasted … on a right-wing economic liberalism that appeared indifferent to local and national needs and that was notably vulnerable to economic crisis”. “The mainstream right”, he went on, “had not translated post-1945 party-political success into a distinctive conservative orthodoxy.” 

What all this has meant is that with every crisis in the UK economy, the Conservative Party approached problems with the conventional liberal economic toolbox. Dangerously, this orthodoxy obscured the importance of the very foundations of economic prosperity, the social bonds that bind people together and encourage long-term sustainable growth rather than debt-fuelled bubbles.

Fortunately, a group of Conservative MPs, marshalled by the New Social Covenant Unit, appear to have understood the need for the development of a distinct conservative economic vision that corrects decades of liberal orthodoxy.

Social Capitalism is a short but punchy pamphlet which weaves together the best economic thinking on how economies grow. It makes the case for why we need to replenish our social capital and strengthen national identity if we want to get our economy moving forward. 

The Conservative Party can extricate itself from the golden cage of neoliberalism

Why do social capital and national identity matter? Simply put, people who trust each other and love their country are more likely to take risks, invest and take the difficult decisions which are required to make businesses grow and economies prosper. The more fractured our society becomes, the harder it is to achieve economic growth. As the pamphlet lays out, developed economies which see higher levels of investment and higher levels of GDP per capita growth tend to be those with higher levels of social capital and a greater sense of national identity. This is most obviously true with the Scandinavian economies, but it is also true of our larger competitors. France, Germany and the United States all report higher levels of national identity and, as a consequence, higher levels of investment and productivity which in turn raise living standards. If we had kept pace with these competitors, households in Britain would be thousands of pounds a year better off. 

We also know social capital and national identity are critical to economic performance from Britain’s own history. The industrial revolution and the subsequent decades of economic growth were driven by high levels of social capital and the building of strong national institutions in the 17th, 18th and 19th centuries. Liberals and socialists tend to take these institutions for granted. In fact, liberals actively seek to undermine these national institutions because they conflict with their own ideas of freedom. Conservatives, however, have traditionally appreciated their importance. 

This is not just abstract theory. Throughout the pamphlet are dozens of examples and practical policies which can turn conservative ideas into reality. Examples include the Wigan Deal, where local people took responsibility with their local council to transform local services, improving lives and saving the taxpayer money. Proposals involve using unclaimed money from dormant bank accounts and insurance policies to invest in social infrastructure through a Community Wealth Fund, growing a new generation of social enterprises to invest in local economies. Conservative ideas for how to grow the economy are still out there, even if the party has failed to pay attention to them. 

Social Capitalism provides a key with which the Conservative Party can extricate itself from the golden cage of neoliberalism. It also provides a genuinely popular programme for economic reform which can deliver the Conservative’s mission to “level up the country” and bring people together. It was conservative values of family, community and nation that created the platform of unprecedented levels of human prosperity since the 18th century. Social Capitalism is a call to revive those conservative values and develop a distinctly conservative vision for the economy. We need it now more than ever.

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