As Britain heads into a General Election May 5, the question naturally arises for supporters of the “Bear’s Lair” free market, sound economy approach: do we want the Tories (Britain’s “Conservative Party”) to win this time? It’s a surprisingly close call.
Traditionally, if you were a British voter supporting free markets and smaller government, you voted Tory. The Labor Party until 1995 was committed by Clause 4 of its 1918 constitution to “the common ownership of the means of production, distribution, and exchange.” It meant it, too, nationalizing the Bank of England, railways, coal, steel and road transport in 1945-51, steel again in 1964-70 and most of the British automobile industry in 1974-79.
The Liberal party, before its 1988 merger with the Social Democrats, had been rather more attractive for “Bear’s Lair” – ites. In 1959 for example the Tory Prime Minister Harold Macmillan offered a leftist Toryism (he had proposed the abolition of the Stock Exchange in his 1938 book “The Middle Way”) and was opposed by the attractive libertarian small-government Jo Grimond for the Liberals. In the two 1974 elections the center-left Jeremy Thorpe for the Liberals was less attractive both politically and personally than Grimond. Nevertheless he was still preferable to the nominally Tory but highly corporatist and Euro-fanatic Edward Heath, who in his 1970-74 term of office had run the British economy into the ground, and fought both 1974 elections on his support for state wage and price controls.
Since the creation of the Liberal Democrats in 1988 the party has moved left, and today is committed to higher levels of public spending and taxation than Labor, together with an altogether unattractive dedication to the social and foreign policies favored by the sillier end of the “chattering classes.” Not an attractive option, therefore and in some circumstances a dangerous one.
Even when the Tory candidate and program are preferable to the alternatives, there may be sound tactical reasons for a “Bear’s Lair”-ite not to vote Tory. In 1992, it still appeared that John Major was largely a Thatcherite, but voting for him validated the internal party coup that had ousted Margaret Thatcher 18 months earlier. Conversely, Neil Kinnock, the Labor leader, was a worn leftist party hack who would be most unlikely to produce the kind of Labor revival that Tony Blair has engineered. Hence a vote for Kinnock in 1992 made sense.
This time, the policy differences between the parties are modest, but the Tories are on the right side of them. However, the tactical issues involved in voting Tory are complex, both in terms of the economy’s likely performance over the next 5 years and of the internal governance of the Conservative party.
In economic policy, both parties are committed in theory to the free market, a change from the Labor governments of 1945-79, which weren’t. The Conservatives favor a somewhat lower level of public spending than Labor, who has increased spending to the point where the smallest recession or public sector crisis is likely to produce state budget funding difficulties, and a sharp increase in the cost of public debt. However, as Macmillan, Heath and Major demonstrated, a Conservative government in power needs to be very committed indeed to lower public spending in order to get it. A new Tory government without specialist financial expertise will be faced with the solid phalanx of the Civil Service, generally strongly Social Democrat if only because their own incomes and power depend upon a thriving and expanding public sector.
The necessary level of commitment doesn’t exist in today’s Tory leadership, as was demonstrated by the Howard Flight incident. Flight, after a highly successful career in the City, had entered politics in 1997 and had been made Shadow Chief Secretary of the Treasury in 2001 by the then Tory leader Iain Duncan Smith. As such, he was the first cabinet-rank Tory with top level financial experience since Oliver Lyttleton in the early 1950s, and offered hope of a fresh and radical approach to government finances should the Tories achieve power.
However, after Michael Howard achieved the Tory leadership in an internal party coup in 2003, he first fired Flight from the Shadow Cabinet then forced Flight’s constituency association in Arundel and South Downs (a very safe seat) to remove him as its candidate. Flight’s nominal offense had been to claim in a speech that a Tory government would be more committed to cutting public spending than official party policy indicated.
The incident demonstrated a severe flaw of character in Howard, in that his biggest rhetorical guns always appear to be trained against his own side. (The Tories had done unexpectedly badly in the European election in June 2004 after Howard had repeatedly denounced the UK Independence Party, thus increasing that fringe party’s strength among those natural Tory voters who disliked the EU but after experience of the Heath and Major governments didn’t trust the Tories to oppose its remorseless expansion.) It also demonstrated an appalling timidity in backing the party’s core beliefs, which bodes ill for Tory performance in government should the party win the election.
On the other side, the economic dangers of a further 4-5 years of Labor are significant but not overwhelming. Since the budget deficit is already so high, it is likely that significant further spending would result in a financial crisis similar to that of 1976, forcing Labor to economize. Blair has committed to a referendum on the EU constitution, which the pro-EU forces are unlikely to win, so the danger of further integration with Euro-sclerosis is also modest. Constitutionally, Blair has done considerable damage, abolishing the House of Lords, imposing new layers of government in Scotland and Wales and attempting to impose them on the English regions (he was defeated in the North-East by a huge majority in a referendum.) At this stage, absent a referendum win for Europhilia, there’s not much more he can do.
Laxity on immigration and policing is already so unpopular that both are major Tory issues; hence Labor is likely to modify its “politically correct” policies in both areas. A reduction in Labor’s overwhelming majority would certainly be desirable, to remove any temptations to extremism, but it’s not clear that a re-elected Labor government with a majority of under 100 would be particularly damaging, compared to a Tory alternative that is unlikely to be usefully radical.
Turning to tactical questions, a more severe danger to “Bear’s Lair” -ites than a moderate Labor majority is a “hung parliament” with no majority, perhaps combined with an increase in Liberal Democrat representation. In such a case, Labor would ally with the Liberal Democrats, whose price for inclusion (apart from any policy follies) would be to alter the British electoral system to proportional representation.
Proportional Representation, used in Italy from 1945-93, produces parliamentary seats for each party proportionate to their voting strength, instead of by a “first past the post” election in each constituency. It would thus increase Liberal Democrat representation, but also produce seats for the National Front, the Socialist Workers and other unattractive fringe parties. As demonstrated in Italy, under a proportional representation system it would be almost impossible for a party to achieve a majority on its own, so all governments would be formed by horse-trading within the political class, a sure fount of corruption and pork-barrel spending. Such a system would also, by nominating candidates through centralized party lists, increase the control of party apparatchiks.
A second tactical question is the likely performance of the British economy, since governments are inevitably blamed for economic difficulties that occur on their watch. Here the current situation appears a poisoned chalice. While British monetary policy has been less excessively accommodating than in the United States or even the Euro zone, it has combined with a flood of world liquidity to produce the usual British disease: a house price bubble, as housing in Britain fills the middle-class speculation role that NASDAQ does in the United States. In terms of affordability, house prices in London and the South East are now approximately twice their long term equilibrium level, far higher than in 1988-90, and thus are likely over the next decade to fall towards it, either through a house price collapse or through a lengthy period of retail price inflation unmatched by house price rises.
Either way, this will be heavily deflationary on the economy as a whole, and will produce squawks of outrage from the metropolitan elite, in the media and elsewhere, whose fortunes are most closely affected by it. Combine it with public finances already heavily in deficit, and you have a recipe for a lengthy financial crisis in which living standards plunge. If this prognostication is correct, 2005 is a good election to lose!
A further tactical question arises from the internal power dynamics of the Tory party. Winning elections, especially doing so unexpectedly, strengthens the internal party position of the winner – that’s why John Major’s win in 1992, which turned out to be a victory for the party’s left, was disastrous for the Thatcherites, who’d had a pretty good run during the 1980s.
In this case, an election victory would validate the internal party coup that removed the rightist Duncan Smith, and would validate the leadership of Howard, whose supporters tend to be on the left of the party. In addition, the Flight affair has raised a very important constitutional question.
In a democracy, political parties are supposed to represent the views of a substantial bloc of the population and then compete for power. This is best done through party membership. The politically committed become members of the party, and then have the right to select MPs and ideally also have a voice in the selection of the party leader. If the local MP is attractive to local party members, they will work harder for the party, increase its support and thereby increase its chance of winning elections – the system is thus self-correcting.
The alternative system, whereby party apparatchiks select the leader and the potential MPs, is dangerous because the apparatchiks have their own belief system, which may well become divorced from that of the party membership, thus producing a party unrepresentative of the views of its members. If views on important matters held by a majority of the public are unable to find representation among the established parties, democracy is endangered.
On capital punishment, the public was frozen out 40 years ago. Capital punishment in Britain is still supported by a majority of the electorate, but there is no chance of its return because pro-hanging views have no political representation.
On Europe, immigration and policing, on all of which the metropolitan elite has views far to the left of the majority of electors, party apparatchik control would marginalize the views of the electorate on issues which, unlike capital punishment, are to them of high importance. In Germany’s Weimar Republic, this led to the rise of Hitler; it is not fanciful to suppose that some almost equally unpleasant response could emerge in Britain.
The William Hague system for selecting the Tory party leader, first used in 2001, is an important instrument by which the leadership can be aligned with the views of party members. In 2001 it produced Duncan Smith, who ran quite well in opinion polls but was forced out of the leadership by an apparatchik/media conspiracy without ever being allowed to fight an election.
The party apparatchiks, having secured the leadership, now wish to perpetuate their control by giving themselves the power to deselect MPs who disagree with them, as in the Flight case. Their ability to do so was enhanced by 1998 Blair government legislation which provided for parliamentary candidate nomination papers to be signed by the central party apparatus (as distinct from by the local party association, as had previously been the case) – yet another Blair blow to the British constitution that passed unnoticed at the time.
To prevent apparatchik control, and restore the democracy of Britain’s institutions, the Tory party needs to have another leadership election, in which the party members are fully involved as in 2001, and to institute party rules that cement the control of local parties over candidate selection and de-selection, other than in cases of severe financial or moral malfeasance. Naturally, such reforms are more likely if the Tories lose the election than if they win it. However, the Flight case demonstrates that without them, Tory party policy may quickly drift light-years away from its roots, and from the beliefs of the party’s supporters. This would not only endanger Britain’s democracy, but also its economy, since professional politicians tend to be excessively comfortable with Big Government.
Hence reforming the Tory party’s constitution is of more long term importance than the result of any one election, particularly an election where the benefits of winning are so doubtful.
Add it all up, and where’s the bottom line?
— A Tory landslide majority would cement Howard in the party leadership, but would also be a resounding win for Tory principles over Labor ones, and would give the incoming government a huge moral authority, making it difficult for it to backslide towards statism. From the current opinion polls, this outcome is very unlikely.
— A small Tory majority would not bring the party much moral authority, but would cement in place the anti-democratic developments of the 2003 leadership election and the Flight case. A Tory government which entered power already compromising with the left would be likely to do more harm than good, particularly if economic circumstances were difficult.
— A “hung parliament” would be a huge gamble. On the one hand, if the Liberal Democrats had done well, it might enable them to bring in proportional representation, thus eliminating forever the chance of a majority Tory government and ceding control of policy entirely to professional politicians. On the other hand, a weak Lib/Lab coalition, particularly if the Liberal Democrats had done badly, might not be able to bring in proportional representation, but would be left with responsibility for a deteriorating economy. If the Tories then used their absence from government to select a new leader and reform candidate selection, the result might be a big and satisfactory Tory majority in 2-3 years time.
— A large Labor majority, along the lines of 2001’s result, would remove Michael Howard but risks the possibility that the Liberal Democrats would do well enough to become the main opposition, thus eliminating the Tories from power forever. This would be especially likely if Tory party demoralization was combined with an internal party struggle won by the apparatchiks.
— The best reasonably probable result is a small Labor majority, the smaller the better, provided it doesn’t result in a Lib/Lab pact (about 6-10 overall would be ideal.) This would give the Tories 1-2 years to reform the leadership and party structure, at the end of which an economic downturn and adverse by-elections would have removed the Labor government’s overall majority. The resulting Lib/Lab coalition would then be unpopular and have very little authority. A repeat of 1974-79, in other words, which proved in the long run to be a good period for the gestation of “Bear’s Lair” economic policies.
As I said, it’s complicated!
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)
This article originally appeared on United Press International.