The Bear’s Lair: Britain’s Overton Window must reopen to Liverpool

Now that the brave British have voted by a small majority to exit the European Union, they need a new philosophy of government. To get one, they must think more broadly, open the Overton Window of permissible discourse beyond the spendthrift Keynesian globalism of the immediate past, the hard-left socialism of Jeremy Corbyn, the social democracy of the 20th Century and the Whiggery/Liberalism of the 19th Century. They must include in their consideration the philosophy against which the Overton Window has been shut for over 150 years, the most successful philosophy ever adopted in British government: the “original definition” Conservatism of Robert Banks Jenkinson, 2nd Earl of Liverpool (1770-1828).

The Overton Window, a term invented by Joseph P. Overton (1960-2003), is the range of ideas the public finds acceptable. Propose ideas within the Window, and you will be taken seriously, if not universally followed. Propose ideas from beyond the Window and you will be treated as at best an eccentric, at worst a dangerous lunatic and a threat to political order.

For Britain to leave the European Union, which it had accepted by a big referendum majority in 1975, was for many years an idea outside the Overton Window. It was first brought within the Overton Window by Margaret Thatcher’s Bruges Speech of 1988. John Major attempted to exclude it through his refusal to hold a referendum on the 1992 Maastricht Treaty (which accordingly lacked democratic legitimacy, though it would have gained it 24 years late by a “Remain” vote last week.) That attempt produced turmoil within Major’s government, and a decade and a half in the wilderness, until David Cameron brought Brexit back within the Overton Window by agreeing to this referendum.

The Overton Window can change quite rapidly over time. Mild racism, homophobia and capital punishment were all within the Overton Window in 1950s Britain; they are clearly not within it today. Austrian economics was not within the Overton Window in 1945-79 until Keith Joseph and Margaret Thatcher put it there with their patronage of Friedrich Hayek. It was slipping out of the Overton Window after Thatcher left in 1990, and has clearly left it since the 2008 financial crisis. Now the ideas that have governed Britain since 1992 have been voted down, and other principles must be found (especially as current monetary policy is on the point of collapse.) I am suggesting that the Overton Window from which policies will be chosen needs to expand, to include those of a highly successful British statesman dead nearly 200 years.

Liverpool was prime minister for 15 years, during which he (i) organized victory in the Napoleonic Wars, (ii) managed the peace settlement that followed (with his colleague Robert Stewart, Lord Castlereagh (1769-1822)), (iii) directed Britain’s economy through the most difficult formative years of the Industrial Revolution, (iv) brought down without default or inflation the highest debt level ever incurred by the British government, (v) designed two versions of the “Corn Laws” that were to determine British trade policy for the next generation, (vi) took Britain back on the Gold Standard against strong opposition and (vii) with his Home Secretary Robert Peel (1788-1850) ended with a vigorous period of social reform. The philosophy by which he governed was in the January 1830 Quarterly Review defined as “Conservatism” and thus deserves to be honored as the original definition of that much-used term. He was unquestionably in the very top tier of British prime ministers.

And he is today almost forgotten, with no full-scale biography written since 1868. The “Conservatism” by which he governed disappeared from the Overton Window of British politics remarkably quickly. The Reform Act of 1832 and the Whig governments that followed diminished its salience, but its disappearance was caused by Peel, who adopted the term “Conservative” for a party he led in a strongly Whiggish direction. Then the young Benjamin Disraeli (1804-1881) defined Liverpool memorably as the “Arch-Mediocrity” in a best-selling novel “Coningsby” in 1844. Peel repealed Liverpool’s Corn Laws in 1846 and once Disraeli had ditched the theoretical policy of reviving them in 1852, Liverpool’s governing ideas had been relegated to the margins of political discourse, so much so that all modern histories of the Conservative Party start with Peel and Disraeli, completely neglecting their much more successful predecessor.

This now needs to be reversed. Liverpool operated with a Parliament chosen on a pre-democratic franchise (as did all British statesmen before 1928) but unlike eighteenth century statesmen, who could govern by patronage, he was fully subject to the tides of public opinion. The power of patronage had been greatly reduced by successive “Economical Reform” initiatives after 1780, while the first election determined by a surge of mass public opinion was the Duke of Portland’s landslide victory of 1807, caused by mass opposition to Catholic Emancipation. Liverpool himself won four clear majorities at General Elections, a track record unmatched by any other British leader, before or since. Thus Liverpool’s ideas were tested by popular electoral success and may well be relevant to our own time.

The most important principle of Liverpool’s government that we must revive is sound money. Liverpool, against opposition from the Whigs and Nathan Rothschild, took Britain back onto the Gold Standard in 1819 at the pre-1797 parity, even though this caused a deflation in prices of some 40% and a corresponding double-dip depression. His government was a period of high real interest rates; it also led to a period in the 1820s of unprecedented economic growth and widespread prosperity. Liverpool’s concern for the integrity of the currency, his toleration of high interest rates and his contempt for speculation would all be highly beneficial economic principles today. Needless to say the Bank of England under the feeble Mark Carney has pursued the opposite policy; it needs to be reformed forthwith.

A second Liverpool principle that would be immensely beneficial today is that of real budgetary austerity. In 1815, Britain’s government debt was 250% of GDP, as high as in 1945 (or as Japan’s today). Unlike Hugh Dalton after 1945, Liverpool did not attempt to bring this down through inflation; he brought it down through rigorous government economy, balancing the budget in 1819, only four years after the war ended. As economic growth resumed in the 1820s, the debt to GDP ratio dropped sharply, and Liverpool’s courage in the austerity of 1816-19 produced stable finances and prosperity for the next century. George Osborne’s much trumpeted “austerity” has left the public sector deficit at around 3.5% of GDP, eight years after the financial crisis, in spite of a much lower debt to GDP ratio and much lower interest rates. Several years’ application of this Liverpool approach is essential to stabilize Britain’s finances.

A third Liverpool principle applies in foreign policy (where he was a close mentor of his friend and colleague Castlereagh). The post-1815 settlement propounded a Quadruple/Holy Alliance, which would intervene in foreign countries when their governments were de-stabilized, to prop up the regime that was under threat — the principle was codified in the 1820 Troppau Protocol. Unlike in domestic policy, Liverpool’s foreign policy principles were compromised in his last years after the willful George Canning (1770-1827) replaced Castlereagh at the Foreign Office in 1822. The Liverpool/Castlereagh policy operated on the opposite principle from the 2003 intervention in Iraq, the 2011 intervention in Libya and the proposed NATO intervention in Syria; by quelling regime change it minimized rather than maximized chaos. It could thus usefully be re-adopted today.

A fourth Liverpool philosophy was best expressed by Castlereagh in 1821, after the economy had turned up: “I am grown as popular today as I was unpopular formerly, and of the two, unpopularity is the more convenient and gentlemanlike.” Like modern statesmen, Liverpool and Castlereagh had to live with the vagaries of public opinion; unlike modern statesmen, they believed that their objective was to get the policy correct; whether or not the public supported it was secondary.

Finally, Liverpool was a moderate protectionist on trade, reducing duties once he could do so after 1820. He recognized both the revenue benefits of tariffs and the economic benefits of free trade. He did not however believe in the free movement of labor, understanding that the immigration of the unskilled suppressed domestic wage rates and that the emigration of the highly skilled took valuable British intellectual property overseas. The technological conditions of world trade have changed unimaginably since Liverpool’s time, but his central principles remain valid.

The sheer efficiency and knowledgeability of Liverpool’s government would also be useful if applied today; as Asa Briggs has written “his sheer professionalism as an administrator enabled him to master all the diverse needs of government between 1812 and 1827.” But for that we would need Liverpool himself, not just his principles.

As British statesmen peer anxiously into the fog of the new world opened up by Brexit, they must beware of missing possibilities outside the current “Overton Window” range that have failed in the past. A re-opening of the Window to Liverpool’s approach would show them new policy opportunities, offering them better ways ahead.

(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.)