Throughout her leadership election campaign, Liz Truss gave a strong impression that her government would be devoted to the free market. The Prime Minister ran on a platform dedicated towards “freedom, low taxes and personal responsibility.” The newspapers depicted her as a radical libertarian and the next Margaret Thatcher.
Quickly, Truss introduced her mini-budget which indicated a change in direction away from the nanny-state consensus that the country has seen since Prime Minister Tony Blair in 1997. The budget pledged to cancel plans to raise taxes, lift regulations on fracking, and, most controversially, lift the cap on bankers’ bonuses and lower the rate of the top tax bracket. Free marketers championed the budget as the most radical since Thatcher. Its opponents smeared it as a budget for the rich.
However, with the pound falling to its lowest ever level against the dollar, causing the Bank of England to intervene, Truss was quickly pressured into reversing the key pledges of the budget. Truss apologized for going “too far and too fast” and within a few days she resigned making her the shortest serving prime minister in British history.
As British libertarians hung their heads in disappointment and embarrassment, enemies of the free market smugly commented about how Liz Truss had destroyed free market philosophy.
Writer and advisor, Nick Timothy tweeted: “Libertarian ideology has smashed the credibility of the Tories and government into pieces.”
Stephen Farry, the MP for North Down, tweeted: “It was clear that her hard right, libertarian agenda would be destructive.”
However, was the budget even as libertarian as those who hated it and those who loved it made it out to be? In reality, no.
The tax cuts were extremely underwhelming. They would have left the tax burden higher than it was under the Labour Government. The only reason why this budget seemed radical was because the British people have had big government gradually tightening its grip over the past few decades and like a frog boiling in water, we haven’t noticed.
Furthermore, Truss wanted to introduce an energy price cap which would cost the taxpayers £150 billion. Despite promising in her leadership that she would deal with the energy crisis by letting the price mechanism operate freely, she turned to dramatic state intervention when push came to shove.
In addition, the panic over Truss’s mini-budget was not caused by cutting taxes. It was because she did not cut government spending, resulting in economic chaos. It was her attempt to finance the deficit by inflation, not the fact that she introduced free market policies, that hurt the economy.
Despite all this, many British libertarians were so desperate for a crumb of free market policy that they were happy to welcome Liz Truss with open arms. Oh, how it’s come back to bite them!
The Not-So-Liberal British Liberal Party
Unfortunately, a supposedly “libertarian” politician promising to loosen the corset of the state while discretely suffocating the electorate with regulations and taxation is nothing new in British politics.
This is not the first time that politicians have in the name of liberty expanded the powers of the government. The British Liberal Party of the nineteenth century began as the party of free trade and laissez-faire capitalism. At this point, liberalism was known as an ideology favoring free commerce and free people with its key thinkers being John Locke and Adam Smith.
However, the party pushed forward legislation that was far from the principles of life, liberty and property. Under the Liberal Party, Parliament enhanced the state’s powers such as fixing prices, regulating working hours, and mandating inspections.
It was under the Liberal Party that Prime Minister Lloyd George entered World War I during which war socialism was implemented. In addition to passing the Military Service Act of 1916 which introduced conscription, the government also strengthened its grip on the economy, introducing price controls, rent controls, rationing and confiscatory taxation.
As it expanded the role of the state to levels unprecedented in British history, it’s clear that as time went on, the Liberal Party became liberal in name only.
The Not-So-Iron Lady
Another key libertarian figure in British history is the Prime Minister, Margaret Thatcher who championed free-market capitalism. However, despite Thatcher’s strong rhetoric on “rolling back the state,” her attempt to cut public spending was unsuccessful. According to the IFS, real-term spending rose every year of her premiership apart from two.
It is also a myth that Thatcher deregulated the economy. The Institute of Economic Affairs reports an increase in the number of regulators during her tenure. The ratio of regulators to people employed in finance increased from 11,000 per person in 1979 to 300 per person in 2010. In addition, the Financial Services Act of 1986 regulated investment and financial markets. These measures are clearly anti-free-enterprise.
Ideas > Politicians
It’s ironic that many advocates of an ideology based on distrust of the government have put their whole faith in politicians. This is not to say that those politicians have not helped the free market in some instances, such as Thatcher’s denationalization policies or the Liberal Party’s free trade reforms. It is to point out that politicians are limited by corruption, opposition, the system and the Overton Window. We’ve seen the attempt to just put the right men in office fail too many times.
Part of the reason why Liz Truss failed while Margaret Thatcher succeeded was the fact that Thatcher was not just a politician but also a teacher. Thatcher is not just famous for her actions but her championing of ideas. But now, after decades of nanny statism, even the term “profit” has now become a dirty word in the vocabulary of the British public. The reason why Truss’ budget was such a failure was because there were no foundations for free market thinking in the UK, therefore it made the change seem unnatural and unwanted.
Free market policy cannot be implemented without the public understanding the power of capitalism and freedom. As Leonard E. Read argued, libertarians should treat politicians, not as agents of positive change, but as thermometers that measure the temperature of public opinion.
“Change the temperature,” Read wrote, “and there will be a change in what’s out front—naturally and spontaneously. The only purpose in keeping an eye on the thermometer is to know what the temperature is. If the underlying influential opinion—the temperature—is interventionist, we’ll have interventionists in public office regardless of the party labels they may choose for their adornment and public appeal.”
“If,” on the other hand, as Read continued, “the underlying influential opinion—the temperature—is libertarian, we’ll have spokesmen for libertarianism in public office. Nor will all the king’s horses and all the king’s men be able to alter the reading of the political thermometer one whit.”
Defending politicians will be the hill the British libertarian movement will die on. It would be much more beneficial to defend the principles of liberty instead of making up excuses for the politicians who betray them. Otherwise, instead of politicians trying to pander their values to liberty, liberals will sacrifice their values trying to pander to politicians.
The post Why Liz Truss Failed While Margaret Thatcher (Partly) Succeeded was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.