Nick Hargrave: The capitalism of the future demands a bigger role for the state

Its muscular power is needed to boost share ownership, build houses and tax wealth rather than income. And let’s rule out a No Deal Brexit.

Nick Hargrave is a former Downing Street Special adviser where he worked for both David Cameron and Theresa May. He now works for Portland, the communications consultancy.

Philip Hammond’s speech to the Conservative Party Conference last October is unlikely to be remembered as a rhetorical classic. But it contains within it an important insight for the political fortunes of the Conservative Party and the long-term prosperity of our country.

Speaking to a less than packed hall, the Chancellor of the Exchequer told delegates that Conservatives of the future must:

“Harness the power of the market economy, taking a model which has evolved continuously down the ages, so that the capitalism of the twenty-first century looks nothing remotely like that of the nineteenth – and adapt it once again to speak to the values of a new generation.”

Hammond was speaking to a truth that Conservatives sometimes forget. Capitalism is not a static construct held in aspic. It is an economic system which flexes to meet the challenges of its time – and in doing so renews its mandate from one generation to the next.

This flexible conception of capitalism has been seen in the differing approaches of Conservative governments since the Second World War.

In the 1950s and 1960s, after a landslide defeat in 1945, our party accepted a greater role for state involvement in the running of the economy; spurred on by a gradual realisation that the laissez-faire approach of the 1930s had been an opportunity lost.

During the 1970s and 1980s, Margaret Thatcher burst onto the scene with an articulation of capitalism that was more libertarian and evangelical about the merits of free enterprise – in keeping with its time and a reaction to the drift and decline inherent in state involvement going too far.

The 1990s and 2000s saw the pendulum swing the other way, and voters demand a gentler articulation of the harder-edged approach of the 1980s – with support for a minimum wage, windfall taxes and more investment in the public realm. On this occasion, our party failed to meet this challenge, clinging doggedly to our post event conception of Thatcherism, and paid an electoral price.

The lesson of history is clear. When Conservatives adapt to generational calls for change on our political economy they prosper and own the terms of debate; more than capable of beating a Labour Party whose competence is usually doubted. When they fail to acknowledge the call for change they lose – and only regain power after a period of painful reflection.

If the events of the past couple of years have taught us anything, it is time for Conservative politicians to once again come up with a coherent answer for how capitalism can renew its generational mandate. Specifically, how it can materially improve the British people’s living standards in an economy that is undergoing a technological transformation; one that is increasingly global, that’s conducted online, that’s moving at pace to automation – and which is increasingly flexible in its conception of the nature of work.

It’s this transformation which is fuelling the rise of identity politics in our country – which for all its short-term attractions is unlikely to end well. It’s fuelling divisions between the upwardly mobile and the educated in our vibrant urban centres who are benefitting from this change – and the many in our towns and communities who feel left behind. Between a younger generation which is finding it hard to amass capital – and an older generation who have assets that have appreciated over the years.  It’s why a lot of public and private polling out there indicates that people feel the country is moving in the wrong direction domestically. And it’s why the main thing keeping the current Conservative voting coalition together is the illusory tiger of a Brexit which can never meet the hype – and one suspects will eventually end in disappointment.

So what’s the real answer for Conservatives in how we reinvigorate capitalism in a way that is relevant for the 2020s and beyond – and in the process renew our own mandate to govern? This could be the subject of several more articles, but here are a few core thoughts as follows:

  • First, in politics you must get the tone and definition right before you get into the policy weeds. The platform must feel upbeat, inclusive, and focussed on the guiding prism of a better future for us all to share. Optimism is infectious. This is where I think in hindsight Theresa May got the balance wrong during the period 2016-17.  The framing of the ‘privileged few’ may have been tactically popular, but it was caricatured and created expectations of a reckoning with business that was self-defeating and ceded political space to Jeremy Corbyn. It’s much easier to have difficult conversations with businesses about their responsibilities in the modern economy if you have an overall macro-message that is supportive. 70 per cent carrot and 30 per cent stick feels about right.
  • Second, I think we are going to have come to terms with a more muscular and high spending state over the next 20 years. Critically, that spending and guiding hand must be prioritised on investment in the future rather than pumping cash hand over fist into resource spending. In Treasury, speak this means more ambitious capital programmes than currently on R&D and science, digital infrastructure and transport. Always remember that the jobs, wealth and economic security of 25 years’ time will come from ideas that we cannot even conceive of yet.
  • Third, people have to feel confident they are benefitting from the system. Rather than using Labour language of ‘fixing a broken market’, focus instead on the positive articulation of what a muscular state can do to promote the holding of capital. Spend much, much more on state-backed programmes to build houses, remodel the corporate tax system with the strategic goal of incentivising employee share ownership – and turbocharge the somewhat limp National Retraining Scheme into a massive endeavour for all people in industries at risk of automation.
  • Fourth, we need to be able to pay for this and remain fiscally credible. There is no perfect way to do this but a shift towards wealth over income taxes is broadly the right way to go. This is hard but inevitable. Most realistically this can only come from a new leader at the height of their political powers.
  • Fifth, there is the question of how we maintain our political definition with Labour. I would strongly suggest we do not fall back into an ideological debate about libertarianism versus socialism (if put like that, Britain over the next 20 years is going to go for the latter). Focus instead on the values and language of economic competence and strong leadership, brought to life in the programme above, and the rest flows from there. With the current Labour frontbench this task is inordinately easier than if we were up against a centre-left leadership.
  • Finally, whatever you do – don’t countenance a ‘no deal’ Brexit. It will detract focus from this generationally important task – and will lead to many more years of austerity. This cannot be emphasised enough.

Chloe Westley: As a migrant to Britain, I say: what’s wrong with patriotism, borders and control?

The desire to protect your home is as universal as the desire to love, to work and to raise a family. Why should protecting your country be any different?

Chloe Westley is the Campaign Manager of the TaxPayers’ Alliance.

When I was a child, I remember our teachers playing Imagine by John Lennon at a school assembly. I thought the sentiment was lovely. All people living in peace, no countries, no borders, no war. It’s a very pretty idea…with absolutely no basis in reality.

The modern Zeitgeist among academics and politicians in Europe is that borders are a thing of the past; that they are a nasty, xenophobic barrier to progress and co-operation, and any sense of national pride should be disregarded as backwards and racist.

As an immigrant to this country, I don’t understand this way of thinking. To deny the notion of nationhood and borders is to deny that there is anything of value in this country worth protecting, or any particular set of principles that divides British society from any other. But this country is special, and it is worth protecting.

It is a privilege to call Britain home. And it isn’t racist or xenophobic to expect the Government to protect and guard its borders, as well as to ensure the implementation of a fair and controlled immigration system. The desire to protect your home is as universal as the desire to love, to work and to raise a family. Why should protecting your country be any different? We put up fences and walls to guard our homes, but guarding national borders is somehow subject to accusations of xenophobia.

Globalists do not believe in maintaining national borders, because they do not believe that this country is their home. After all, if you believe that there is nothing that distinguishes Great Britain from the rest of the world, and reside here merely for convenience, then you would be satisfied being born or living in any other country. In fact, the way some on the Left describe this country with disdain, you would think they would prefer to live just about anywhere else.

There are of course those who describe themselves as strictly ‘European’ – not citizens of the world, but citizens of Europe. They advocate a greater European superstate, to replace individual nation states, with a strict border around Europe. They replace nationalism with supranationalism – the community is extended to the European continent. Whilst this is a minority view, (just 15 per cent freely choose to describe themselves as ‘European’), it is worth pointing out that calling oneself a ‘proud European’ expresses the same innate instinct to belong to a country (albeit an imaginary country, as the EU is not yet a superstate).

Living in a world without borders, and without nations, would not magically result in world peace and a greater sense of belonging. Rather, people would seek other tribes to belong to – quite possibly even extreme political and religious tribes.

Moral Psychologists such as Jonathan Haidt lhave warned against the dismissal of national identity. The need to belong to and defend a community is an innate human instinct, and is often expressed by loyalty to the nation state:

“There is nothing necessarily racist or base about this arrangement or social contract. Having a shared sense of identity, norms, and history generally promotes trust…Societies with high trust, or high social capital, produce many beneficial outcomes for their citizens: lower crime rates, lower transaction costs for businesses, higher levels of prosperity, and a propensity toward generosity, among others.”

There are of course extreme forms of nationalism, particularly ethno-nationalism, that need to be avoided. We should strive for a golden mean of nationhood: one which allows citizens to care for and protect one other, to maintain national borders and traditions, which is welcoming to visitors and immigrants, and is fair and just in dealings with other nations.

A shared national identity doesn’t necessarily mean that citizens believe their country or their people are innately superior to all other nations. Your love for your family does not require you to hate strangers – but you would do anything to protect and care for them above other people, simply by virtue of them being family.

You cannot force people to stop loving their country. A shared national identity is what brings people together, despite differences in religion, politics, football teams and age. Because the thing that we have in common is our home – and we should take care of and protect our home together.