Why I’m not a fiscal conservative
Once taboo, the label ‘conservative’ is suddenly in vogue on the left. With Blue Labour’s colour-coded provocation and the bold land-grab of One Nation Labour, it is argued that a conservative attachment to everything from community life and national identity to family values and fiscal probity can be a source of intellectual renewal and electoral recovery for the left.
To my surprise, I find myself in sympathy with much of this. One of the least attractive features of New Labour was the mindless celebration of novelty for its own sake. On every issue from globalisation to public service reform, the message was the same: change is coming, so modernise or die. But the idea of progress as historical juggernaut has left people feeling powerless and alienated. If politics doesn’t give them a means of regulating the pace and direction of change in their lives, then what’s the point of it?
When I read Michael Oakshott’s famous invocation ‘to prefer the familiar to the unknown, to prefer the tried to the untried’ I now feel the urge to nod in silent agreement. It’s not that I oppose change; far from it. It’s just that I’m sick of seeing change pushed through with an almost Maoist indifference to the human consequences. After years of manic neophilia, a dose of healthy conservative scepticism about the claims of progress would do the left a power of good.
There is also a moral dimension to my new conservative temperament. I see traditional institutions and modes of life as bearers of values to be tampered with reluctantly, especially by the encroachment of amoral markets. I have become impatient with the left’s tendency to explain away social ills in purely structural terms while ignoring the importance of things like responsibility, virtue and character. And although I remain a republican of the mind, I’m more inclined to see the monarchy (or at least the reigning monarch) as an oasis of lost public service values than a tool of class oppression.
There are, of course, plenty of senses in which conservatism is not compatible with progressive left politics. Societies can and must change for the better, and while conservative scepticism provides a useful check against the excesses of modernisation, it cannot become a veto. There is no place for conservative moralism when it interferes in the wholly private choices people make for themselves. Conservatism also cannot be allowed to become a defence of social hierarchy and the idea that everyone should know their place. In these and other contexts, the conservative Dr Jekyll can easily become the reactionary Mr Hyde.
To this list of don’ts I would add fiscal conservatism. In an age of austerity and concern about the burden of public debt, fiscal conservatism has become a rallying point for those who blame our economic ills on state profligacy rather than market failure. It has led to the introduction of a constitutional debt brake in Germany, the imposition of punitive loan conditions on Greece and other fiscal sinners, and it has revived pressure for balanced budget amendments in the US and elsewhere. In the UK, it has been invoked as Labour’s route back to economic credibility by the authors of In the Black Labour (ITBL).
I am very much for fiscal responsibility, and to the extent that ITBL advocates it, I have yet to meet anyone who disagrees. But fiscal conservatism is something entirely different and the result of pursuing it isn’t always healthier public finances. There are three main reasons why the left should reject it.
1. Fiscal conservatives ignore economic reality.
True fiscal conservatives dislike the use of demand management as a tool of economic policy and seek to restrict its scope as much as possible. In most cases they argue for budgets to be balanced, not just in the medium-term, but in each financial year. Exceptions are permitted in only the most extreme conditions.
The authors of ITBL don’t go this far and say they favour ‘effective Keynesianism’. But they have a funny way of showing it. One of their suggestions is that fiscal policy should be divorced from the economic cycle and that Labour should set a target of achieving a surplus towards the end of each parliament. But sound fiscal policy must be adapted to the unpredictable rhythms of the economy, not some arbitrary political timetable. What if the end of a parliament coincided with an unexpected downturn? Should a Labour government deflate anyway just to meet its target? Fiscal conservatism is dogmatic when good economic policy needs to be pragmatic.
2. Fiscal conservatives have an ideological bias that favours private over public.
As Stewart Lansley has pointed out, there are two sides to the fiscal equation: taxation and expenditure. Fiscal conservatives focus monomaniacally on the spending side of the equation. That’s because their motivation has nothing to do with creating sustainable public finances and everything to do with an ideological desire to slash taxes and shrink the state. The tendency to hollow out the tax base with giveaways to the wealthy is one of the reasons that US budget deficits have ballooned in periods of conservative hegemony.
ITBL starts by claiming to be ideologically neutral on tax versus spending, but then devotes all of its analysis to the question of how to make cuts and none to the equally important question of how to strengthen the tax base. In urging Labour to be the axe man, not the tax man, there appears to be an a priori acceptance of the Tory argument that Britain’s deficit is a problem of over-spending, not under-taxing. I assume this to be a defensive rather than an ideological position. Of course the next Labour government will need rigorous spending controls, but it will also need to look at ways of tackling tax avoidance and making the better off pay their fair share.
3. Fiscal conservatives have little or nothing to say about private sector reform.
Because true fiscal conservatives essentially see government as the root of all evil, their solution is for government simply to get out of the way. They are positively hostile to an active economic role for the state and have nothing to say about how the private sector needs to be reformed.
This is not where ITBL is coming from at all, which is another reason to question its fiscal conservatism. It talks about the importance of an active industrial policy in delivering more growth and innovation. But although it mentions the need for ‘a different conception of the state’, is say nothing about the need for a different conception of capitalism.
The unique insight of Ed Miliband’s leadership, and why he is so different from any other potential leader, is that if the scope for using tax and spend to clear up the mess of a dysfunctional capitalism has become more limited, then we have to do something radical to make capitalism functional to the needs of a just society. In Miliband’s phrase, we have to build fairness into the DNA of our economy. This is a much more expansive agenda than the orthodox industrial policy route offered by ITBL.
The authors of ITBL are not really fiscal conservatives at all. They are like the kids of 1977 (I was one) who stuck safety pins through their school jumpers and called themselves punks because they thought it made them sound a bit hard and dangerous. To the extent that they seem to mimic aspects of the real thing, Labour ought to be very wary. Otherwise it is just a call for fiscal responsibility, with which everyone ought to agree.
David Clark is editor of Shifting Grounds.