In 1944, when economist F.A. Hayek dedicated The Road to Serfdom to "the socialists of all parties," the intellectual and political currents were running strongly against free-market liberalism. In Great Britain, all parties—Labour, Conservative, and the moribund Liberal Party—shared the disdain for the "vulgar" and "selfish" marketplace. Democratic socialism was ascendant, and Hayek's was one of the few voices in Britain advocating a return to classical liberalism, limited government, and a market economy.
But as Britain enters the 1990s British leftists of all stripes are reeling from the failures of their government's socialist policies and the political victories of Margaret Thatcher. The challenge to socialists now is to make their policies relevant and attractive to voters in the next decade. Increasingly, classical liberalism, particularly as expressed by Hayek, is being taken very seriously by the British left.
The British postwar political consensus rested on socialism and the welfare state. Key industries—steel, coal, communications—were nationalized, and medicine very nearly so. But after 30 years, these policies turned Britain into an economic basketcase. Beset with strikes, high taxes, pervasive controls, and inflation, Britain limped through the 1970s as the sick man of Europe.
The return of the Tories to power in 1979 might have made little difference had not Margaret Thatcher and her closest associates been in touch with a body of ideas variously called the "new enlightenment," the "new liberalism," or "New Right." The Tories have undertaken to alter radically the direction of British politics.
For the moment, advocates of the free market seem to have the ideological initiative. Carmen Callil of the left-wing publishers Chatto and Windus complains that this is "a time when right-wing thought dominates the exchange in political ideas." Both on the level of practical politics and that of higher theory, socialists feel constrained to respond to the free-market liberalism espoused by their opponents in and out of government.
Faced with widespread public acceptance of Thatcher's policies, the Labour Party is engaged in a painful policy review, seeking to show that Labour wishes merely to "guide" the market and not abolish it. Headlines such as "Kinnock pledge to free enterprise: Labour will intervene 'only when market forces fail'" are now commonplace. Labour leader Neil Kinnock now calls for "supply-side socialism" in which government "invests, builds and then moves on, rather than retaining any permanent stake in the enterprise it backs." Labour promises that, except for British Telecom, it will not renationalize enterprises privatized by the Tories. Amusingly, after years of ridiculing yuppies who have benefitted from economic growth, Labour plans to offer its own credit card, the Affinity Card, to party members.
Such revisionism doesn't go far enough for some Labour sympathizers. John Willman, General Secretary of the Fabian Society, scorns the "timidity" of Labour's new look: "Labour could be the party of the consumer or the antiprivilege party (provided it was willing to take on privileged groups in the labour market and the public sector)."
Peter Jenkins of the liberal Independent notes that Labour "could become once again the voice of modernisation" but only if it "can live down its reputation as the party of nationalisation and the champion of producer interests against the consumer." Giles Radice, MP for Durham North, thinks Labour is on the right track: "Labour's policy will be based on the extension of individual rather than of trade union rights." But it must be clear the Party would only intervene in cases of "market failure" or to provide "pure public goods."
Some of the responses of socialist theoreticians to the "reborn" free-market ideology are interesting as well. In Against Socialist Illusion, David Selbourne writes that socialists are out of touch with real working class values. He argues that—trade unionism aside—individualist and propertarian values run deep in the British working class. By using the rhetoric of individual rights and liberties (cynically and insincerely, Selbourne suggests) the right has tapped a deep reservoir of popular feeling. Only by showing an equal concern for liberty and property can the British left recapture its lost ground in the late 20th century.
In The End of Organized Capitalism, Scott Lash and John Urry compound socialist discomfort. In their view, far-reaching trends are converging in Western societies to wreck the politics of socialism. An increasingly competitive world market is undermining the economic deals made by business cartels, trade unions, and governments within the framework of single nation-states. At the same time, changes in industrial organization and popular residential patterns are eroding class-based politics (especially in the United States, Britain, and West Germany), revealing that "the workers" are not the monolithic vanguard of anything.
Lest this be thought the strange aberration of overwrought leftists, let us turn to the striking essay by Geoff Mulgen, "The Power of the Weak," in the December 1988 issue of Marxism Today. In this very thoughtful piece Mulgen compares strong power systems (1920s Ford plants, bureaucracies, armies) and weak ones (mutual aid societies, businesses, markets). He does not mince words: The strong systems waste human energies, treat people as things, are inward-looking, rigid, inflexible, unwieldy, and suffer from the ills of centralized, hierarchical management. "As anyone who has worked in a large bureaucracy knows, most of its energy is used simply reproducing itself." Unfortunately, most of the institutions beloved by socialists—the state, trade unions, and political parties—display just these traits.
By contrast, weak power systems waste less human energy, are outward-looking, making use of competition and cooperation. Their decentralized cellular structures allow networking and make them flexible and able to innovate.
One senses that Mulgen is getting onto very Hayekian ground where unintended consequences do battle with spontaneous orders. Alluding to the issue of socialist economic calculation, he notes Polish economist Oskar Lange's belief that computers would facilitate central planning. But Lange was wrong because "technology runs up against the context in which information is produced." Strong power systems distort information; weak systems give incentives for accuracy. While the central planners plod along, capitalists are running "a permanent revolution in techniques of control."
The basic flaw of governments, he continues, "probably most effectively described by Friedrich Hayek, is their inefficiency as information systems." Then, in a startling passage worth quoting in full, he adds: "At a time when the market was mainly producing very standardised products using highly-centralised decision-making structures Hayek's argument was only partially convincing. Forty years later, when capitalism has learnt much more quickly than the state the virtues of flexible specialisation, differentiation and of more subtle, multidimensional market research techniques, the critique becomes devastating." The left needs to look into discovering other "weak power structures" compatible with and able to correct what they believe to be the limitations of that other weak power structure, the marketplace.
Now the striking thing about this essay is that it appeared in Marxism Today, the theoretical journal of the Communist Party of Great Britain, not in some mildly reformist or Labour Party journal. It doubtless goes much too far for many readers of that magazine. Nonetheless, it clearly points to the impact of both the free-market initiatives of the Tory policymakers and the long-standing criticisms of socialism advanced by Hayek and his mentor Ludwig von Mises. As acceptance of the death of socialism as the last, best hope of mankind becomes widespread, perhaps people of all persuasions will be forced to reexamine the case for the market combined with other private institutions.
In a 1985 symposium put together by the Institute of Economic Affairs, Matthew Lynn, an adherent of the centrist Social Democratic Party, commented on the relationship between the new liberalism and the Tory Party: "much of what is termed the New Right is anyway more liberal than conservative, and it is certainly a mistake to think that all their ideas are going to find a place in Conservative Party manifestoes. Already, many people on the New Right are becoming disillusioned with the current Conservative Government's unradical attitude to many issues. It may be that a more genuinely radical political force, perhaps the SDP, will be necessary to carry out further market-oriented reforms. If so, within a few years, we may find dated the idea of placing market thinking on the right of the political spectrum."
It may be too utopian to expect such a development at the center of British politics in the near future. But it would be a wonderful thing indeed if one unintended consequence of the Tory years in power was to put market reform somewhere on the agenda of all political contenders. Such a form of competition could be extremely constructive. One might in time be able to dedicate a book to "the libertarians of all parties."
Joseph R. Stromberg is a writer for Knowledge Products who recently returned from a year in Great Britain.
This article originally appeared in print under the headline "Over There: The Road to Liberalism".