This morning, British prime minister Theresa May finally conceded defeat. She announced that she would be stepping down as prime minister on June 7, and that an election contest would take place to determine her successor as Conservative party leader, and presumably as the next premier. Much of the commentary surrounding her departure will focus on her inept handling of the Brexit negotiations, or her misjudgment in squandering the safe majority bequeathed to her by David Cameron, but I’d like to draw attention to an equally calamitous mistake: her disdain for free-market economics.
At a very early point in her leadership, Mrs. May announced that she rejected the policies of the “libertarian right” and vowed to “repair free markets.” This speech heralded the return of an industrial strategy to Britain, which was watered down somewhat but still displayed a worrying amount of fatal conceit. This conceit was in full display with the manifesto her advisers produced as the platform for the disastrous 2017 election. As Ryan Bourne of the Cato Institute pointed out, it contained proposals to reregulate the labor market, cap energy prices, and bash successful CEOs. Unsurprisingly, as the Conservative Party shifted leftwards, so did the electorate, resulting in the loss of David Cameron’s majority.
Yet despite the rebuke, May’s government continued in the paternalist fashion laid out in the manifesto. Perhaps most striking has been the complete capitulation to extreme environmentalist fads — most recently manifesting in bans for plastic straws, cotton buds, and stirrers from 2020. Whenever her government saw a problem, it moved to “clamp down,” legislate, and often exercise a ban.
The most likely reason for this aversion to any sort of market thinking was laid out by former government adviser Stian Westlake in a widely-shared Medium essay, entitled “The Strange Death of Tory Economic Thinking.” He set out two different schools of economic thought, each one named after a great department of state:
The problem is that intervening directly in left-behind towns, low-productivity firms, and low-skilled workers isn’t necessarily the best way to achieve it. It comes back to the old dichotomy between the Treasury View and the Home Office View. In the Treasury View, in the economic mode of thinking, obliquity is commonplace. The economy is complicated and unexpected consequences abound. The Home Office is more Route One: if there are villains, you bang them up. If there are illegal immigrants, you deport them. You can see why they favour the direct route. It just might not work very well.
Mrs. May, of course, spent much of her career in government at the Home Office.
The result was something that the late British economist David Henderson called “do-it-yourself economics.” In turn quoting the late Anthony de Jasay, he noted that followers of this doctrine “ . . . tend to speak of the “market” as though it were a person, and a downright dangerous character at that, inclined to malignant deeds. They make accusations against the “market” that they would never make against the “set of voluntary exchanges”, overlooking that these two are synonymous of each other.” This characterization would seem to apply to virtually every Mayite critique of free markets.
Most of the leading candidates to replace Mrs. May are more sympathetic to free markets and classical liberal ideas. As well as cleaning up Mrs. May’s many mistakes in the handling of Brexit, it must be hoped that whoever comes next will also clean up the mess she made of economic policy.