The claim is made in the article ‘Why Economic Liberalism Cannot Claim The Future’ – to which this article is a direct response – that economic liberalism is supported by many, because they believe it to maximise individual freedom. There is a much more robust reason to be an economic liberal: economic liberalism simply provides the best outcomes; it is the framework that allows individuals to thrive and increases our material wealth more than any other.
In the article, the author noted that the Liberal Party moved from a more liberal economic worldview, to a more interventionist one in the early twentieth century, and that subsequent gains made by those government such as pensions and the welfare state have not been rolled back. This is all true, but there have been plenty of enduring political consensuses in British politics that have overstayed their welcome. The post-war consensus formed by Attlee’s Labour government lasted 35 years, and was popular for creating the NHS and expanding state services. The reason that fell however, was changing economic circumstances that exposed the system’s flaws. It was uncompetitive and British manufacturers were beholden to militant unions, shackled by excessive taxation being overtaken by growing economies, particularly in the Far East. In short, changing economic consequences force reassessment of long held economic principles.
When the author asks ‘why are those same Liberals fighting against the state and further regulation?’ the answer is simple: changing economic circumstances have exposed the flaws of over-regulated economies and overactive states meddling in economic affairs. There is no clearer example of where our current illiberal economic framework has failed, than the great economic malaise of modern times: the housing-finance bubble which partially burst in 2008, and continues to immiserate some of the most vulnerable people in society.
The thousands of pages of financial regulations which drove smaller banks out of the market in the second half of the twentieth century, sowed the seeds for the desperation of governments to bail banks out. As there were simply so few, that feared the contagion effect on the rest of the market should one of these mega-banks fail. A market with numerous suppliers is a prerequisite for economic freedom, choice and agency. The voracious appetite of too many social liberals to believe that risk can be regulated away, has created markets where the barriers to entry are too high for anything other than an oligopoly of a few suppliers, who can then behave more like cartels than competing providers.
The economic case for a reduced government role in the economy is clear, the political reason why the Liberal Democrats should pursue one is too. The causes of the 2008 crisis, were driven by illiberal economic positions: an interventionist state underwriting banks and creating moral hazard; an engorged system of entitlements that bankrupted several states worldwide and a regulatory system that robbed consumers of genuine choice. The Green Party, Labour and the Conservatives want us to continue believing that the answer to every economic woe, is not to empower the individual by allowing them to choose. Instead it is to increase the scope of the regulations that prevent competitive markets existing while destroying the competition that drive economic growth and material wealth. The Liberal Democrats have a choice to put clear water between us and the other main parties, by accepting the flawed economic policies of the past. There are few realistic votes to be won from those who are despondent at what they perceive to be an under-regulated society, and an unsupportive state. They have been hoovered up by the Green Party and Labour, who will always outflank the Liberal Democrats on the left among those voters. We would do far better running on a ticket of radical, liberal economics, rather than sailing so close to the failed social democratic policies of the last 20 years.
It has been 8 years since the biggest economic crash since the Great Depression, and we as a party, should define ourselves by showing that we have learned from that event. Something which crushed the living standards of the poorest and most vulnerable people across the developed world. While every other party plods the same worn and failed course., we should argue that we have learned that overlarge states, and overzealous regulators do not destroy poverty, but instead destroy choice, competition and freedom. Liberal economics, with a belief in the individual, and their ability to innovate and provide solutions free from the shackles of government machinations, is a message of hope, not just on the doorstep, but for those who need it most.