Osbornomics

Many people appear have been nonplussed by the apparent contradictions of "Osbornomics" revealed in this week's budget statement: welfare slashed, but the minimum wage up; the bank levy relaxed (for bigger banks), but a new apprenticeship levy imposed on big businesses; corporation tax down, but tax on dividends up; inheritance favoured, but buy-to-let disfavoured. For some, this is just evidence of Osborne's obsession with political positioning; for others, evidence of opportunism and incoherence. These are not mutually-exclusive. Those expecting a landmark budget - one that would reset the assumptions of economic policy, like Geoffrey Howe in 1981 or Nigel Lawson in 1988 - were disappointed, with the suspicion mounting that this iteration was uncomfortably close to the "omnishambles" of 2012, despite the avoidance of self-inflicted wounds like the pasty tax.

Given the lack of any clear economic focus (the subsequent productivity plan was largely tinkering), most of the commentary has veered towards a political interpretation. For example, Simon Wren-Lewis noted that "Most of the Conservative base is not devoted to the cause of free markets, but is passionate about their own families' income and wealth"; while Tim Harford was equally scathing: "Mr Osborne promised a Budget for working people but reality does not match that sound bite. The biggest tax break was for people inheriting expensive homes from their parents". As reliable as clockwork, Martin Kettle piped up that "George Osborne's budget was more New Labour than Thatcherite". His evidence? "It was a budget that reduces the size of the state while using the state's power to intervene in labour markets and raise pay". This ignores the fact that state intervention is not, contrary to myth, anathema to Tories, as even the IEA recently pointed out, but to accept that would be to admit the narrow ideological space between New Labour and the Conservative Party.

According to Kettle, "Many on the left, and some on the right, believe all modern UK politics exists in the shadow of Thatcherism. In this view, as Britain was de-industrialised after 1979, there was an epochal battle between neoliberal, small-state and socially authoritarian ideas against social democratic, mixed-economy ideas". This is not just the usual triangulation that insults the intelligence of anyone who is not a centrist. It continues the fallacy that neoliberalism desires a small state and is socially authoritarian, when the evidence (from the size of the state to gay marriage) is to the contrary. Thatcher was certainly a social reactionary, which might be taken to contradict her laissez-faire attitude towards economics, but that fails to situate her historically: she owed more to the pessimism of Hayek than the optimism of Friedman.

The Conservative party of 1979 was not neoliberal; and it came to power because Labour was exhausted, not because it promised a radical programme. It's cabinet members included a majority of Heathites (aka "wets") and traditional de haut en bas Tories, like Hailsham and Carrington, many of whom derided Keith Joseph, the nearest thing to a neoliberal, as a "mad monk", as much for his un-Tory-like fervour as his barking policy ideas. Kettle creates the strawman of an abrupt political shift, which obscures the slow march of neoliberalism to hegemony between the early-70s and the mid-90s. He insists that "This is not 'the same old Tories' – and it is important to understand why". In fact, this is very much the same old Tories, if by that is meant the historic party of property that long-predated Thatcher and the right-to-buy. Ironically, Kettle echoes Paul Goodman in seeing Osborne as an opportunist in the tradition of Disraeli, but views this tactically (the "political obsessive" meme that has attached itself to the Chancellor) rather than strategically.

"New Labour was a sustained first attempt to rebuild a post-industrial, more market-orientated form of social solidarity, which rejected the injustices and anarchies of the post-1979 neoliberal order as well as the economic unsustainability of the regime it replaced". While New Labour was certainly ameliorative and progressive, its commitment to a "more market-orientated form of social solidarity" was textbook neoliberal. Kettle is trying once more to detach New Labour from association with the now-toxic neoliberal brand, which leads him to reverse-engineer Blair & co as the progenitors of contemporary Conservatism: "So it might be more useful to think of the Cameron governments – as to some extent some of their members have thought of themselves – more as alternative successors to new Labour rather than to Thatcher". The suggestion that New Labour was a "second watershed", rather than the culmination of a process lasting a quarter of a century, is one more attempt to deny the real implication of Thacher's delusional boast that her greatest achievement was Tony Blair, namely that they were both phases of a common endeavour to entrench a state intervening decisively on the side of capital.

On the conservative right, Tim Stanley is happy to applaud the historical continuity of Osborne's stance: "It revisits that moment in the 19th century when capitalists first realised that a little regulation could both improve society, give workers a stake in the system and make everyone more profitable in the long-run". The libertarian right, represented by Allister Heath, acknowledges this genealogy but regrets that intellectual purity is being sacrificed for political expediency: "We now know that Mr Osborne’s brand of conservatism attempts to marry, not entirely coherently, a smaller state with extensive government intervention ... [His] beliefs are consistent with a philosophical tradition that has held sway in the Tory party for most of the past 65 years, with the crucial exception of the Eighties and early Nineties". In their different ways, both Stanley and Heath acknowledge that Osborne is no committed free-marketeer or instinctive state-shrinker. Their employment of the diminutive - "smaller", "little" - is just whistling to keep their spirits up.

We've seen two crucial interventions recently that reveal the nature of neoliberalism in what we may come to see as its dotage. The key event in Greece was not the decision of the eurozone group of 18 to ignore the referendum result, but the decision of the ECB to limit liquidity support last week, thereby pulling the trigger on Greece in slow motion. We were presented with the spectacle of a central bank deliberately undermining a national banking system for which it has ultimate responsibility as the lender of last resort. By extension, this meant undermining a popular government, confirming Varoufakis's subsequent characterisation of the euro's management as "disciplinarian". The power-play within the Troika (which has left the IMF looking a broken reed), and specifically the decision to bail out Greece's creditors and refuse any debt restructuring, saw the shift of neoliberal focus from capital access (deregulation, liberalisation, privatisation) to capital consolidation (the protection of accumulations and inheritance). Post-2008, neoliberalism has evolved from a historically progressive (if destructive and class-biased) force to a conservative and reactionary one. Consider the continued determination to black-ball Syriza from EU political society for not being sufficiently penitent.

The second intervention was Osborne's decision to restrict child benefit to two kids (I wonder if the Civil List will be similarly curtailed for any additional royal sprogs). Behind this is the idea of children as property. Historically, conservatism has been divided between a reactionary distaste for the breeding habits of the poor ("more mouths to feed"), which lives on among neo-Malthusians and some Greens, and natalism, which encourages large families as a matter of national policy (initially for bigger conscript armies and then for a growing labour supply). The former saw children as an asset that belonged to the family, hence the reluctance to allow its "cost" to be externalised onto society (but also the toleration of child labour, which externalisded its benefits). The latter saw children as an asset of the nation, hence the willingness to socialise investment, which started with medals for fecund mothers and culminated in the welfare state (its growth in the interwar and postwar years owing much to concerns over population replenishment). This policy change, as much as the further privileging of inheritance, confirms the lesson of Greece: that we are in an era focused on the preservation of capital, not its expansion.

Returning to Martin Kettle: "British voters remain highly receptive to a modernising Labour approach that shows it is in touch with the way the country and the world have changed and are changing. Whether Labour offers them that is what the party must now decide in its leadership contest. In the absence of such an offer from Labour, however, Osborne's budget will seem to many voters like a logical and not wholly unreasonable alternative". Kettle's insistence on historical inevitability, and the plea that Labour - as a modernising vanguard - should offer the electorate what is best for them, rather than what they might want, emphasises the degree to which neoliberal practice since the 1970s consciously borrowed from both Marx and Lenin. What Kettle has failed to accept is that neoliberalism dispensed with the revolutionary form in 2009. We are in an age of reaction, in which the preservation of gains is now paramount.