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Thatcher’s Perverse Victory and the Prospect of an Ethical Economy

15th April 2013

ResPublica's Chair of Trustees, Professor John Milbank, writes for ABC Religion and Ethics

Margaret Thatcher has been retrospectively turned into some sort of heroine – even a saint. But her true status was grasped most accurately by the Jewish atheist historian Raphael Samuel. In a justly famous series of articles published in the Guardian in the 1980s, Samuel argued that Thatcher was Britain’s first truly secular leader.

The post-war settlement, which reached its apex in 1948, was the last truly Christian covenant of the complex and freely theocratic British order. It was the final manifestation of social Anglicanism and the last fruit of the spirit of Victorian philanthropy. It enshrined a welfare state which Christians had done much to imagine and implement; it sought to sustain in perpetuity a wartime spirit of service and solidarity; finance, industry and transport were subordinated to collective ends; the educationally elitist but totally free and accessible grammar schools were further entrenched into the education system; religious education was made compulsory.

Thatcher was the prime agent of the destruction of this settlement – and for this reason the churches opposed her far more than did the Labour Party, which finally accepted her agenda. First, as education secretary, she stopped school milk – an important symbol of the state’s commitment to child health. She then closed more grammar schools than any of her predecessors. As Prime Minister, she began weakening of the NHS, adopted a punitive approach to welfare, destroyed the remnants of British industry, removed certain worker rights, allowed banking to operate in an amoral fashion and, for the first time since the Victorian era, increased poverty and inequality.

What is more, nurtured by the very liberal and evolutionist-progressivist doctrines of her Wesleyan father, she proceeded to undermine all the paternalist institutions of the High Tory/Old Labour consensus: local government, independent universities, the higher civil service, the Bar, the honour-code of the City of London, the House of Lords and even the Monarchy. She despised the public service ethic on which these were based and neurotically supposed that anything not based on self-interested contract must secretly be controlled by a closed and complacent cabal. As Raphael Samuel rightly insisted, it was not Mrs Thatcher that upheld Victorian values – it was rather the striking miners whom she defeated only thanks to the folly of their leadership.

It is doubtless true that the British establishment needed reforming: British industry needed updating; welfare and economic control was too statist rather than participatory; and trade unions had lost the plot of genuine cooperation and worker power-sharing. But the real problem with British manufacturing was poor management and technical education. And though the crisis of the late-1970s was dire, it was by no means as bad as is now widely believed. Other more solidarist solutions were certainly possible, as Tory Michael Heseltine realised.

Furthermore, I would argue, Thatcher’s triumphs were at best temporary and uneven – at worst, they were simply illusory:

Over-dependent on finance, the British economy is once more diseased.

Cut off both from the Commonwealth and Europe alike, the much heralded revival of British power under Thatcher has proved short-lived. The current Coalition government is slashing the armed forces in true Thatcherite “Little Englander” spirit.

While Tories today like to complain about the perfidious “dependency culture,” it was Thatcher herself who first made welfare a way of life by ensuring mass unemployment in the short-term and a low wage economy in the long-term.

While Thatcher preached the importance of the individual never being in debt, she presided quite happily over the beginning of the debt culture.

While she rightly encouraged home ownership by selling off council houses, she failed to replenish the stock of social housing and encouraged an economy where property is overrated and landlords are petty tyrants. The current housing crisis in Britain is, in large measure, part of her legacy.

On top of all this, Thatcher rejected the insistence on relationality and reciprocal respect for personhood that has been so profoundly part of the Jewish and Christian traditions for well over a century. In its place, she famously championed a claustrophobic suburban austerity derived directly from the narrow moralism and thin Christology of her father, Alderman Alfred Roberts. His desiccated Methodism had little to do with the more authentic Methodism which, from John Wesley’s High Toryism through to the primitive Methodist trade unionists, always wedded pietism to social justice in the name of the Kingdom of Christ. Apart from that tenuous religious thread, Thatcher was a coiffured nihilist with no culture or imagination and very restricted intellect. Her near pathological obsession with detail often caused her to lose sight of the big picture (as with her failure to see that the Argentineans were serious about the Falklands).

What makes this retrospective fawning over Mrs Thatcher all the more sickening is that reveals the extent of her success in redefining what it means to be Anglo-Saxon. Her fundamental error was to adopt the American “Puritan-and-Enlightenment” spirit at its individualist worst (for there is, as Marcia Pally has heroically insisted, another America) as the true Anglo-Saxon identity.

In so doing, Thatcher forgot that Commonwealth countries are more European than the United States. She perpetuated Churchill’s mistake of failing to try to link British and European and French Commonwealths – that is, ex-colonial territories – as a new power matrix. As Adrian Pabst has compellingly argued, the hegemony of neoliberalism rests on this cultural-political error.


Nearly everyone in British politics has come to believe some version of Thatcher’s narrative, which ascribes all economic success to the unleashing of purely selfish individual endeavour. Capitalism is, so the familiar narrative goes, the greatest innovation of human history: it has delivered unimaginable wealth, gotten rid of disease and lengthened human life. But capitalism itself is amoral, so its success must come through what Robert Skidelsky has described as a kind of Faustian pact with the devil: if we each selfishly pursue our own interests, rationally calculating what will make us happiest (at least in terms of our own private goals), then the market mechanism will harmonise all outcomes by aligning supply with demand.

In other words, out of egotistic chaos, social harmony and untold wealth will magically arise. All that Mrs Thatcher supplied was a moralistic twist to this tale: in her distinctive telling, the market rewards the thrifty and parsimonious, though she had already turned a blind eye to much supposedly beneficial greed. With the passing of time, however, it is telling that even the Tories quietly dropped this moralising addendum.

Nevertheless, all that the Left could muster in response is a slightly modified version of the same narrative. Yes, capitalism may be evil, but it is a necessarily evil that can, to some degree at least, be tamed. So during times of economic crisis, governments can intervene in order to ameliorate flagging demand. Outside such crises, governments can still intervene when necessary by means of monetary policy (like valuing or devaluing the currency and setting interest rates) and direct subsidies to industry. Moreover, the worst consequences of capitalism can be tempered through tax and spend, the redistribution of wealth and provision of welfare. In addition, housing and education policies can ensure that everyone had an equal opportunity to play the market game.

The problem, of course, is that in recent years both versions of the success-story of capitalism – the robust, triumphalist version of the Right, and the more accommodated, pandering version of the Left – have been discredited as the ever more sordid, even semi-criminal character of capitalism comes to light. Self-interested behaviour has proven itself simply to serve the self-interested individual, not society at large – not even economically. And when it does serve individual interest, it is interest taken in the short-term.

So while the oft-made promise was that the massive wealth accruing to the few as a result of the suppression of workers’ wages in the 1970s would trickle down to the many, in reality inequality under neoliberalism after Thatcher has grown ever wider. Quite quickly, it turns out, the fabled mounds of capital had nowhere to go and there arose need to stimulate demand all over again. Thus the contradictory cycles of capitalism observed by Marx seemed to be accelerating.

But instead of turning back to Keynes, Western nations embraced a sort of bastard Keynesianism which increased demand by increasing the indebtedness of almost everyone at every level. What we have discovered, however, is that just as high-wage demand tends to eat into profits, in the end so does debt-demand. Debts cannot endlessly be passed on by means of more and more fictional mechanisms. Someone has to pay up sometime. We cannot really do without the final securitisation of the abstract on the concrete.

That is where we seem to be today. Belief in the “invisible hand” – as the only remaining economic and social bond – has left us with both rampant individualism and excessive abstraction. And if we go on denying that we have anything concrete in common, then the common good will be reduced to an increasingly unreal idea of wealth – just a big pile of numbers, with most of us assigned very few of them. But now that egotism and virtuality have stopped delivering the economic goods, we are realising that even capitalism needed more cooperation and reciprocity than liberals have believed.

If you don’t trust your colleagues within your own firm or bank, then a kind of anarchy ensues. To contain the anarchy, we have imposed a form of top-down impersonal management – the sort that kills cooperation, tacit interactive processes and creativity. And so what we are now seeing is rampant de-professionalisation, the abolition of any true sense of vocation.

Working people have, of course, faced this for centuries: their guilds, self-regulating bodies and the ownership of their own means of production, homes and workplaces, along with the right to organise their own time and labour, were removed long ago. But now this de-professionalisation, this removal of self-regulation and an ethical ethos governing work is hitting the middle classes as well.


So what about the Left’s softer version of the same narrative, the wager that capitalism is a ferocious beast that can, to some extent, be subdued and made to work for us – a kind of “Thatcherism with a human face”? This version is in just as much trouble.

Half a century of attempted redistribution through welfare policies have led to an increasingly unequal society. Moreover, the whole idea of redistribution is unstable. It depends on endless economic growth in order to be able to redistribute without damaging the capitalist mechanism. On this point, liberals are in some respects correct: excessive state intervention can be one factor in over-inflating demand and so inhibiting profit. Sooner or later, excessive benign demand would eat into profits, and even Keynesians would recommend lower taxes, less government expenditure and wage restraint.

And yet Keynesianism as an adequate alternative to neoliberalism is clearly delusory. In deeply depressed circumstances, of course demand-stimulation remedies should be applied from the top – Hayek and Friedman thought so, too. But such measures make little difference and even then, only for a short period, as Roberto Unger has recently pointed out.

It was not the New Deal but the First World War that finally revived the flagging American economy in the middle of the twentieth century. The more truly economically transformative role of government has never been through fiscal stimulus, but by helping to provide the right kind of physical, educational, financial and legal infrastructure and through taxation systems which tend to discourage monopoly and encourage participative and competitive enterprises.

Inversely, Keynes’s view of happier capitalist times was scarcely different – if somewhat more interventionist – from that of the neoliberals. His work remained within the largely shared paradigm of neoclassical economics, which assumes the isolated, rational, utility-maximising economic actor. We can certainly agree that it is desirable to substitute more money in people’s pockets for the degrading demand of debt, but to do so in isolation would just take us back to the treadmill of the capitalist cycles. Sooner or later, excessive benign demand would eat into profits – and even Keynesians would recommend lower taxes, less government expenditure and wage restraint.

Of course, Keynes believed that clever mandarin management could anticipate crises and keep profit and demand, output and consumption in a permanent balance. But this is to ascribe to the same neoclassical belief in the “natural clearance” of rational markets as that of the neoliberals. The only difference is that Keynes and Keynesians believe rather more in the need for the “visible hand” of the state to make periodic adjustments to the “invisible hand” of the market if this balance is to be sustained. They believe that this is necessary because of the ineliminable element of irrationality in most human beings, who fail sufficiently to act in their own utilitarian self-interest.

The real problem is that the capitalist market is inherently asymmetric and unstable because prices, wages and interest rates are not based (at least in theory) upon any negotiation as to mutually acceptable justice, but rather upon a struggle always to gain the best deal possible for oneself. In consequence, the very purpose of the ownership of capital is understood to be the maximisation of that capital at whatever social cost, and the very purpose of working and consuming to be the extraction of the best deal from employers and the best bargain from merchants for oneself that one possibly can.


The accumulation of capital always tends to outrun the possibility of its realisation, and the extraction of material benefit by worker and consumer tends to threaten the very existence of productive firms and profitable stores and wholesalers. Not only does this “contradiction” manifest itself in alternating cycles of excess profitability and excess demand, one can also often have the phenomenon (as Simonde de Sismondi noted, before Marx) of simultaneous over-production and impoverished consumption – for example, rotting stocks of food and yet a starving populace. Today, such a circumstance exists on a global scale.

Surely the only way to achieve an economic equilibrium is to craft an economy based upon ethical equilibrium – in other words, an economy based on the constant attempt at every level to attain a truly social and shared consensus regarding the inherent justice of all economic exchanges. In that case, these exchanges are more likely to be upheld by all as contributing to future mutual benefit and their drastic contestation to be viewed as both self-destructive and socially damaging. It then becomes possible (as it scarcely is at present) for management and workers to accuse excessive demands and rewards on either side of being against the collective interest, without thereby indulging in the rankest hypocrisy.

This requirement is by no means utopian insofar as it already operates in some degree (the degree to which our market is not, after all, perfectly capitalist) and insofar as people possess both an inbuilt sense of equity and an ability to see that human interests are fundamentally shared. Yet it can appear utopian to the extent that consensus as to the justice of economic exchanges requires a stronger measure of cultural consensus concerning fundamental human goods and their relative rank-ordering than we now appear to have. One can argue, however, that without a serious attempt to improve that consensus, our economy, being evermore depleted of trust, will become evermore prone to crisis and dysfunctionality.

By contrast, a Keynesian attempt to balance economic forces at the centre can never succeed for long, any more than it can make much productive difference: without endorsing any ethical consensus as to the inherent justice of prices, wages and shares, and thereby any inherent social unity as inhabiting the market itself, the state must also by riven by the same inherently antagonistic forces which it forelornly seeks to mediate.

Above all, the mantra of “More State, Less Market” cannot deal with the disease of a market system, which is increasingly criminal, unequal and incapable of generating wealth, at least in the UK. In a globalised world, it is this system which dominates, leaving the state very little room for manoeuvre at the tactical level.

In the face of the rolling series of recent global economic crises, all we have seen is impotent anger from various protestors, with hardly any analysis or proscriptions. Any notion of capitalism’s final crisis is simply implausible because, although it is chronically crisis-ridden, capitalism has infinite resources whereby to readjust and recover – indeed, that’s the perverse beauty of its indifferent abstraction. Moreover, there is no sign of the invention of a new variant of socialism to replace a tottering system.


What is needed now is an altogether different narrative – one that can challenge, not just the dominant told by the Right since the 1970s, but the whole of narrative of modernity itself. Put simply, Is the success of the market economy really the same as the success of the capitalist economy? Increasingly, historians and the subtler economists are saying, No.

The market economy, which stretches back at least to the twelfth century, is constituted by the division of labour, the freedom to work and trade and the attempt to increase wealth in the full sense of the improvement of human life. It was this economy that was responsible for the growth of free cities (unique in the history of the world) and for the first industrial revolution in the West. But it wasn’t a capitalist economy. Why not?

A capitalist economy, as Stefano Zamagni explains, does not pursue the common good, but “the total good” – that is, the sum total of individual utilitarian happiness in the aggregate, people counted one by one, not in their real relationships. But an abstract sum means a sum of numbers, the total wealth of a community, which may accrue to some more than to others. Hence the British GDP is evidently not the common good of the British people.

But the older market economy can be described, following Zamagni, as a “civil economy” – an economy that really does pursue the common good: the good of every one of us as we concretely exist in our families, workplaces and communities. But how can we do that by labouring and trading in the market? The answer is that one can both pursue a reasonable profit for oneself, and at the same time try to offer to others a social benefit in return for a social benefit that they are offering you. In other words, one can trade in real human goals as well as in hard cash.

Likewise, a contract can be a reciprocal agreement about a shared goal and value, not just the joint meeting of two entirely separate individual goals. The latter applies when I take a cab: I want to get to the station, the cabbie needs to feed his children. But this sort of contract does not apply if I and my neighbour agree to put up a hedge between our gardens that we both want, or a shared tennis court at the bottom of both our gardens. And it does not apply if you know the cabbie or if you offer him an unnecessarily generous tip.

So what historians have shown is that, well into the sixteenth century, a civil economy operated according to ideas of contract that were not purely competitive. The price mechanism was to a degree determined cooperatively as well as competitively. So, for example, it was not assumed that you would always charge the highest possible price that the market would tolerate. You might lower that price in order to help your neighbour because you did not want to destroy your neighbour, and it would not even makeeconomic sense to do so. Even tough-minded economists are now rediscovering the idea that so-called “shared benefit” can make economic sense.

If you withheld charging the highest possible price from your neighbour, then it was clearly seen that you were offering him a gift. The same would apply if you paid your workers rather more than you needed to, or if you offered your debtor a lower rate of interest than you might have extorted – all these were seen as gift and there was no absolute distinction of gift from contract. This fact formed the operative basis for notions of just prices, just wages, just rates of interest and the restriction of usury.

Alongside this, civil economy was a vocational economy. People served apprenticeships and there were conditions of entry to professional associations or guilds. These guilds tried to govern quality, treatment of customers and protection of workers. They conferred dignity and even an aura of religious mystery about craft. Recall that in the pagan world, labour enjoyed no such status: its sacred importance was invented by Christian – especially Benedictine – monks and was then communicated to the laity.

Surely, it might be objected, it was the distinction of contract from gift and the abolition of guilds and protective corporations, along with enclosure and the removal from the worker of the ownership of the means of production, that lead to the great capitalist take-off? But it is just this view that may not be so clear. There is a sense in which – to echo Bruno Latour – we have never been capitalist. Let me here make a few crucial points:

The capitalist take-off had, to an extent, already begun with the civil economy.

Its deviation into a capitalist economy was the result of peculiar contingencies: the influx of overseas trade from the New World and American gold, which skewed the balance in favour of the power of liquid wealth and the owners of that wealth; and the Protestant ethos, which took a gloomy view of life in this world and so reduced notions of the common good and the possibility of prudential rather than purely selfish judgement in everyday life.

Outside the Protestant world, and even the Anglo-Saxon world, the civil economy continued in a modified form. Indeed, many elements of it are still there in contemporary Italy and Germany. The latter’s economic success is not, then, purely a capitalistic success.

To a large degree, the Enlightenment reacted against the individualism of contract. Thus Adam Smith’s economist contemporaries in Naples and Milan tried to revive the civil economy, and they argued that when you buy meat from your butcher, you do so partly out of benevolence, because he was a friend and you needed his shop to remain there. (Actually, we still think like that in my small town Southwell in Nottinghamshire, despite the attempts of the Tory Newark Town Council to make us join their version of modernity!) Even Adam Smith wanted the market economy to be embedded in networks of social sympathy.

What, then, about Victorian England? Admittedly, there was the Benthamite influence which led to fully fledged utility-maximising economic theory. But, meanwhile, we also had Quaker manufacturers trying to care for their workers; we had regional banks operating in partnerships with cities; we had a fusion of heritage and economic effort that combined cultural and economic flourishing.

Despite all the Dickensian horrors, there was a certain driver of trust and common purpose, and quite soon people tried to amend those horrors through extraordinary efforts of philanthropy. It was in that atmosphere of mutual assistance that the Labour party was first born – in tune with the true narrative of Western economic success, not in opposition to it.


So what if both the liberal and the Marxist or Social Democratic narratives are just myths? What if we did not need the Faustian pact with the devil? What if even the factory system and enclosure were not entirely necessary to economic success (after all, they do not seem to have been so to the same degree outside of the UK – by no means in France, for example)? What if the Nottinghamshire Luddites of the clothing trade, heir of that hero of vanishing fraternity, Robin Hood, were right, and one did not need to sacrifice quality of work to levels of production (for it was that sacrifice that they opposed, not machines as such)?

It is, of course, possible to say that the bad practice of capitalism, the abandonment of the common good, has produced a great deal of wealth in its own terms, and that it has produced material benefits to many, as well as exploitation, impoverishment, uglification and lack of meaning in work. One can argue about the extent to which all this could have happened differently.

But what is certain is that our more extreme form of capitalism, totally removed from the norms of civil economy is not working well any more. For a very long time now, growth has been slowing while inequality and unemployment has vastly increased.

Perhaps, then, a different sort of pact is worth considering – one with God, instead of the devil. Maybe virtuous practice can also achieve more stable and sustainable economic prosperity. This is the alternative narrative that Lord Maurice Glasman and others in the Blue Labour movement wants to tell. At the heart of this retrieval of the authentic Labour legacy lies a linking of the renewal of our culture and of pride in our regions with economic recovery.

This stems from the realisation that, if we are still sick in the UK, it is a psychological and not just an economic sickness. We need to recall who we are as a nation: the people who invented constitutional government and gave it to the world – and must continue to do so, freed from the shackles of excessive American influence. We also need to recall who we are in our localities. In Nottingham, to take my own example, we are a place of free manufacturing from medieval alabaster statues (which supplied the whole of Europe) through lace-making to modern bicycles and pharmaceuticals to the world market. We are a place of craft, skill and greenwood fraternity and sorority. That is the kind of pride and self-belief that will make us want to work in the future to any purpose.

And rather than relying primarily on state redistribution, we need to forge an economy that operates justly and fairly in the first place – both through the internal ethos of firms and professional associations, and through a new legal framework which demands that every business deliver social benefit as well as reasonable profit.

This does not mean, of course, that the state has no role. Alongside the admirable ideas of the “Big Society,” we need a new notion of the public that slides between the social and obligation to the state. It is at this point – following Lord Glasman – that we need to embrace the idea, not of Keynesian tactical government intervention, but of the strategic shaping of new economic institutions: systems of apprenticeships, entry conditions to work through the operation of professional bodies, new polytechnics, more visionary business schools, regional banks and partnerships between such banks, local business and new city-based parliaments.

We can renew our country if we renew our love for each other and for our common purpose. And by rejoining gift to contract we can recover at once our ancient English festivity and our spirit of genuine economic enterprise.

ABC Religion & Ethics Article

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