The party of capitalism?

Most of us instinctively think of the Tories as the party that promotes capitalists' interests. But is this true?

In the day job, I point out that fiscal austerity, along with Cameron's apparent desire to see a fall in household debt, would both be bad for profits (except under unlikely conditions). This poses the question: if Tory policies threaten to depress profits, how can we say that the Tories are the party of capitalism?

One answer might be that they'd like to be the party of capitalism, but are also the stupid party, and so are incapable of seeing that capitalists' interests require - at least temporarily - a looser fiscal policy.

Another possibility is that they are playing a longer game. They believe that fiscal austerity will weaken workers' bargaining power (pdf) and so permit higher profit margins. But this runs into the objection that if austerity weakens aggregate demand we might have high profit margins but a low output-capital ratio and so a low profit rate - which is not obviously in capitalists' interests.

Yet another answer would be Kalecki's famous one - that governments must renounce activist fiscal policy in order to maintain capitalists' power in the longer-term by ensuring that the economy remains dependent upon business "confidence."

All these answers have a common problem. They render the claim that "the Tories are the party of capitalists" untestable. Pretty much any policy that seems to jeopardize capitalists' near-term interests can be explained away either as stupidity or as being in capitalists' longer-term interests.This poses the question: what evidence would disconfirm the claim that the Tories are the party of capitalism? Unless this can be answered, the claim loses any empirical interest.

There is, though, another possibility. Maybe it's not that Tories like the capitalist class, but rather that they hate the working class.

Comments

[Alex]

The radical consensus suggests that the Tories are the party of finance, not the party of capitalism.

[Alex]

(because links are evil and must die)

http://www.harrowell.org.uk/blog/2012/08/23/the-radical-consensus/

[Zorblog]

One more fantastic post!
Now drop the rationality assumption and re-ask the question.
Or put another way, is stupid synonym of not rational? Not so sure...

[Steve]

They're trying to be the party of good government, reducing spending at a time when it is out of control.

In a democratic system the right wing are the team that pretends to be competent, and the left wing are the team that pretends to care.

Sadly, this being a democracy, neither team has the political will to actually fix anything, so things will likely worsen until some kind of dictator steps in.

[Roger McCarthy]

This is precisely how Carl Schmitt defined 'being political' as a largely negative process of identifying who are your enemies and how you can best hurt them within a particular set of constitutional constraints.

So yes IMO Tories do define themselves by their hatred of the working class and there are indeed circumstances when you can visualise them actually taking a personal financial hit in order to inflict more harm on those enemies.

In what sense is Lord Ashcroft for instance acting as a rational profit-maximiser in devoting huge sums to to the Tory cause - his main business interests are not even in the UK and the very public nature of his support makes it actually rather difficult for the Tories to pay him back in state contracts or whatever.

And Tory MPs who actually boast/complain that they could be making so much more money as full-time directors or lawyers or whatever are AFAICS in general not lying - and some like Zac Goldsmith are spending far more of their own money as MPs than they could conceivably ever hope to get back.

This may even apply to the Kochs and Adelsons - even though the transfer of wealth promised them by a Romney Presidency is truly vast the risk of their not getting that result is very high and any non-ideological profit maximiser would surely back a pragmatic liberal like Obama and look to a more expansionary economic strategy to raise their overall wealth in the longer term.

So there again sheer visceral hatred seems to be the key.

And have you actually looked at rates of profit? - I did last week and noticed that after rising quite rapidly from the ditch of 2009 they started falling again in Q4 and Q1.

[Robert Allen]

And yet countless so-called working class conservatives both vote for the Tories and support them.

[Roger McCarthy]

Hardly countless.

30 million voters in 2010 of whom 20% were DEs and 30% of DEs voted Conservative so we're talking about 1.8 million working class Tories

Add in C2s as well and that's 4 million.

But given the lower propensity of the working class to vote we're still only talking about a fifth or less of them who vote Tory.

So hardly remarkable given just how much propaganda effort goes into persuading them to vote against their own interests.

[rogerh]

I lean to the left politically speaking and I tend to think 'Tories' are a bit stupid, but not sure why. I disagree with many of their views and find some uncongenial but not sure why.

I doubt Tories are playing a 'long game' but I do think governments have to pander to the rich - they generally start and run businesses. Usually governments fail at this job.

However, do Tories hate the working class? - they may have done, now I suspect they don't care - they have no use for the working class - the unemployed and low-waged are the State's problem. Worse, I suspect the cutoff point of 'useful to a Tory/not useful to a Tory' is slowly shifting up the social spectrum. Ultimately this trend (if true) will make Tories less votable unless the media is on-side and the Levenson/Murdoch business will not help that - unless of course Labour fail to present a credible opposition.

[pablopatito]

I agree with Alex. The Tory party is the political wing of the City of London. As Vince Cable put it, the interests of the financial sector "are often not the same as those of the real economy".

Please write a blog explaining if fiscal austerity is good or bad for the financial sector.

[Charlie B]

Hmmmm, Capitalism is a method for ownership of the means of production being maintained in private hands. Socialism sees that process reversed. So I would say that if Government debt got to the point where there was a need to confiscate wealth (being the means of generating future production) then that would be avowedly socialist.

Therefore trying to reduce the deficit to prevent this is supportive of Capitalism surely? Certainly the steps to place more elements of production in private hands that had previously been state owned (free schools, NHS outsourcing, G4S) would seem to be fairly capitalist in nature.

Also, I am not sure the Tories do hate the working class, necessity is not the same as intent. Ultimately, I'm pretty sure the Tories would love to give everyone free puppies to guarantee they stay in power, but the fiscal reality (or the perceived fiscal reality) is that this is not possible. To play the devil's advocate, the fact that Labour handed out the freebies for as long as they did suggests contempt for the working class, as merely votes to be bought with goodies rather than intelligent enlightened members of society with whom an argument can be laid. A populace so blinded to other's needs that they look only to their own needs and vote to maintain their entitlements...? (exhibit a - the baby boomer generation)

[NomadUK]

I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative. I believe that is so obviously and universally admitted a principle that I hardly think any gentleman will deny it.  
 
- John Stuart Mill, letter to the Conservative MP, Sir John Pakington (March, 1866)

[pablopatito]

@Charlie B, exactly what freebies did Labour give out to the working classes? I must have missed them.

[Alex Bell]

This post is ridiculous, completely wrong and, as you call the Conservative party "stupid".

I'll tell you why it's wrong. This supposed debilitating austerity is a myth - government spending is actually up this year by 3% and the period to eliminate the structural deficit has been extended by 2 years.

Secondly, dealing the nations debt inherited by one of the worst ever Chancellors Gordon Brown was UNANIMOUS across all parties. Yes, Labour wanted to take an extra couple of years to do it but it's small scale political squabbling masquerading as a major doctrinal dispute.

OF COURSE nobody wants to make big cuts, it has a contractionary effect on growth and no serious person would argue that it doesn't. However, unfortunately the UK had reached the situation where it had no choice but to act or face losing its funding from the markets. the UK's fiscal deficit was above 10% a year, third largest in the world more or less after Greece and Spain, which in case you don't know what means, signifies that every year the government debt increases by 10%. Not to mention private debt which was and still is around 160% and you have a total public and private debt at around 260% of GDP, with only Japan higher. And you know what happens with debt? YOU HAVE TO PAY IT BACK

Yes you do, sooner or later, whether you are forced by the creditor or whether you take the decision that this burden is unsustainable and start to try and reduce it before the interest payments eat up all of your income. The more debt you take on the more money is spent paying off interest payments and less on investment, education etc...A little bit of debt is good but when a country has OVER DOUBLE ITS GDP IN DEBT what do you think is the likely outcome? Throw in a sovereign debt crisis to your biggest export destination and it's not looking too great anyway...

Making cuts is hard, which is why countries never do it in the good times. The UK's growth would have been stagnating anyway with so called austerity, consumers and corporates are DELEVERAGING - that's what happens after a massive debt boom and financial crisis. The UK government generated candyfloss revenues during the boom years to make a wholly unaffordable expansion to the state and is now paying the price.

Sure, maybe growth would have been 0.2-0.4% higher a year but for the purpose of establishing a credible plan to elimate the structural deficit and being able to borrow at low rates and (somehow) maintaining a AAA credit rating, which happens to be extremely important in the UK which has a huge financial sector dependant on this rating, it was definitely worth it.

In this environment, there is no quick and easy way to create growth. The Conservative government has attempted to improve UK's supply side and make it a more attractive business environment but hasn't gone nearly far enough - here is where you can justifiably criticise the government. But of course it's much easier to go for the same absurd, juvenile arguments that the Conservatives hate poor people.

Those brave enough to make foresighted changes will have left long before the full benefits are appreciated by voters, and, the writer of this blog (whoever he/she is) really needs to get this into their heads - the world doesn't owe you a guaranteed standard of living, your economic growth, your productivity, your innovation have to justify it. You can't just go on a debt-fuelled binge forever to solve all underlying economic ills. Surely the past has proven this?

[Charlie B]

@pablopatito hmmmm, what did the Romans ever do for us?

But serious answer...http://www.ifs.org.uk/bns/bn92.pdf

Given that we were running a deficit in a growing economy before the 2007 crash it must have gone somewhere, indeed it increased in real terms by some 50% over Gordon Brown's tenure. At a guess I would say the large increase in NHS spending, increases in education spending, Surestart, Housing benefit, welfare.etc. Your answer is revealing as despite that increase you seem underwhelmed...maybe it wasn't very wisely spent. As with most things it not just the quantity, it's the quality...

[Sam]

Traditionally, the Conservative party has been more the party of the landowner than the party of the capitalist. It certainly has an unabashedly capitalist group within it, but most of the party has an ambivalent relationship with capitalists.

And while a loose fiscal policy is better for the capitalists, it doesn't sit well with the landowners, who see it as "giving away their stuff".

Perhaps the fact that the current administration talks a lot about austerity whilst pursuing policies that, whilst not as spendthrift as the Brown years, aren't actually very austere tells you that the Tory capitalists are less stupid than the landowners.

[Blissex]

«Conservative party has been more the party of the landowner than the party of the capitalist.»

More broadly of the rentier, which covers also a lot of finance and a lot of capitalists.

But in recent times it has been like New Labour and even more more so than New Labour the party of the "aspirational" middle classes, that is of property speculators.

The past 20-30 years of politics in the UK and elsewhere have all been about redistributing income from workers to rentiers by delivering massive low-tax or tax-free capital gains on property owned by the speculative middle classes.