Following the brutal market backlash against her plans for unfunded tax cuts and tens of billions of pounds in additional spending, Liz Truss resigned as British prime minister, succeeded by her Tory rival, Rishi Sunak. The international media is now struggling to make sense of it all, but the task may be impossible. I have been working at it for over a decade and remain perplexed.
In 2007, I wanted to learn more about Friedrich von Hayek and "Austrian economics" -- the inspiration for Ms Truss's libertarian philosophy -- and so attended a two-week summer school programme organised by the Foundation for Economic Education (FEE) in the United States. Founded in the mid-1940s to incubate free-market ideology, FEE emerged as one of America's first and most influential right-wing think tanks. All the "greats" of libertarianism -- including its high priest, Ludwig von Mises, the journalist Henry Hazlitt, and Hayek himself -- had convened under its auspices.
I was immediately struck by how different the organisation felt compared to other think tanks and academic forums I had encountered. One minute, we were all innocently agreeing that individual liberty is a valuable principle; the next minute, we found ourselves on a philosophical rollercoaster ride, with the concept of "self-ownership" hurtling us toward fantastical places.
I remember well the key points that were drilled into us. First, liberty is both the necessary and the sufficient condition for the maintenance of human dignity. Second, freedom amounts to the protection of individual liberty from state encroachment. Third, governments exist in opposition to their people. The final point was that markets -- propped up exclusively by private property (an extension of "self-ownership") and contracts (the basis for voluntary exchange) -- are the only just means of ordering society.
During my first week at FEE, I was convinced that I would succeed in setting up a Socratic dialogue: "Isn't inheritance anti-meritocratic?" I asked. "What if we defined freedom positively (as 'freedom to' rather than 'freedom from')?" "Are market failures worse than the state failures the libertarian perspective emphasises?"
No one else chimed in. They nodded in glazed agreement with the instructors. By the second week, I had been silenced. Given the slippery slope of libertarian logic, I was alarmed to learn that FEE also held "summer camps" for schoolchildren. FEE was not a forum for critical engagement; it was an indoctrination programme -- an intellectual cult.
Imagine my surprise to see a decidedly libertarian political doctrine pursued in the UK, the country I have long called home. Ms Truss and her (first) chancellor of the Exchequer, Kwasi Kwarteng, will now be remembered primarily for their undying faith in the power of tax cuts -- including on the country's highest earners and corporations -- to spur growth. Even though the country is experiencing double-digit inflation and a massive cost-of-living crisis, they apparently didn't foresee any problem in announcing £45 billion (1.7 trillion baht) in unfunded tax breaks.
Ms Truss's "mini-budget," unveiled on Sept 23, read like something handed down from the libertarian high priesthood. Ms Truss and Mr Kwarteng offered a preview of their agenda in the 2012 book Britannia Unchained, which was strongly influenced by Hayekian think tanks like the Institute for Economic Affairs (the British counterpart to FEE). The book, co-authored with three other Tory politicians (Priti Patel, Dominic Raab, and Chris Skidmore), bemoaned Britain's supposedly "bloated state, high taxes, and excessive regulation", hallmarks of the "nanny state" that had been coddling "idle" Britons and allowing them to work too little and retire too early.
Likewise, the EU was characterised as a super-nanny that was smothering British competitiveness. The book warned that Britain was becoming a second-rate power in Europe and a third-rate power in the world. Four years later, those arguments became the driving force behind Brexit.
Ms Truss and Mr Kwarteng's agenda triggered a run on the pound, which hit its lowest level ever against the dollar. Projected mortgage payments rose sharply, and British bonds dropped in value, forcing the Bank of England to step in as market maker of last resort. The IMF weighed in to voice concerns about the UK government's plans. Trussonomics -- one of the most ambitious attempts at libertarian economic policymaking in living memory -- failed to last a month. It was a costly experiment. Ms Truss's policy misadventure has addressed all the questions that my time in Irvington-on-Hudson: when put into practice, libertarian philosophy does indeed wilt faster than a head of lettuce. ©2022 Project Syndicate
Antara Haldar is Associate Professor of Empirical Legal Studies at the University of Cambridge.
