Economists are familiar with Gresham’s law, the principle that bad money drives out good money. What is less appreciated is that the theory also applies to politics. As the modern British Conservative Party amply demonstrates, politicians can enter a similar catastrophic loop where ideology drives out realism, faith confuses nuance and political purists banish pragmatists.
The political version of currency depreciation sees ideological factions drive out rival viewpoints in a battle that ultimately shrinks a party’s base. Parties that fail to stop this, especially in majority voting systems that reward large coalitions, are on the road to political decay.
This is not just a conservative problem. Jeremy Corbyn’s Labor Party provided the near perfect example after its hard left takeover of the party. Moderate MPs left, were expelled, formed new parties or simply sat in the back seats as the party plunged into ineligibility. Others fled Westminster for the sanctuary and autonomy of life as a regional mayor.
Another clear example of this political debasement is offered by American Republicans in the era of Donald Trump. Afraid of challenging the MAGA crowds, those in the party who should know better are complicit in the fiction of a stolen election and are securing candidacies by signing up to its platform. Once that happens, good people melt.
The Truss Tories aren’t in that league, but they show plenty of signs of late-stage political debasement. It’s a world where political purity trumps all other qualifications, so you elect someone as your leader who admits to being a poor public performer because he fits the ideological profile; as if, in modernity Politics, communication skills are just a “nice to have”. You can see it in the allies who denounce your Thatcherite rival at the head as a socialist because he raised taxes to protect public finances. Here, a Home Secretary, named to have led Brexit’s most hardline faction, describes a parliamentary backlash against a botched budget as a ‘coup’. Cabinet ministers bicker openly.
Intolerance is also relevant. For six years, the Conservatives have lost decent, traditional and talented MPs. Under Boris Johnson, the remaining rebels who were not actually expelled from the party were barred from power. Many left in the last elections.
Now framework, who won as the hard-right candidate, also struck supporters of her leadership rival Rishi Sunak from the full cabinet. Part of that is inevitable attrition. She’s not wrong to demand a team that backs her politics, but when even pragmatic Brexiter MPs are now outside the tent, the pool of available talent is dwindling. The weak drive out the strong.
Dismissing the top Treasury official signaled the ambitious to shut up. The ministers bow their heads. The result is a government that has no one with the political antennae and influence to control the ideological sugar rush – or to see how an unfunded tax cut for the wealthy during a cost of living crisis would happen, even before it spooked the markets and raised mortgage rates.
An argument can be made for Truss’ ideas – parties are, after all, supposed to have political leadership. But the vision must be anchored to the circumstances. You can only navigate the ocean you are in. Encouraged by free-market think tanks such as the Institute of Economic Affairs and the Taxpayers Alliance, Truss and his chancellor Kwasi Kwarteng crafted an ideology-fueled “mini” budget that matched neither the moment nor the markets. .
Can conservatives stop the decadence? Theoretically yes. Truss has more than two years before the election is called, enough time to change the narrative. Economic storms may subside. Labour’s huge advances in the polls are less a matter of enthusiasm for the opposition than of contempt for the government.
And there are a few positives. Truss eventually backed down on scrapping the top 45p tax rate. There is an effort to reset the relationship with the EU. Second-order policies are abandoned. It is urgent to ensure delivery; many conservatives praise the coordination skills of Nadhim Zahawi, the cabinet minister who describes himself as the government’s chief operating officer.
Some still hope to correct course. The revolt against the ‘mini’ budget has been led by former cabinet colleagues such as Michael Gove and Grant Shapps. A prominent rebel argued there was a battle to prevent ‘libertarians at the top’ from swaying the party away from conservative values or becoming the ‘political arm of think tanks’.
But these are thin straws to be grasped. There is also a rebellious party, a leader who cannot communicate with voters and who fractured the Conservatives’ winning electoral coalition, an inexperienced ministerial team and a shattered reputation for competence.
The public’s first impression of Truss was both disastrous and deserved. Maybe she will grow as a leader. The backlash can temper his instincts. But those of us who have seen previous governments disintegrate detect the familiar smell of death.
Historically, there is only one way back to the deepest loops: opposition. Parties lose office or are pushed out of office until they band together and learn to prioritize the concerns of voters over the feverish dreams of activists. Truss should appreciate that. This is the market solution.