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How Late Liberalism Undermines Itself

Just as surely as the French Revolution devoured its children, modern-day liberalism is eating itself, and destroying with it all the norms and institutions that help complex societies to mediate differences. As liberalism grows illiberal, as it turns its back on pluralism, its universalism gives way to relativism, and its belief in the inevitability of progress is contradicted by live events; its contradictions and failures mount. Just like other tired ideologies and struggling regimes, it sinks into a state of conflict with the people it claims to understand and does what declining systems of government always do: it bestows privilege and prizes upon its favorites, while disregarding the suffering and needs of those it does not favor.

Today the millions who once worked for British and American manufacturing companies have little reason to bow before the altar of globalization. Those who live in the communities ravaged by deindustrialization still wait, in vain, to be rescued by the invisible hand of the market. Those affected by severe social problems, like drug addiction, family breakdown, and persistent antisocial behavior have little time for the simplistic niceties of John Stuart Mill’s harm principle.

As liberalism has grown more ideological, it has started to attack and destroy the customs and institutions that help us to forge common identities, build up trust, encourage reciprocity among strangers, and reconcile the natural and never-ending conflicts of values and interests that occur in human society. For years liberals explained pluralism as the means by which, together with our rationality, we build an ever more perfect society. But this idea carries with it less and less conviction among those in the societies it has created. Those with a different vision of a better future are routinely dismissed as irrational, sinister, or simpletons who want to cling to outmoded ideas—such as religious faith or any other tradition that sets limits on individual freedom.

And so, when they see their fellow citizens struggling, and when, far from the megacities they call home, they see communities in crisis, many liberals feel not sympathy but scorn. In the words of Janan Ganesh, a Financial Times columnist, liberal Londoners, like those living in other prosperous communities around the West, “look at their domestic stragglers and feel . . . shackled to a corpse.” The best response for prosperous liberals, he says, is to simply ignore the stragglers altogether: “a seething minority is still a minority.”

Janan Ganesh is far from alone. In America, Hillary Clinton spoke dismissively of the “deplorables” who, inexplicably, chose not to vote for her. In Britain, the same disdain is directed towards the many working-class voters who chose to leave the European Union. Writing in the Observer, Nick Cohen complained that “it is as if the sewers have burst,” and described Leave voters as “a know-nothing movement of loud mouths and closed minds.” Sir Vince Cable, then leader of the Liberal Democrats, said the Brexit vote was “driven by a nostalgia for a world where passports were blue, faces were white, and the map was coloured imperial pink.”

Matthew Parris, a columnist for the Times and a former Conservative MP, reported back from Clacton, a working-class town in Essex. “Only in Asmara after Eritrea’s bloody war,” he wrote, “have I encountered a greater proportion of citizens on crutches or in wheelchairs.” Summing up, he said: “This is Britain on crutches. This is tracksuit-and-trainers Britain, tattoo-parlour Britain, all-our-yesterdays Britain. . . . I am not arguing that we should be careless of the needs of struggling people and places such as Clacton. But I am arguing—if I am honest—that we should be careless of their opinions.”

These statements may be unusually blunt, and injudiciously honest, but they represent a school of thought among liberals and those who govern us. They reflect a divide within our countries, between elites who have come to disrespect the masses and fear democracy, and many ordinary citizens, who have reached the conclusion that they are governed by a class with no knowledge of and no interest in the lives of people like them.

Free Falling

Are they so wrong to come to this conclusion? Ordinary people, living mainly in provincial cities, towns, and the countryside, have to contend not only with market fundamentalist policies that have made them poorer and less secure. They also have to contend with policies that explicitly work against their interests.

In Britain and America, the laws and regulations that govern markets have changed—quietly, slowly, imperceptibly—in ways that suit big business, investors and the executive classes, but which work against the interests of ordinary workers and citizens. Yet our leaders behave as though markets are naturally occurring phenomena. Proposals to change the rules to make markets work fairly are routinely rejected, because to do so would be “anti-market” and therefore “anti-business” and bad for economic growth.

This market addiction is based on the misconception that personal freedom is the preeminent human value. It fails to account for market failures caused by imperfect information, a lack of competition, or unfair competition, often from companies backed by foreign governments. And it fails to appreciate that markets are man-made constructs that can be reformed and made to work better.

The laws that underpin markets are there to ensure that trades are conducted fairly and to increase confidence that contractual commitments will be met. These laws are not, and should not be, limited to trades between businesses selling to one another. They should include, too, trades between employers and employees and sellers of goods and services and their customers. This is why in the past, as capitalist economies developed, and as our countries became more democratic, governments regulated markets to create a more civic capitalism that protected the interests of workers and consumers and wider society too.

Many changes were resisted by the vested interests of their day. Far from being a drag on growth, however, many new regulations made further growth possible. Factories were made safer, children were educated, and housing was improved. There was compensation for workplace injuries as well as pensions and support for people who found themselves out of work. The environment was protected. Trades unions were recognized, their roles confirmed in legislation and collective bargaining was permitted. Later in Britain, a minimum wage was introduced and new benefits—covering maternity pay, paternity leave, and protections in a variety of other circumstances—were introduced and extended.

This civic capitalism was not only about complying with the law. By paying their taxes, contributing philanthropically, and educating and training local people, many companies not only met their legal obligations but also became important community institutions. In doing so, they made sure that the foundations of capitalism—a skilled and healthy workforce, a prosperous consumer society, civic confidence and social capital, infrastructure and institutions—grew stronger.

But liberals have allowed this civic capitalism to decline. In particular, the relationship between labor and capital has become precariously unbalanced. In part, this is because large structural changes, like globalization and changing technology, are squeezing Western workers. In Britain, our low-skill, low-productivity, low-wage, high-immigration economic model also puts workers on a weaker footing. But the imbalance between labor and capital has also been brought about deliberately through government policy.

Today, fewer than one in seven private sector workers in Britain is a member of a trade union. The total number of unionized workers has fallen from thirteen million in 1979 to 6.2 million in 2017. Nine in ten workers were subject to collective bargaining in the 1970s, while today fewer than three in ten negotiate their pay collectively. Over the same period, labor’s share of national income has fallen from two-thirds to just over one half. While Britain has a history of poor labor relations and irresponsible trade union leadership, studies prove what many trade union members know: organized labor can increase wages for its members through collective bargaining. But government policy has sought to limit the role of trade unions and decentralize pay bargaining as far as possible.

Instead of emphasizing collective rights, British governments since Margaret Thatcher have prioritized individual workplace rights. But these rights are only of use to workers who are legally entitled to them: many workers are not, because they are made to work as self-employed contractors or because their employment is casual—meaning that they never reach the qualifying period. More than 15 percent of British workers are self-employed, and more than 6 percent are in temporary work. Around 3 percent are on “zero hours” contracts, which offer only limited rights and protections. Studies suggest “hidden employment” is common, where employers evade their legal responsibilities by deliberately recruiting agency workers rather than full-time employees. Prominent complaints about employers’ conduct include the unauthorized deduction of wages, unfair dismissal and exploitative terms and conditions.

And these rights are only of use to people if they are applied to those who are entitled to them: there is plenty of evidence that rights are simply not enforced for many workers. According to official figures, there are 342,000 jobs that pay below Britain’s National Living Wage, notably in hospitality, retail, and childcare. Another prominent form of “wage theft” is unpaid holiday pay, worth at least £1.8 billion, and affecting an estimated one in twenty workers. Similarly, temporary workers are often encouraged to opt out of their right to receive the same wage as permanent workers, which begins after twelve weeks of work, in return for “pay between assignments.” But this pay is often withheld, costing workers an estimated unpaid wage of around £1 billion each year.

The decline of countervailing power has consequences not only for pay and conditions but for the protection of jobs. Manufacturing jobs have been exposed brutally to the reality of global competition, while other jobs have not. Professionals who provide services have been shielded from globalization through nontariff barriers to trade including, for example, the need to have specific qualifications and licenses to practice. Meanwhile, low-skilled and unskilled workers in both manufacturing and service sectors have faced competition for work and lower wages caused by mass immigration.

As the labor market changes and more people find themselves in self-employment and temporary work, this countervailing power will decline further, and more people will become exposed to the risk of exploitation. Yet the liberal policy response has not been to try to protect workers, but to celebrate the rise of the gig economy. Never mind that the reality of the gig economy already means the loss of rights and protections for many workers, never mind the fact that the relationship between big tech companies and their workers amounts to a form of neofeudalism. For today’s liberals, individual freedom and the untouched market is still all that matters.

While workers in the middle and bottom of the labor market struggle, those at the top have never had it so good. Britain’s broken corporate governance renders shareholders, workers, and consumers powerless, and leaves the executive classes largely unaccountable and very well paid. In the last twenty years, executive pay has more than quadrupled. In 1998 the average FTSE 100 chief executive earned £1 million. By 2015 it had increased to £4.3 million. In 1998 chief executives were paid on average 47 times what their employees earned. Today, the ratio is 128 to 1. Over the same period, the value of the companies they run has hardly increased at all. Yet economic liberals attack any attempts to reform corporate governance as “anti-market” and either block or water them down.

Redistributing Upward

In Britain, despite massive regional disparities in productivity, prosperity and pay, public investment goes mainly to already-rich London and the South East of England. Almost half of all public investment in research and development, for example, goes to London, Oxford, and Cambridge. On transport, London receives more than a third of all spending in England, amounting to more than twice as much per capita as any other part of the country. London also gets more than anywhere else in the country when it comes to school spending. In total, both local and national government spending per capita is higher in London than anywhere else in the country.

But this is not the only way in which, in Britain, liberal elites have been quietly redistributing to the rich. Despite being a deeply unequal society—of G7 countries, only the United States has higher income inequality—several important policies are making the rich richer, cementing the position of the powerful, and keeping ordinary families in their place.

The consolidated wealth held by Britain’s richest 10 percent of households is already around five times greater than the wealth of the bottom half of all households combined. But now there are several reasons to worry that the divide will get even worse.

The main components of the country’s wealth are pension savings and real estate. And yet, while savings for average income groups remain insufficient, tax relief on pension savings has for years disproportionately benefited higher earners.

Pension savings benefit from 100 percent tax relief, and until recently were subject only to generous annual and lifetime maximum caps. Recent changes should reduce the benefits for rich savers, but as recently as 2015–16, the top 11 percent of income taxpayers accounted for 52 percent of pension tax relief. The top 1 percent, with incomes of more than £150,000 and more, accounted for 15 percent. Yet those earning less than £20,000 per year—40 percent of taxpayers—accounted for just 7 percent of pension savings attracting tax relief. And the cost to Treasury revenues is considerable: total pension tax relief is worth an estimated £38.6 billion per year.

So for the biggest component of the country’s wealth—pension savings—government policy has been helping the rich to get richer. And the same is true for housing, the second biggest component of wealth in Britain.

International studies show that countries with low homeownership rates, such as the United States and the Netherlands, tend to be those with the highest levels of wealth inequality. Yet this is the direction in which Britain is heading. Homeownership in England has been falling since 2003, long before the great financial crash. Young people are increasingly likely to find themselves trapped for years in rented accommodation. And more people now own their home outright than pay a mortgage, demonstrating not only the difficulties faced by the hard-pressed and the young, but the consolidation of wealth by the affluent and the elderly.

The average house now costs almost eight times average earnings, the worst ratio on record. The proportion of people living in the private rented sector has doubled since 2000, and more than 2.2 million working households with below-average incomes spend more than a third or more of their disposable income on housing. It should be no surprise, then, that British households are among the most indebted in the developed world.

Liberal politicians talk about fixing Britain’s housing crisis, but their ideology prevents them from taking the measures that would achieve that. Immigration, for example, is behind 37 percent of new demand for housing in England, yet nobody shows any intention of reducing or controlling the numbers of people coming to Britain.

Neither has government addressed the market failures that mean far too few houses are being built. Britain has not built the number of houses it needs since the state, in the form of local authorities, built significant numbers itself, often totaling more than one hundred thousand per year. Similarly, successive governments have failed to address the over-consolidation of the construction sector, which allows firms to engage in land banking, then build out slowly and profiteer.

But the problem is also about the financialization of housing. When the normal means of buying a home—through mortgage borrowing, savings, inheritance, and gifts and loans from the “bank of mom and dad”—are supplemented by government finance schemes, housing prices will inevitably rise. Yet this is what ministers have done.

“Help to Buy,” the government scheme set up in 2013, lends people up to 20 percent of the cost of their new home, if they have a 5 percent deposit and a mortgage for the remaining 75 percent of the value of the house. In London, the government loan increases to 40 percent and applies to homes worth up to £600,000. No interest is charged on the government loan for five years, and the home must be newly constructed.

Unsurprisingly, the scheme has significant deadweight costs. Thirty-five percent of recipients could have afforded a home without the government subsidy; 40 percent of the loans have gone to people with annual incomes above £50,000. And it is expensive: one official analysis shows it took up 45 percent of the government’s housing budget in 2016–17. But just as bad, Help to Buy has increased house prices even further, because property developers have baked the government subsidy into their prices. The valuation of new-build homes leapt suddenly after Help to Buy was introduced and has increased faster than older homes since.

In multiple ways, then, government policy is inflating the price of housing assets, redistributing to the rich and making it harder for those without wealth, or worse, those with debts, to catch up. And yet there is one further way, which is what the former chancellor, George Osborne, used to call “monetary activism.” Ultralow interest rates and quantitative easing, in the form of half a trillion pounds of newly created money, did not cause rampant inflation as some predicted, but a narrower and hidden form of inflation instead—in the form of higher prices for housing and financial assets including pensions savings.

The Bank of England has defended monetary activism robustly, saying “the overall effect of monetary policy on standard relative measures of income and wealth inequality has been small.” And it is certainly true that following the financial crash, monetary policy supported the incomes of younger workers and those with less wealth by keeping the real economy going.

The Bank insists that, relative to the income and wealth enjoyed by different households before monetary activism, the effects of the policy have been similar for rich and poor alike. But this is a strange way to look at things because, as the Bank admits, “the marginal gains from . . . changes in monetary policy for wealthier groups are estimated to have been much larger in cash terms than for less wealthy households, with the main contributions coming from higher housing wealth and pension wealth.” In the years following monetary activism, the poorest 10 percent of households experienced only a marginal increase in their measured real wealth of around £3,000, compared to £350,000 for the wealthiest 10 percent.

From academia to the OECD, many studies show that monetary policy has made the rich richer. As the Bank of England’s own chief economist has said, to a significant degree, the recovery after the financial crash belonged to “those already asset-rich.” And who should be surprised? It was the deliberate aim of monetary activism to redistribute to the rich, by increasing the value of financial assets and maintaining the value of overpriced housing assets.

Divisions and Contradictions

The problem is not only economic. With violent demonstrations, mobs pulling down statues of historic figures, and campaigns to “defund” the police, the cultural consequences of liberalism are also becoming plain to see. With culture as with the economy, first liberalism divides us and then it picks a side.

There is nothing inherently wrong with identity politics, if by that term we mean leading political debate with the welfare of specific groups in mind. Just as understanding class identity can help us to inform political decisions, respecting group identities can prevent us from ignoring the wants and needs of many fellow citizens. Without moderate identity politics—which have promoted the rights and welfare of different minorities—we would certainly be a more unequal and less fair society.

Thanks to the likes of Martin Luther King, or the Suffragette and Suffragist movements for example, there has been a great transformation in social attitudes in Britain over the course of the last twenty or thirty years. Huge majorities now reject homophobia, racism, and sexism. But these campaigners of old differ from contemporary, identity-obsessed liberals. While the older generation fought for equal rights and an equal political status, today’s identitarians demand that we recognize and reward difference.

To understand how this change has come about, we need to understand the postmodernist philosophy that shapes modern cultural liberalism. Influenced by thinkers like Michel Foucault, cultural liberals believe discourse is oppressive. Language, customs, and traditions all exploit the weak and prop up the powerful. Even victims of the powerful participate in their own oppression through their own language, stories, and assumed social roles.

And so equal political and civil rights are not enough. Oppressive discourses perpetuate exploitative hierarchies, so we need to penalize people who share the characteristics of those at the top. Because power lies with white men, whiteness and masculinity must now be attacked. Because we do not understand how our social roles are constructed, we do not understand even our own words. So those who hear us, especially oppressed groups, understand better than us the true meaning of what we say. And because discourse is a form of violence, violence is a legitimate response to oppressive language.

As a result, the customs, norms, and institutions that once brought us together are no longer venerated, but assaulted as bastions of oppression. And so the bonds between us are destroyed. In place of a cohesive society, with common habits, symbols, and traditions, we are reduced to membership of fragmented groups defined by our identities that inevitably conflict with one another.

The identities that are becoming more politically prominent are based on sexuality, ethnicity, religion, and gender. More traditional identities, based on community, class, and nation, are becoming less prominent. And a more militant form of identity politics—in which all political issues must be judged through the prism of identity, minorities are expected to identify politically with their group, nonmembers are seen as incapable of representing minority group interests, and a special status is granted to minority groups—is now widespread.

To the practitioners of militant identity politics, the individuality of people from minority backgrounds counts for little. When Boris Johnson appointed the most ethnically diverse cabinet in Britain’s history, the response from identity-obsessed left-liberals was not to welcome the news, but to condemn the black and Asian ministers he appointed. One left-wing journalist, who happens to be white, even said: “Someone from a minority group who chooses to serve in a far right government is no longer a person of colour. They’re a turncoat of colour. It’s one thing to opt out of fighting oppression, quite another to legitimise it with your own skin.”

Militant identity politics runs into the inevitable clash between human values and interests. In 2019, when a school in Birmingham taught pupils about homosexuality, hundreds of Muslim parents protested outside the school gates and six hundred children were withdrawn from lessons. At one protest, parents held signs that read, “Say no to promoting of homosexuality and LGBT ways of life to our children,” “Stop exploiting children’s innocence,” and “Education not indoctrination.” The local Labour MPs defended the parents and their behavior.

Other examples abound. Thousands of cases of “honor violence” are recorded every year, mainly against women. Forced marriage and polygamy are illegal, yet believed by the authorities to be widespread. An estimated 170,000 women in Britain live with the consequences of female genital mutilation. The authorities, often reluctant to intervene in what they see as cultural matters, often let these crimes go unchecked. There has only ever been one prosecution in Britain for female genital mutilation.

Liberalism’s journey from universalism to moral relativism is not the only perverse consequence of identitarianism. Members of the Labour Party are increasingly concerned that the use of all-women shortlists, designed to increase female representation in Parliament, is now undermining attempts to increase black and ethnic minority representation in the House of Commons. According to the logic of militant identity politics, women are a disadvantaged group who need to be protected. Clearly men can make way for them, but what if those men are black and therefore members of another disadvantaged group? And what about that dramatically underrepresented group, the working class?

These examples all demonstrate how identity-obsessed liberalism ends up causing tensions and rivalries between the groups it is supposed to support. But this is nothing compared to what it does to attitudes towards the majority group. Militant identity politics requires continuous evidence not only of disadvantage but discrimination and the oppression of identity-based groups by society in general and white people in particular.

Discrimination and disparities in the experiences of people from different ethnic backgrounds undoubtedly continue. But we cannot hope to build a tolerant, trusting society capable of overcoming differences in values and interests without customs and institutions that help to forge shared identities and a peaceful common life.

Militant identity politics attacks these very things. It undermines trust in civic, legal, and democratic institutions. It can be repressive for individuals, who are expected to conform by expressing their views only through the prism of their group identity. And it can undermine people’s affiliation with other, vital identities, such as their attachment to their immediate locality, region and nation. The culmination of this cultural liberalism, in Jonathan Haidt’s words, is no longer the politics of our common humanity, but the politics of the common enemy.

The Liberal Dystopia

Herein lies the explanation of how liberalism brought about the West’s division, disorder, and decline. Like all other ideologists, liberals are engaged in a rebellion against human nature. They want to make the world something it is not, and something it can never be. They want to force people to conform to the expectations of their theories. And they hate the people—and the communities, traditions, and institutions they hold dear—when they fail to conform.

They are, as Burke said of Rousseau, lovers of their kind, but haters of their kindred. Their liberal utopia, like all utopias, is proving to be unavoidably oppressive. Those who challenge the liberal version of progress are deemed irrational, nefarious, or bigoted. And the wanton destruction of unifying traditions and institutions makes the mediation of clashes in values and interests impossible. The result is social breakdown, violent disorder, and a state that can no longer even keep the peace.

As the edifice crumbles, liberals are rushing to attack those who disagree with them, while bestowing privileges upon their favorites. And as they do so, they grow similar to their philosophical enemies they so despise. By rigging the system in favor of their own supporters, they resemble the populists they love to warn against. By refusing to change, even as the absurdities and failures of their ideology become apparent to all, they resemble their own caricature of conservatives, whom they allege can never change.

Change, however, is precisely what is needed, and what conservatives—liberated from liberalism—must deliver.

This article is an American Affairs online exclusive, published November 20, 2020.

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