Liz Truss has emerged victorious in the Conservative Party race to succeed Boris Johnson and will be named Britain’s new prime minister by the Queen on Tuesday. For them, this is the culmination of a long political journey.
By her own account, Truss grew up in a “left-wing household” and accompanied her parents to protest marches. She later joined the centrist Liberal Democrats and at the age of 19 gave a speech at their conference calling for the abolition of the British monarchy. Over time, it shifted from the left side of the spectrum to the pro-market right side.
At the university, Truss read Friedrich von Hayek. She discovered her love for entrepreneurship and the private sector – and joined the Conservative Party. That was in the mid-1990s: Tony Blair’s New Labor was on the rise. The Tories were extremely unpopular after the fall of Margaret Thatcher. Joining a party was therefore a clear ideological statement.
By the time she was elected to the House of Commons in 2010, Truss had finally turned to right-wing libertarianism. She founded the Free Enterprise Group, a contact point for other pro-market Tory MPs of her generation, the so-called “Thatcher children”. She stood out above all for her commitment to deregulation, lower taxes and a smaller state.
As she rose through the ranks of ministers – first in the Ministry of Education, then in the departments of environment, justice, finance, international trade and finally as foreign minister – she became a key player in a transatlantic network of pro-business think tanks.
This network owes its existence to the Mont Pelerin Society, named after a gathering of economists organized by Hayek in Switzerland in 1947. Members of this group later founded free-market think tanks in the United States (like the libertarian Cato Institute and the conservative Heritage Foundation) and the United Kingdom (like the IEA, the Institute for Economic Affairs, and the Adam Smith Institute). These ultimately provided the intellectual basis for Reaganomics in the US and Thatcherism in Britain.
To understand Truss, one must understand this network. It is a tight transatlantic network of intellectuals and institutions between Washington and London. The Free Enterprise Group, for example, functioned effectively as the parliamentary arm of the IEA. Truss has recruited many of her senior policy aides from institutions such as the IEA and the Adam Smith Institute.
Truss laid out her vision in a speech at the Cato Institute in 2018. She wanted a new “Anglo-American dream” with less regulation and lower taxes for the generation of “market millennials”, as she called them. These are young people who grew up with the Internet economy and demanded a high degree of choice and individual freedom.
“Free enterprise is an ode to individuality and nonconformity,” Truss told her American audience. This free enterprise allows “the youth to thrive and the anti-establishment to thrive.”
The only major departure was Truss’s decision to oppose Brexit in the 2016 referendum, unlike the rest of the libertarian right in the Conservative Party. This is probably best understood as opportunism. Because since then, Truss has become the darling of the “Hard Brexit” wing of the Tories.
She stylizes herself as a fighter for an Atlantic and entrepreneurial Britain that has been liberated from the supposed constraints of the EU market – and thus the European social model. During the current leadership struggle, she has always insisted that she will not compromise with the EU in the dispute over goods controls at the border between Northern Ireland and the rest of the UK.
But there is a paradox: Truss takes office in the midst of an economic hurricane. UK inflation is expected to peak at 22 per cent and real incomes are set to fall by 10 per cent by 2024. Many small businesses are already going bankrupt, including the pubs so loved by the British.
There is broad agreement in Westminster that Truss’s proposals to ease the burden on budgets through tax cuts rather than “handouts” will prove grossly inadequate.
Rather, a gigantic package of various state interventions would be necessary to prevent widespread impoverishment. In the long run, taxes will have to rise to finance this. Truss’s notion that she has the political and economic space to wage a trade war with the EU (which is still by far the UK’s largest trading partner) is ridiculous.
Truss has to make a decision. It can hold on to its deep-rooted and long-cherished Hayekian and hard-Brexit principles. Or she can jettison those principles and instead offer government economic measures and a no-holds-barred Brexit policy to limit the slump in British living standards — and thereby secure a chance at power in the next general election in 2024 stay. The question is: how does Liz Truss decide?
