The Rise of Conservative Capitalism: Ideological Tensions within the Reagan and

Thatcher Governments
Author(s): Kenneth R. Hoover
Source: Comparative Studies in Society and History , Apr., 1987, Vol. 29, No. 2 (Apr.,
1987), pp. 245-268
Published by: Cambridge University Press

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 The Rise of Conservative Capitalism:
Ideological Tensions within the
Reagan and Thatcher Governments
KENNETH R. HOOVER

University of Wisconsin-Parkside

The phrase liberal capitalism has occasionally been used

political criticism to lump together the ideological approac
political parties and to suggest that there are few signifi
among those who generally support a market-based politi
Macpherson, in an influential essay entitled The Real Wor
(1965), argues that "by admitting the mass of the people in
party system, the liberal state did not abandon its funda
simply opened the competitive political system to all the i
been created by the competitive market society."' As a fi
then, liberal capitalism appears to stand for a combination
tualism, utilitarian individualism, and the laissez-faire eco
Smith.

With the rise to power of Prime Minister Margaret That

Ronald Reagan, a considerable cleavage has developed a
support capitalism. Reagan and Thatcher have assemble
series of policies for what I will identify as conservative
than dealing incrementally within a general consensus on r
they have reversed the growth of taxation, shifted resources
service programs, resuscitated traditionalist prescriptions
ior, and advanced the apparent substitution of the market
the key institution of the society. There are foreign policy
development, though they are beyond the scope of this art

This article is based in part on a paper prepared for the XIII World Congre
Political Science Association, Paris, July 1985. I would like to thank N
Kann, Thomas Moore, and Raymond Plant for their suggestions in writin
I C. B. Macpherson, The Real World of Democracy (London: Oxfor
1965), 11. More recently, the discussion of "liberal democratic capitalism"
of attempts to revise Marx's theory of the state. See Samuel Bowles an
Crisis of Liberal Democratic Capitalism: The Case of the United States,
11:1 (1982), 51-93.

0010-4175/87/2205-0302 $2.50 ? 1987 Society for Comparative Study of Society and History

245

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246 KENNETH R. HOOVER

While some critical theorists may have minimized the contribution of liber-
al social ideals to the amelioration of the inequalities produced by capitalism,
the Reagan-Thatcher policies make it quite clear that conservative capitalism
is indeed different from the liberal version, particularly from its contemporary
"reform liberal" variant. Modern liberal reformers and social democrats
believe that all people are entitled to the prerequisites for competition in
market society. The disadvantaged should, by governmental programs and
regulations, be given the means of competing: education, health care, job
training, the right to bargain collectively with management, freedom from
various forms of discrimination, and protection from the abuse of power
whether economic (as in job safety and environmental programs) or politica
(as in civil liberties). These forms of governmental intervention plus Keyne
sian economics make up the core of liberal capitalism. This program is to b
distinguished from socialism (though socialists have often supported its polic
initiatives) by the prohibition of a direct government role in the ownership and
control of the means of production.
Samuel Bowles and Herbert Gintis, in their analysis of liberal democrati
capitalism, disagree with those on the Left who dismiss the reformist tende
cies of liberals.2 They go on to point out that conservatives have (accurately
viewed liberal reformism as a regulator of class conflict, as well as an inhib
itor of free enterprise. I will argue that these two aspects of the conservativ
view express different tendencies that lead to significant policy conflicts
within the conservative capitalist movement.3
What, then, is conservative capitalism? The capitalist element is apparen
in the plain preference for the market as an allocator of values. What is no
liberal is the move away from policies aimed at furthering equal opportunit
through government intervention. What makes these approaches conservati
is more complicated and requires exploration of the split within contempora
conservatism, an assessment of the political backgrounds of the key actor
and an ideological analysis of their policies. We will use, as an illustrative
case study, the struggle over President Reagan's New Federalism proposal
and its partial implementation, along with examples of similar conflicts ove

2 Bowles and Gintis, "Crisis of Liberal Democratic Capitalism." The phrase democrat
capitalism has been avoided here largely because it is used for quite different purposes by Left
and Right. On the Left, the phrase is an entry into the argument that democracy has alter
capitalism in fundamental ways and that the current struggle is over the reassertion of capitali
control over democracy. This position is summarized in Robert Alford, "The Reagan Budge
and the Contradiction between Capitalism and Democracy," in The Future of American Democ-
racy: Views from the Left, Mark Kann, ed. (Philadelphia: Temple University Press, 1983), 22
53. On the Right, conservatives such as Michael Novak use the phrase democratic capitalism
convey a quite different message: that democratic political norms legitimize the inequalitie
produced by the economic results of capitalism. The Spirit of Democratic Capitalism (New York
Simon and Schuster, 1982).
3 Novak, Spirit of Democratic Capitalism, 52-53, 60.

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 RISE OF CONSERVATIVE CAPITALISM 247

policy within the Thatcher government. From this we can begin to

picture of the dynamics of conservative capitalism. The objective is
mine what this ideological split means for the future of conserva
italism. The analysis of these strains may be predictive for other e
of contemporary conservatism throughout Europe.4 In the conclu
suggest aspects of the interplay of class, personal identity, and ide
account for some of these tensions within both the liberal and conservative
versions of capitalism.5

CONSERVATIVE IDEOLOGY: THE LIBERTARIAN-TRADITIONALIST

SPLIT

The terminological paradox is that conservatism, a philo

capitalist society and historically at odds with capitalism
now seen as the primary defender of the capitalist mar
course of the analysis, we will see that this is not so muc
the development of a rival inclination. Conservative capit
these rival tendencies. The competition between them
dangered the programs of both the Reagan and Thatcher
While there is division within conservative capitalism
concerning the role of the state, both tendencies begin
limits of human nature and an acceptance of inequality. W
rational individual capable of contracting with others for
ment of the human condition, the conservative sees a spi
ited, semirational personality whose behavior cannot be
alone. Rather than using the state to move such creatures
equality and abstract justice, the conservative concern is t
priate environment for the nurturance of the particular s
sonality. From this analysis of the human condition, wh
conservatives of all kinds, flow two divergent streams of
the role of the state should be. George Nash has labeled
vative variants as traditionalist and libertarian.6 Nash's te

4 For a survey of these expressions, see Geoffrey Smith, "Europe

Growing," Institute for Socioeconomic Studies Journal, 9 (Summer
5 The claim here is not that ideas cause events. Rather, it is similar t
Tholfsen in Ideology and Revolution in Modern Europe: An Essay on th
(New York: Columbia University Press, 1984): unlike the extrinsic relat
nature, human society is influenced by intrinsic logical and conceptual
ded in antecedent traditions and beliefs-among the most powerful o
ologies. See Tholfsen, 2-3. Where causation lies cannot be determined
explored in studies such as that undertaken here.
6 George Nash, The Conservative Intellectual Movement in Americ
Basic Books, 1979), 81-82. Cf. the distinction between organic and indiv
Kenneth Dolbeare and Patricia Dolbeare, American Ideologies: The Co
of the 1970s (Chicago: Rand McNally, 1976), 56-71.

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 248 KENNETH R. HOOVER

to the historical sources, if not as colorful as Drys and Wets, or Diehards and
Ditchers.7 The traditionalist stream follows from classical natural-law doc-
trine and the organic-society conceptions of Edmund Burke, while the liber-
tarian stream follows from the niileteenth-century utilitarianism of the Man-
chester liberals as recast by Ludwig Von Mises and Friedrich Hayek.
Libertarians believe in individual initiative; the use of governmental power
to improve an individual's competitive position is immoral.8 The libertarian
version of equal opportunity is passive, emphasizing the absence of obstacles,
rather than the presence of requisites for individual competition. Equality
before the law is thought to be a sufficient guarantee of equal opportunity.
The inequalities of the marketplace cannot be criticized on moral grounds for
the reason that they are nonintentional in nature.9 Libertarians see a role for
government only in protecting the freedom of individual choice from en-
croachment by others.
Traditional conservatives see government's role as the guarantor of appro-
priate forms of in-equality. The use of governmental power to counter the
natural inequality of people is impractical and unwise. 10 Theirs is the organic
view of society in which all of the parts are interdependent and each is to be
supported by appropriate forms of institutional action-including governmen-
tal support for the indigent. Government must act to restrict individual behav-
ior that threatens the maintenance of the institutional structure of the society.
Here common cause is made with the "evangelical Right" on a number of
social issues.

7 Robert Behrens locates the fault line in the Conservative Party between the Ditchers, who
have bought into the postwar politics of statism, and the Diehards, who insist on the "true faith"
of the free market and personal responsibility. The libertarian-traditionalist distinction differs in
assessing the historical dimension of this split and its impact on current policy. Traditionalists, in
our view, deviate only when they compromise Burke; and the faith of the Diehards, as Behrens
allows, is in an adaptation of utilitarianism and laissez faire, not the conservative tradition. Cf.
Behrens, "Diehards and Ditchers in Contemporary Conservative Politics," The Political Quar-
terly, 50 (July-September 1979), 287-88, 292; idem, The Conservative Party from Heath to
Thatcher (London: Saxon House, 1980), 7-9, 39. For terminology used in the analysis of
developments in Great Britain, see the distinction between the New Right and the Tory Far-right
in Patrick Dunleavy, "Analysing British Politics," in Developments in British Politics, Henry
Drucker, ed. (New York: St. Martin's Press, 1983), 292-93; the discussion of Drys and Wets in
Ronald Butt, "Thatcherissima: The Politics of Thatcherism," Policy Review, 26 (Fall 1983), 30-
35. Cf. Lon Felker and Robert Thompson, "The Intellectual Roots of Economic Conservatism in
the Reagan and Thatcher Administrations," Journal of the North Carolina Political Science
Association, 3 (1983), 38-55.
8 Tibor Machan, ed., The Libertarian Alternative (Chicago: Nelson-Hall, 1974), 499. For
nuances in the argument, cf. Nash, Conservative Intellectual Movement, 16-18, 32-33; and Noel
K. O'Sullivan, Conservatism (New York: St. Martin's Press, 1976), 27.
9 For a critique of Hayek's argument in this respect, see Raymond Plant, "Hirsch, Hayek, and
Habermas: The Dilemmas of Distribution," in Dilemmas of Liberal Democracies, A. Ellis and
K. Kumar, eds. (London and New York: Tavistock, 1983), 45-64.
10 Cf. Nash, Conservative Intellectual Movement, 73; Robert Nisbet, Community and Power
(New York: Oxford University Press, 1962).

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 RISE OF CONSERVATIVE CAPITALISM 249

We have seen these ideological tendencies jockey for position over

several years. I will briefly trace their emergence during Reagan's first
relation to his policy proposals on income security and the New Fed
examine some internal dissensions over their implementation, and a
impact of these policies on the structure of opportunity. We will then
the Thatcher government, where similar strains may be observed in
dimensions of style and policy.

CONSERVATIVE CAPITALISM IN THE UNITED STATES: THE NEW

FEDERALISM AND THE STRUGGLE OVER INCOME-SECURITY POLICY

The struggle over income security remains at

debate in the United States. The specific question
the federal government should finance welfare wa
of President Reagan's 1981 New Federalism pr
was originally envisioned as a sweeping change in
relations involving drastically different budgetar
categorical aid programs into block grants, large
ulatory activity, the return of revenue sources to
ment of enterprise zones to aid economic develo
mented, the New Federalism was to rival the New
as revolutions in the federal system.
Like its two predecessors, this revolution was dr
tion and powered by the perception of widespread
the revolution is incomplete. It consists of budget
tions rather than the whole program of structura
the original New Federalism proposal. Whether t
will be completed depends on clearing the hurdl
Whether that final hurdle can be cleared depend
ideological thrust that has energized the movemen
internal conflicts between traditionalists and libertarians.
A brief history of Ronald Reagan's association with welfare policy pro-
vides essential insights into the conflicts that have shaped income-security
policy. The ideological history of the New Federalism really begins with the
California Welfare Reform Act of 1971. The centerpiece of Ronald Reagan's
governorship, it was a response to rapidly growing welfare rolls and to pres-
sure from federal welfare administrators to raise Aid to Families with Depen-

11 Richard Williamson, "1980: The Reagan Campaign-Harbinger of a Revised Federal-

ism," Publius, 11 (Summer 1981) 149-50.
12 Structural reforms were much more popular than the cuts in antipoverty programs. Cf. John
Robinson and John Fleishman, "Ideological Trends in American Public Opinion," Annals of the
American Academy of Political and Social Science, 472 (March 1984), 56-60; "Public Recep-
tive to New Federalism," Gallup Report, 185 (February 1981), 2-9.

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250 KENNETH R. HOOVER

dent Children (AFDC) payments to reflect increases in the cost of liv

Essentially, the approach was to tighten eligibility, impose a one-year
dence requirement (later struck down), simplify the administration of t
and raise the benefit levels to those remaining on the rolls.
The California Welfare Reform Act was associated with a turnaround in the
caseload of substantial proportions. Some analysts attributed the change to an
improving economy, increased use of abortion services, satiation of the eligi-
ble population, and the stringent new regulations enforced pursuant to the law
by Robert Carleson, then Reagan's welfare director.14 The Welfare Reform
Act was in any event a success by all the criteria of politics.
The importance of the act for our purposes is that it was conceived by
Reagan and Carleson as their alternative to the Family Assistance Plan (FAP),
a federal guaranteed-minimum-income proposal of the Richard Nixon admin-
istration. The FAP represented the culmination of a campaign to get tradi-
tional conservatives into a coalition with reform liberals that would place
welfare on a national footing along with Social Security as a part of the
nation's basic safety net. Daniel Patrick Moynihan, a prime mover within the
Nixon administration for the proposal, reports that Nixon's receptivity to
income security came directly out of a concern for the threat, readily apparent
in 1969, of dissolution of traditional authority in America.15 His response, in
that respect, mirrored Bismarck's in a similar situation. 16
While the governors of other states, faced with similar increases in welfare
rolls, lobbied for federalization of welfare, Reagan opened the path to an
alternative state-based approach. His success made him a leader among liber-
tarian conservatives and those traditionalists who feared the rise of a welfare
ethic. Both the governor and Welfare Director Carleson testified against the
FAP before the United States Congress. Reagan was politically the nation's
most potent critic of the proposal, and had a great deal to do with its defeat. 17
The Nixon White House worried that Reagan could use the issue to pose a
threat to Nixon's renomination in 1972.18 The defeat of the FAP strengthened
Reagan's hand as leader of a national conservative movement-a strength
derived directly from his involvement in the welfare policy area. For these
reasons of political history, conservatives came to see welfare policy as an
issue associated with questions of federalism, and Ronald Reagan as the

13 Lou Cannon, Reagan (New York: Putnams, 1982), 174-86.

14 Ibid., 184; cf. Frank Levy, "What Ronald Reagan Can Teach the U.S. about Welfare
Reform" (Washington, D.C.: The Urban Institute, 1977).
15 Daniel Patrick Moynihan, The Politics of a Guaranteed Income: The Nixon Administration
and the Family Assistance Plan (New York: Vintage, 1973), 110.
16 Nixon is reported to have specifically endorsed the "Tory men, liberal principles" theory
of policy innovation. Ibid., 214-15.
17 Ibid., 374-75; Christopher Leman, The Collapse of Welfare Reform (Cambridge: MIT
Press, 1980), 92.
18 Cannon, Reagan, 178-79.

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 RISE OF CONSERVATIVE CAPITALISM 25I

policy leader. The issue again became a factor in presidential politic

when an ill-conceived proposal (similar to the New Federalism
Reagan's campaign for the nomination.19
It is indicative for future policy directions that the California
Reform Act was explicitly an alternative to full federalization
When Reagan became president and proposed his New Federalism,
trade-off of the federal portion of AFDC to the states that was t
centerpiece of the structural revolution in federal relations. Libert
lieved that competition between states to lower welfare tax loads i
position themselves for economic development would, by the logi
market, accomplish the policy goal of reducing the availability of
The tax savings would stimulate job-producing investment, thus
unemployment and welfare dependence simultaneously.
When it came time to implement the Reagan program, the issue
security proved to be the focus of some important differences w
administration. A good deal has been written about the split within
House staff during the first term between the "hard-liners," gene
ified by Edwin Meese, and the "pragmatists" identified with Jam
There are indications, however, that the New Federalism program
fected by a split that was ideological as much as temperamental. Th
this split was precisely the matter of federalization of AFDC. The
the split reflects classic tensions between libertarian and tradition
of conservatism. Two key actors in the New Federalism initiative
these ideological tensions: Robert Carleson and David Stockman.
Robert Carleson, formerly the president's assistant for human
and executive secretary of the Cabinet Council on Human Resourc
at all the crucial stages of the New Federalism debate and, indeed, o
controversial initiatives of the Reagan administration in Social Se
form, housing policy, food stamp programs, urban enterprise zone
icaid.20 More than any other figure on the staff, he invoked the cla
of libertarianism. "Income earned belongs individually to the
earn it. It does not belong to the state, nor does it belong by right to

19 Ibid., 202-7.
20 See Robert Pear, "3 Key Aides Reshape Welfare Policy," New York Times, 26
p. 12; on AFDC, Linda Demkovich, "Medicaid for Welfare: A Controversial Swap
Journal, 14 (27 February 1982), 363; on Community Development Block Grants
Lovell, "CDBG: The Role of Federal Requirements," Publius, 13 (Summer 198
hunger, Linda Demkovich, "Hunger in America: Is Its Resurgence Real or Is Evid
rated?" National Journal, 15 (8 October 1983), 2051; on Social Security, idem, "
Schweiker May Be Paying a High Price for Loyalty to Reagan," National Journa
1982), 849; on Medicaid, "A Weekly Checklist of Major Issues," National Jo
February 1982), 303; and on ending federal programs for the cities, Francis Visco
Jordan, "Will Cities' Link to Washington Be Cut?" Nation's Cities Weekly, 4
1981), 1-2.

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252 KENNETH R. HOOVER

segment of the population." Welfare should be provided only to those

"because of advanced age or permanent and total disability, are unable
support themselves." All others, if not excluded from the system ent
should be required to work in compensation for their benefits, includ
mothers of small children.21
Carleson translates this preference into an argument for local contr
welfare. "A welfare system must be designed and administered at the
level of government in order to tailor the assistance to meet the tempo
needs of the community's truly needy in a timely and accurate mann
income maintenance is handled nationally, the result would be "irresi
pressure on Congress to increase the centrally set benefit levels," lead
more people to find a way on to the roles, and eventually "the n
economic system would collapse."22 This analysis accords with the
tarian's fear of the threat to individual freedom posed by majoritarian
cracy.
Liberals argue that there are many dimensions to inequality of opport
George McGovern, in a response to Robert Carleson's article "Soci
sponsibility," quoted above, comments, "Regrettably, it [Carleson
philosophy rooted in the Horatio Alger fiction that achievement is but a m
of will; it is scornful of all that science tells us about the physical, psych
cal, environmental, economic, and social factors that can inhibit the re
tion of human potential." 23 McGovern's list of opportunity factors is su
tial, and it covers the programmatic agenda of liberal capitalism.
What differentiates Stockman from Carleson is that Stockman, direc
the Office of Management and the Budget, argued the case for
Federalism's budgetary reforms as preconditions to making effective p
policy that was to include means-tested national health care and "univ
income maintenance." Robert Carleson, by contrast, favored devolutio
AFDC and had doubts about the federalization of Medicaid.24 Stockman
thought that the categorical aid programs had drained away money and political
energy that should be going into an over-all rationalization of federal respon-
sibilities. Budget reductions, program consolidations, and devolution of the
categoricals are needed to control the federal budget. However, Stockman saw

21 Robert Carleson and Kevin R. Hopkins, "Whose Responsibility Is Social Responsibility?:

The Reagan Rationale," Public Welfare, 8 (Fall 1981), 9, 13-14. Cf. Associated Press, "Rea-
gan Blasts Welfare Programs," 16 February 1986.
22 In Claude E. Barfield, Rethinking Federalism (Washington, D.C.: American Enterprise
Institute, 1981), 70. Economist Wallace Oates, "The New Federalism-An Economist's
View," Cato Journal, 2:2 (Fall 1982), 479, points out that the federalized share of AFDC has
fallen, rather than risen.
23 George McGovern, "Whose Responsibility Is Social Responsibility?: An Opposing
View," Public Welfare, 8 (Fall 1981), 9.
24 In Barfield, Rethinking Federalism, p. 81. Regarding Carleson, see "A Weekly Checklist
of Major Issues," National Journal, 7 (13 February 1982), 303.

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 RISE OF CONSERVATIVE CAPITALISM 253

a distinction between these strategies on the one hand, and the need
national minimums in the areas of health and income security on the
federal level should concern itself with "foreign policy, the socia
systems we run nationwide-Social Security, Medicare and mea
entitlements-that embody all those fundamental commitments tha
made." 25
Stockman's position accords with the traditional conservative ar
that society has a commitment to its dependent citizens that must b
matter of obligation. Programs that attempted to alter the distri
advantages in the marketplace, however, were subject to the budge
cuts and/or devolution to the states.

However, the Reagan deficits meant that any effort to rationalize entitle-
ments at the federal level would require cutting back drastically on benefits to
those whose claims were, in any way, weak. Stockman learned that weak
claims and weak constituencies are not the same thing, and political realities
are more significant than fiscal realities. An affordable federalized Medicaid
would exclude many marginal recipients covered under current state pro-
grams-and that was politically unacceptable, just as the full assumption of
Medicaid costs was fiscally impossible in view of the deficits.
In fact, there is good reason to believe that this dilemma undermined the
New Federalism negotiations in the spring of 1982. Richard Williamson, the
president's agent in the negotiations, remarked in a retrospective analysis that
footdragging by "certain administration officials, whose enthusiasm for the
New Federalism initiative had dissipated," was responsible for the failure to
complete the Medicaid-for-AFDC swap. He locates the problem in the Office
of Management and the Budget and attributes it to a "senior OMB offi-
cial. "26 The matter of income security was in any event the issue of principle
that could not be resolved between the governors, both Republican and Dem-
ocratic, and the Reagan White House.
These differences on the crucial question of federalization of AFDC are
symptomatic of differences on a wider scale of issues. John Kessel, in mea-
suring policy preferences displayed in interviews with Reagan White House
staff members, found divisions into "unalloyed conservatives," who think
national defense is the only legitimate federal activity, "domestic conser-
vatives," who favor some new domestic program initiatives, and "lenient
conservatives." The differences among these groups are not great, but it is

25 Quoted in James Reston, "Discussing the Bugs in the Machinery," interview with David
A. Stockman, New York Times, 12 April 1984, p. 12. Cf. Barfield, Rethinking Federalism, 82.
26 Richard Williamson, "The 1982 New Federalism Negotiations," Publius, 13:2 (Spring
1983), 27-28. On weak claims, weak clients, and the role of political constituencies, cf. William
Greider's commentary in "The Education of David Stockman," The Atlantic Monthly (De-
cember 1981), 30, 51-52; David Stockman's apology for the deficits, The Triumph of Politics
(New York: Harper and Row, 1986), 124-27, 408-10; and his 1975 preview of that apology,
"The Social Pork Barrel," Public Interest, no. 39 (Spring 1975), 27.

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254 KENNETH R. HOOVER

interesting that Carleson appears among the "unalloyed conservatives

Stockman in the "domestic conservative" category.27
As for President Reagan, he has referred to his philosophy as
tarian," yet his positions reflect a mix of libertarian and traditionali
ues.28 The president's economic policies seem to be libertarian, wh
social positions are traditionalist. The cross-cut comes in the area of go
mental programs for the poor. The safety net is recognized, though de
mentalization of social responsibility is encouraged. While a libertarian
oppose the federalization of Medicaid and AFDC, and a traditionalist m
federalize both in bare-bones form, the New Federalism proposed a s
one for the other at the federal level.
Whatever their effect on the implementation of the New Federalism, these
ideological differences between libertarian and traditional conservatives have
been less apparent than the tactical flexibility of the Reagan administration in
advancing its program. The result has been the creation of a form of New
Federalism expressed in budgetary priorities, the apparent denationalization
of regulatory functions, tax reductions and the consolidation of some social
welfare programs into block grants. As the effects of these moves on the
position of the poor, in particular, become evident, the libertarian ideological
initiative behind the structural reform agenda of the New Federalism will be
tested and evaluated.

THE IMPACT ON THE POOR

The New Federalism has already altered greatly th

what, when, and how?" The issue of inequality and
opportunity structure is the point of collision betw
conservative capitalism, in either its libertarian or t
sequently, any evaluation of the prospects of cons
take account of the economic impacts of the polici
such an assessment is largely outside the scope
general indicators that these policies have worsened
in American society. Our purpose in reviewing this
the results are such that libertarian goals have
traditionalist fears have been reinforced.

27 John Kessel, "The Structures of the Reagan White House," American Journal of Politica
Science, 28:2 (May 1984), 235-36. In his memoir, Stockman variously describes himself as an
"intellectual conservative" and a "social idealist" who thought supply-side economics along
with a rationalization of means-tested entitlements could genuinely help the poor-he was intent
on using libertarian means for traditionalist ends (p. 40). Cf. Daniel Patrick Moynihan, "Political
Aids," The New Republic (May 26 1986), 18. He finally had to acknowledge that a tax increas
was the only way out if equity was to be served, a position that separated him from thoroughgoing
libertarians such as Donald Regan, then secretary of the treasury and now White House chief of
staff; Stockman, Triumph of Politics, 347-48, 363-64.
28 Cannon, Reagan, 194.

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 RISE OF CONSERVATIVE CAPITALISM 255

The greatest concentration of analysis has gone into detailing

the New Federalism programs on levels of economic inequality
tributive measures can be viewed as indicators of opportunity
outcomes. For the poor, benefits, taxes, and income form the m
which educational, social, physical, and even psychological opp
largely defined. For the rich, by the terms of supply-side econo
the measures of investment potential.

Budget Cuts and Tax Changes

Substantial cuts in federal assistance for the poor were a notable
Reagan program. A number of these cuts affected federal relat
they could have been replaced by state-based programs. Few c
up in this way. As Richard Nathan pointed out, "these cuts fell
on one group, the so-called working poor, made up primarily o
of household and their children living on a combination of earn
welfare."29 Budget cuts and program changes in the safety-ne
alone meant that the federal government expenditure per cap
people fell from about $1,700 in 1980 to $1,575 in 1983,
decrease.30
While the cuts were substantial, they were considerably smaller than origi-
nally proposed by the Reagan administration. In its first major budget ini-
tiative, the administration proposed cutting "human capital" programs by
nearly 40 percent. Congress agreed to cuts averaging 23 percent.31 The
AFDC was slated to increase by 9.8 percent; a cut of 28.6 percent was
proposed by the Reagan administration; and Congress enacted a 14.3 percent
decrease. Food stamps were targeted for a 51.3 percent cut; Congress accept-
ed a 13.8 percent reduction. The most dramatic example was the Women,
Infants, and Children program; a proposed cut of 63.6 percent became, in the
hands of Congress, a 9.1 percent increase.32
Because the changes were made in the midst of a recession, they had a
particularly burdensome impact on the poor. In a strong economy, it was
estimated that the independent effect of the Omnibus Budget Reconciliation
Act (OBRA) welfare program changes would have increased the poverty level
by 2 percent (557,000 people, of whom 300,000 are children).33 Advancing

29 Richard Nathan and Fred Doolittle, "Reagan's Surprising Domestic Achievement," Wall
Street Journal, 18 September 1984, p. 28.
30 John Weicher (American Enterprise Institute), "Welfare 'Reforms' Will Stick," Chicago
Tribune, 16 August 1984, p. 27. The president indicated that total spending on the poor went up
during his administration, but that was the effect of the recession on the size of entitlement
populations.
31 D. Lee Bawden and John Palmer, "Social Policy," in The Reagan Record, John Palmer
and Isabel Sawhill, eds. (Cambridge, Mass.: Ballinger Press), 204.
32 Ibid., 185-86.
33 U.S. Congress, House, Committee on Ways and Means, Effects of the Omnibus Budget

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256 KENNETH R. HOOVER

the proposal in a period of deep recession meant that the impact was additive.
According to one study, the OBRA changes plus the recession increased the
projected poverty population by 7.6 percent as compared with a 5.7 percent
increase attributable to the recession alone.34
Various alterations in the tax laws resulting from the Reagan administra-
tion's over-all tax cut were particularly hard on the poor. The federal tax
burden for a poverty-level family of four changed from a $134 refund in 1978
to a $285 payment in 1982, and a $383 payment in 1985. Prior to these
changes, the tax threshold was $1,000 above the poverty line for a family of
four; by 1986, the threshold was to have fallen to $2,500 below the poverty
line. The tax burden was increased by the additional impact of increases in
state and local taxes to compensate for federal revenue reductions.35 The
distribution of the tax cut was sharply unequal in its effect on dollars retained
by the taxpayer. The tax cuts added amounts ranging from nearly nothing for
the less-than-$10,000 bracket, to about $1,500 for those in the $20,000-
$40,000 bracket, to more than $8,000 for those with incomes larger than
$80,000.36

Income Distribution

While it can be argued that the New Federalism initiatives should be dis-
tinguished from changes in tax policy, the fact is that, for purposes of analyz-
ing shifts in the opportunity structure, they were both part of the revolution in
federal relations that Reagan envisioned upon taking office. The most signifi-
cant impact, for purposes of the ideological debate, was that the distribution
of income was made more unequal.
According to 1984 Census Bureau data, the bottom 40 percent of the
population has lost ground in median income since 1980 with respect to the
top 40 percent (-$477 and +$1,769, respectively).37 A staff report of the
Congressional Joint Economic Committee (November 1985) found that the
real income of families with children has been especially hard hit: The lowest
quintile lost 23.8 percent in mean income from 1979 to 1984. Losses to the

Reconciliation Act of 1981 (OBRA) Welfare Changes and the Recession on Po'verty, Com-
mittee Print for the Subcommittee on Oversight and Subcommittee on Public Assistance and Un-
employment Compensation, 98th Cong., 2d sess. (Washington, D.C.: GPO, 25 July 1984),
Table A, p. x.
34 Ibid., 12.
35 Center on Budget and Policy Priorities, Washington, D.C., "Taxing the Poor" (April
1984).
36 Congressional Budget Office projections, February 1983, cited in "The Combined Effects
of Major Changes in Federal Taxes and Spending Programs since 1981," staff memorandum,
April 1984, prepared by the staff of the Human Resources and Community Development and Tax
Analysis Division of the Congressional Budget Office, Table 3, p. 7a.
37 Newsweek, (9 September 1985), 24. This is the lowest percentage recorded for the bottom
40 percent since the Census Bureau began collecting this data in 1947.

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 RISE OF CONSERVATIVE CAPITALISM 257

three middle quintiles were 14 percent, 10.5 percent, and 3.2 percen
gain to the top quintile of 1.5 percent.38
These shifts bear out the direction of the projections generated on
of modeling reported by John Palmer and Isabel Sawhill in Au
According to the Urban Institute's simulations of the impact o
policies, the lowest quintile was to lose 7.6 percent of its income, a
quintile stood to gain 8.7 percent. While some redistribution w
taken place because of the recession, the Reagan policy increas
equality of the redistribution. When measured against the Urban
alternative, more conventional policy model, the Reagan policies a
percentage points to the gain of the top quintile, and increased the
bottom quintile by an additional 4.1 percent.39
The continuing high levels of poverty place the justification of fu
Federalist initiatives in doubt. While libertarian conservatives ma
sured by the degovemmentalization of some areas of policy and r
traditional conservatives in Congress and the media have evidence
restlessness over the increasingly difficult position of the poor. Th
tion of the black family and the feminization of poverty generally
increasing numbers of children below the poverty line. The povert
black children (51 percent) is the highest it has been in fifteen yea
Meanwhile the trickle-down effects have been scattered and cont
at best. The percentage of the population living below the povert
declined slightly (from 15.3 percent to 14.4 percent), but there ar
million more people living below the poverty line now than there w
late 1970s. Unemployment has declined somewhat, but remains on
higher than for any previous recovery. The congressional Office
nology Assessment studied the fate of displaced workers in the per
84. Only 60 percent found new jobs and nearly half of them took p
The savings rate, which was supposed to rise in consequence of th
and supply new investment in jobs, has instead fallen to the lowe
since the early 1950s.41
The assessment of the success of the initiatives of the first term of the
Reagan presidency must be that what has been accomplished is a form of de

38 U.S. Congress, Joint Economic Committee, "Family Income in America," staff report,
99th Cong., 1st sess. (28 November 1985), Table I, p. 4.
39 Marilyn Moon and Isabel Sawhill, "Family Incomes: Gainers and Losers," in Palmer and
Sawhill, The Reagan Record, 329, Table 10.5; 333, Table 10.6.
40 Kenneth Noble, "Study Finds 60% of 11 Million Who Lost Jobs Got New Ones," New
York Times, 6 February 1986, p. 1. Noble reports that "the study said a large proportion of the
displaced workers were middle-aged people in manufacturing 'with long and stable job histories,'
rather than young people who change jobs often," and estimated that the program instituted in
1982 to deal with displaced workers reached no more than 5 percent of them.
41 Robert Hershey, "Savings Take a Dramatic Slide," New York Times, 3 November 1985,
sec. 4, p. El.

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258 KENNETH R. HOOVER

facto New Federalism that could be reversed through changes in budgetary

priorities.42 While very great changes took place, it is not at all clear that the
foundations for a permanent structural change were secured then, nor are they
likely to be secured in the second term.
The 1984 elections produced a major victory for the president, but not for
his party in Congress. The president's support among governors of his party
as well as congressional Republicans declined markedly. The National Gover-
nors' Association, in its 1986 report on "Federalism and the States" rejected
out of hand the president's stated intention of turning more federal respon-
sibilities back to the states without the funding to support them.43 The elim-
ination of the state tax deduction, which would have had many effects similar
to those envisioned by the New Federalism, was dropped from the tax reform
bill at the insistence of congressmen and senators from both parties. The
Senate Budget Committee, notwithstanding its Republican majority, sum-
marily scrapped the president's budget in early 1986 because of criticism over
the damage done to domestic priorities.
The drive toward a comprehensive New Federalism is stalled in good part
because of profound political and ideological disagreements within President
Reagan's own ranks. While the separation of ideological motivation from
political prudence can never be entirely clear, we can shed additional light on
the role of ideology by comparing the Reagan administration with the govern-
ment of Prime Minister Margaret Thatcher to see if the same fault lines appear
within the British version of conservative capitalism.

"THATCHERISM" AND THE EMERGENCE OF CONSERVATIVE

CAPITALISM IN BRITAIN

Margaret Thatcher and Ronald Reagan emerged as le

roughly similar manner. Staking their claims to
grounds of turning toward a purer form of conserv
in the 1970s as their own parties failed to deliver
cope with inflationary economies and rising levels o
both cases the opposition party came to grief in try
whose demands could not be met amidst the oil shoc
rates, and increasing unemployment of the 1970s.44
the result of a mandate for change than of a mand
than continue the current drift.

Margaret Thatcher came to power in a bitter intraparty struggle for lead-

42 See U.S. Advisory Commission on Intergovernmental Relations, Significant Features of

Fiscal Federalism, 1984 Edition (Washington, D.C.: A.C.I.R., 1984). Cf. Kenneth Palmer and
Alex Pattakos, "The State of American Federalism: 1984," Publius, 15 (Summer 1985), 1-17.
43 "Federalism and the States 1986," report issued by the National Governors' Association
(Washington, D.C.: National Governors' Association, February 1986), 14.
44 See Samuel Beer, Britain against Itself: The Political Contradictions of Collectivism (New
York: Norton, 1982), 64-75.

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 RISE OF CONSERVATIVE CAPITALISM 259

ership in 1975 following the defeat of Edward Heath. The way

prepared by the challenges laid down by Enoch Powell on the imm
and social expenditure issues-a rough parallel in British polit
welfare issue (with its racial overtones) in the United States.45 Th
were joined with those of Keith Joseph, the intellectual force beh
etarism, and Thatcher became the standard bearer when both Powell and
Joseph foundered on accusations of racism.46
In both cases there were elements of a middle-class revolt against social-
welfare programs coupled with high levels of taxation. By striking these
chords, both Reagan and Thatcher were able to use middle-class populism as
a recourse against the upper-class images of their parties. In practice, the
economic policies they advocated benefitted the upper classes materially.
The Heath government had tried and failed to break out of the conventional
mold established by the Labour Party, and this allowed Thatcher to attack
both the principles of the Heath leadership and his practical hold on the party
establishment with its traditionalist cadre in Parliament. As Milton Friedman
pointed out, "the thing that people do not realize is that Margaret Thatcher is
not in terms of belief a Tory. She is a nineteenth century Liberal. But her
party consists largely of Tories. They don't really believe in free markets.
They don't believe in free trade. They never have as a party."47 Though the
Reagan and Thatcher governments each arrived at power by playing upon
somewhat different ideological combinations, they are both heir to the natural
strains between libertarian and traditionalist ideology.
In the Thatcher government, there are a number of examples of that ten-
sion. One of the sources of her rise to power was the criticism of Prime
Minister Heath's nationalization of the Rolls-Royce company and his support
for statutory control of wages and prices. While both of these positions could
be justified by traditionalist concerns for maintaining the "ensemble" of the
basic forces in the society, they are anathema to libertarians. There were
similar conflicts between the Heath and Thatcher coteries over social-welfare
issues.48
Sir Keith Joseph, apostate from Macmillanite Toryism and founder of the
Conservative Party Centre for Policy Studies, took the lead for British liber-
tarians in simply denying that society was responsible for inequalities between
people (thus living up to Robert Behrens description of the Diehards as
"sociology-baiters").49 What was not caused by society cannot be corrected

45 Ibid., 177-78.
46 Robert Behrens, The Conservative Party in Opposition, 1974-1977: A Critical Analysis
(Coventry: Lancaster Polytechnic, 1977), 13-15.
47 Quoted in Raymond Plant, "The Resurgence of Ideology," in Developments in British
Politics, Drucker, ed., 13.
48 Cf. Behrens, Conservative Party, 14-17, 74.
49 Nick Bosanquet, "Social Policy," in Developments in British Politics, Drucker, ed., 168-
69; re Behrens, see his "Diehards and Ditchers," 286.

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260 KENNETH R. HOOVER

by government intervention. It is in this proposition that the divide is re

Traditionalists argue that, far from excusing itself from responsibil
social inequality, it is the function of government to intervene prec
maintain those inequalities that are essential to some imagined orchest
of forces in society. For example, when Prime Minister Thatcher prop
eliminate the indexing (to inflation) of children's benefits, she had to f
opposition of, among many other groups, the Conservative Wome
tional Advisory Council.
These conflicts over government responsibility for the plight of ind
individuals are perhaps the most obvious expression of the traditiona
libertarian split. There are, however, other differences apparent in B
conservative politics that may have equally profound consequences fo
future of conservative capitalism generally.

Elites versus "The People"

Traditional conservatives historically have been suspicious of democr
an indirect fashion, promarket ideology is an intellectual coconspirato
rise of democratic attitudes and practices in the workplace-a develop
deeply threatening to traditional elites.
Ralph Miliband, writing in 1978, identified a process termed "de-su
dination" in British life:

De-subordination means that people who find themselves in subordinate positions, and
notably the people who work in factories, mines, offices, shops, schools, hospitals and
so on do what they can to mitigate, resist and transform the conditions of their
subordination. This process occurs where subordination is most evident and felt,
namely at the "point of production" and at the workplace in general; but also wherev-
er else a condition of subordination exists, for instance as it is experienced by women
in the home, and outside.50

Both Miliband and Samuel Beer, who notes a similar phenomenon as a

"decline of deference," observe that this has contributed to the downfall of
the "civic culture."51 While both argue that this development is the product
of democratic reformism in the political sector, it is also the case that the
consumerism of the marketplace leads to a democracy of expectation, a faith
in mobility, and an appetite for gratification that is unsettling to the estab-
lished order and to its mission of instilling the virtues of self-discipline that
make the "civilized life" possible.52 The disintegration of family structure is
widely attributed to the pressures of the market psychology.53

50 Ralph Miliband, 'A State of De-Subordination," British Journal of Sociology, 29:4 (De-
cember 1978), 402.
51 Beer, Britain against Itself, 194-97. Cf. William Harbour, The Foundations of Conser-
vative Thought (Notre Dame: University of Notre Dame Press, 1982), 185.
52 This is a problem that Adam Smith was vaguely aware of, but did not address. See Martin
Camoy, The State and Political Theory (Princeton: Princeton University Press, 1984), 29.
53 See Charles Leathers, "Thatcher-Reagan Conservatism and Schumpeter's Prognosis for
Capitalism," Review of Social Economy, 4:1 (1984), 28-29.

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 RISE OF CONSERVATIVE CAPITALISM 261

Libertarians are party to radical democracy through their advocacy of t

market and of populist political initiatives to "return power to the peop
Their role as carriers of the democratic creed is significant, although it is q
distinct from the romantics of the Left and their community-based concep
of direct democracy.54 However, the combination of libertarian and roma
tendencies has made the movement toward democracy all the more powe
ful-and ultimately all the more threatening to traditionalist values. T
combination has some conservative intellectuals worried. Escalating level
aspiration and expectation have created a "rising tide of entitlement" th
threatens the Western way of life. For conservative capitalists, the solution
to limit the expansion of democracy-not to restrain the market.55
Traditionalists have a proprietary interest in the civic culture which, tho
it has elements of liberal rationalism in its British version, heavily favors
prescriptive role of the upper classes. The complaints of libertarians abo
traditionalist foot-dragging on Thatcher's program have resulted in open
tilities. Sir John Hoskyns, a libertarian partisan and head of the Prime M
ter's Downing Street Policy Unit, accuses the traditional elite of "a p
prietorial feeling towards the country as a whole, almost as if it were an
tate of which they were the benevolent owners."56 More serious was
Keith Joseph's attempt to reduce grants to university students which nea
threatened the continuance of the Conservative government's majority i
Parliament.57 To strike at the funding of education was to threaten the m
revered institutional basis for conveying British civilization and culture.

Traditionalist Pragmatism versus the Rationality of the Marketplace

Aside from the conflicts over the role of the elite, libertarians and tradi-
tionalists differ as to the role of reason in human affairs. Burkean conser-
vatism was founded in a revolt against the rationalist assumptions of Lockean
classical liberalism. While both libertarians and conservatives place strong
limits on the reach of the social contract, the libertarians have their own
version of the rationalist faith: a doctrinaire belief in the marketplace as the
ultimate social institution. The marketplace as a cipher for self-interest in the
making of choices is the centerpiece of a whole architecture of social-choice

54 Beer, Britain against Itself, 126-31. Cf. Richard Vigurie's mix of libertarianism and
populism in The Establishment vs. the People (Chicago: Regnery Gateway, 1983).
55 Frances Fox Piven and Richard Cloward, The New Class War (New York: Pantheon,
1982), 23. Cf. Alford, "Reagan Budgets," in Future of American Democracy, Kann, ed., 47-
48, on Daniel Bell's argument of the same kind; and Samuel Beer's argument about "pluralist
stagnation" in Britain, Britain against Itself, 100-101.
56 John Hoskyns, "Conservatism Is Not Enough," Political Quarterly, 55 (January-March
1984), 10-11. The government is also criticized by the libertarians for being "inadequately
radical." See Hugh Thomas (chairman of the (Conservative) Centre for Social Studies), "The
Fruits of Conservatism," New Society, 67:13 (1984), 435-36.
57 David Walker, "Thatcher Faces Revolt on Student Aid," The Chronicle of Higher Educa-
tion, 3 (3 December 1984), 1.

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262 KENNETH R. HOOVER

theory. It is precisely the doctrinaire claims of the libertarians fo

tionality of the marketplace that traditionalists distrust.
Robert Behrens argues that rationalism doesn't really divide conse
from nonconservatives today since both versions of conservatism ha
than a sufficiency of doctrine.58 However, there appears to be som
qualitatively different in the subjective pragmatism of the traditiona
compared with the objective-sounding economism of the libertaria
claims made by libertarians for the power of the unrestrained mark
setting right of inequities are elaborate. The unfettered market is t
the blight of underdevelopment, solve the problem of welfare dep
lead to more disciplined personal behavior, and stimulate the mode
of industry.59
Many of these goals are included in the traditionalist program; the
is that the market has its own logic, and it is independent of elite judg
control. There is no inherent protection of the values of "theocentr
ism" or of the customary mores and preferences that form the core
tionalist belief.60 As Arthur Aughey points out, "there is no neces
relation between an economic system based on free enterprise and
relations and a cohesive community. Conservatism presupposes a co
ty, one nation, exhibiting 'differences' but not to the extent of irre
conflict. Society must be conscious of itself as a whole, it mus
common sense of identity."61
One of Thatcher's closest calls in Parliament came in the summer of 1985
over the issue of raising the salaries of top government executives. The logic
of the marketplace dictated that the best talent could not be had without
substantial increases. A regard for the restraint shown in the pay policy for
teachers, nurses, and lower-level civil servants, as well as the condition of the
country generally, led forty-eight Conservative members of Parliament to
defect. One Tory from the West Country remarked that the government
should behave "with a little more sensitivity, a little more humility, and a
little less arrogance."62
Part of the difficulty of implementing a rationalist doctrine in complex

58 Behrens, Conservative Party, 17-18.

59 For a sampling of these claims, see W. H. Greenleaf, The Rise of Collectivism, Vol. I of
The British Political Tradition (London: Methuen, 1983), 161-63; Behrens, "Diehards and
Ditchers," 286-95.
60 William Harbour, Foundations of Conservative Thought, 186-87. Cf. Beer's citation of the
sentiment of a prominent Tory M.P. of traditionalist background that "political advice, derived
from liberal economic theory . . . leaves governors and its own adherents always frustrated at the
distance between their model of the world and reality," in Britain against Itself, 173-74.
61 Philip Norton and Arthur Aughey, Conservatives and Conservatism (London: Temple
Smith, 1981), 285.
62 Quoted by R. W. Apple, "Thatcher Barely Escapes Defeat as 48 Conservative M.P.s
Rebel," New York Times, 24 July 1985, p. 4.

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 RISE OF CONSERVATIVE CAPITALISM 263

governmental structures is that the results are often internally contradictory.

For the Reagan administration libertarians, their credo dictated a devolution
of federal responsibilities to state and local governments. This was to serve
the populist aim of returning power to the people, as well as the market
argument that such local authorities would compete to reduce social services
in the effort to attract new investment. To the extent that the initiative was
implemented, what resulted was an increase in confusing and contradictory
forms of state regulation and service financing and, very probably, a less
efficient environment for economic growth.63
In Britain, the controversy over center-local relations took similarly pecu-
liar twists. Promises of devolution were quickly subordinated to the need for
tight control from the center over local social spending in order to serve the
fiscal entailments of monetarism.64 In both countries, the pattern appears to
be that the structural aspects of the libertarian doctrine generally lose out to
the imposition of class-based policy preferences from the top.65
Thatcher's increasingly severe troubles in the House of Lords provide
further illustrations of these tensions. In surveying ten major defeats for the
government in the period 1979-84, Donald Shell points out that Conservative
peers

seem reluctant to acquiesce in the new ideological conservatism; instinctively they

prefer the cautious approach to change which sees the need to make exceptions when
new policies are invoked, and which is sensitive in a paternalistic way to the delicate
social fabric Mrs. Thatcher seems ready to destroy.66

Institutionalism versus Free Enterprise

Traditional conservatives have different preferences in institutions from liber-
tarians. Traditionalists prefer institutions such as the church and the family
that are customary in character and hierarchical in organization. Tradi-
tionalists who look beyond the temporary gains the market brings to elites see
a world in which society is turned over to the pursuits Hobbes foresaw in

63 Susan Tolchin and Martin Tolchin, Dismantling America: The Rush to Deregulate (New
York: Houghton Mifflin, 1983), 255; cf. "State Regulators Rush in Where Washington No
Longer Treads: Will the New Federalism Create a Fifty-Headed Hydra?" Business Week, (19
September 1983), 124.
64 Patrick Dunleavy and R. A. W. Rhodes, "Beyond Whitehall," in Developments in British
Politics, Drucker, ed., 126-128. Robert Behrens points out that antidevolutionists were generally
found on the free market side, though there were exceptions. See Conservative Party in Opposi-
tion, 19-20.
65 Timothy Conlan, "Federalism and Competing Values in the Reagan Administration
(Paper presented at the Annual Meeting of the American Political Science Association, Wash
ington, D.C., September 1984), cites ten cases where structural devolution lost out to Reagan
prescriptive policy goals. Cf. Alfred Light, "Federalism, FERC v. Mississippi, and Produ
Liability Reform," Publius, 13 (Spring 1983), 85-96.
66 Donald Shell, "The House of Lords and the Thatcher Government," Parliamentary Af-
fairs, 38 (Winter 1985), 16-32.

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264 KENNETH R. HOOVER

Leviathan: a "restless desire of power after power," driven by the realization

that the individual "cannot assure the power and means to live well . . .
without the acquisition of more."67
To counter this trend, traditionalists have argued for an active role on the
part of institutions to moderate and balance excesses by attending to the needs
of various strata of the population. As Robert Behrens has observed in charac-
terizing the approach of Prime Minister Heath, it was the mission of conser-
vatives to use "political skills to create a fresh balance between different
elements and doctrines in society when their imbalance threatened social
harmony. ... In time of undue individualism the party might defend the
state, yet in times of state authority and socialism, it would champion the
individual. Confronted with the question: 'What will you conserve?', the
[traditionalist] response was an unabashed, 'That depends.' "68
Libertarians are repulsed by any such notion. Traditional institutions are the
problem, not the solution. It was Heath's "corporatist" attempt to involve the
Confederation of British Industries and the Trades Union Congress in eco-
nomic policy making that Sir Keith Joseph objected to in the 1970s. The
breaking of the miners' strike provides another illustration, as does the an-
guished response of Harold Macmillan on behalf of the organic view of
society.
The revolt of the party traditionalists against the libertarians became suffi-
ciently widespread that a splinter group of thirty M.P.s, named Conservative
Centre Forward, was briefly formed (May 1985) to challenge Thatcher's
policies in Parliament. The movement was led by Sir Francis Pym, prominent
spokesman for moderate centrist Toryism and former Cabinet member. Pym
juxtaposed the doctrine of laissez faire with Marxism as the extremes of
British politics-arguing that Thatcher's economic blunders have been re-
trieved only by her Falklands success and the ineptitude of her opponents.69
The government's weakening position in the Commons and the Lords is
part of a pattern that found another traditional institution, the Church of
England, becoming openly critical of Thatcher's economic policies. A report
issued in December 1985 by the Archbishop of Canterbury denounced
Thatcher's economic policies for increasing the gap between rich and poor,
and failing to consider the moral issues behind economic policy.70
There are movements similar to the American moral majority in Great

67 Thomas Hobbes, Leviathan (London: Penguin, 1970), 1-2.

68 This is a more dynamic conception of traditional conservatism than Samuel Huntington
finds in the American version, where the traditionalist is seen more simply as 'one who stands by
established institutions." Samuel Huntington, 'Conservatism as an Ideology," American Politi-
cal Science Review, 51:2 (June 1957), 470.
69 Francis Pym, The Politics of Consent (London: Hamish Hamilton, 1984). Cf. William
Keegan, Mrs. Thatcher's Economic Experiment (London: Allen Lane, 1984), on the doctrinal
infighting.
70 Joseph Lelyveld, "Thatcher Government Upset over a Critical Church Report," New York
Times, 2 December 1985, p. 1.

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 RISE OF CONSERVATIVE CAPITALISM 265

Britain that advocate bolstering the family, disciplining sexual beh

advancing the agenda of the church. There are some tentative lin
tween such groups as the Listeners' and Viewers' Association, w
motes increased media censorship, and such traditionalist political f
as the Monday Club and the Salisbury Group. That these initia
taken second place to economic and international priorities has re
some clear expressions of dissatisfaction on the part of the m
tionalists with Thatcher-as with Reagan.71
In dealing with these internal tensions, both governments have
more often by waffling than by implementing one policy at the expen
other. As Robert Behrens remarks, "Mrs. Thatcher's particular sk
flying a Diehard [libertarian] kite and then carrying on, leaving
changed or merely adjusted at the margin.'72 Similarly, Reagan's
declarations of loyalty to the libertarian creed have not prevented
backing off the program when opposition became too strong, as in
ed flirtation with cuts in Social Security.

CONCLUSION

To return to the comparison of conservative capitalis

Bowles and Gintis argue that the latter is a spectrum
to the natural tendency of capitalism to erode.73 R
liberal capitalism as an ideal type, they see it in Mar
relations interacting dialectically and changing over t
tive, the extended fight over the level and form of sub
the process. Yet reducing these tensions to the lang
"contradictions" runs the danger of obscuring the dis
evident in the policy initiatives that have been take
Reagan governments.
The question then is, when does it become useful t
vative capitalism from the liberal version? Perh
changes from halting erosion to advancing the main f
isn't one more attempt to have the government supp
system; it is an effort to dispense with the doctor
healthy. The aim here is to bring into being a ne
entirely the New Deal and Butskellism (the converg
servative programs under the leadership of R. A. But
the 1950s and early 1960s).
What the admixture of elements of traditionalism

71 Martin Durham, 'Family, Morality, and the New Right," Pa

nal of Comparative Politics, 38:2 (Spring 1985), 180-91.
72 Behrens, Conservative Party, 118. Cf. "Thatcher's Answ
Will, Los Angeles Times, 30 September 1983, sec. II, p. 7, c
Thatcher Government (Oxford: Basil Blackwell, 1984).
73 Bowles and Gintis, "Crisis of Liberal Democratic Capital

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 266 KENNETH R. HOOVER

that this is a movement with an uncertain future. Just as the reform li

of the New Deal drew upon a combination of ideological tendencies i
socialism, progressivism, and populism, so conservative capitalism
than one camel in its tent. And just as liberal capitalism foundered on
of placating its middle- and lower-class constituencies while at the s
maintaining a competitive economy, so conservative capitalism enc
the collision between the immediate interests of its traditionalist backers and
the policy dictates of the free market. It is this inbuilt tendency of the market
to disrupt political formations that invites further analysis.
Politics relies heavily on class interests expressed as ideology; yet the
marketplace is no observer of prescriptive values. Insofar as they endorse the
marketplace, both liberal capitalism and conservative capitalism ultimately
separate themselves from the self-interest of individual class members even
while advancing Adam Smith's version of the general interest. There is, after
all, a difference, to use Smith's terms, between what vanity seeks (whether of
the upper-, middle-, or lower-class variety) and the "general interest of the
society" in improving its productivity. The market operates so as to favor the
latter, while the ideology of the market draws people in through an appeal to
the former. While defenders of the market appreciate its apolitical charac-
teristics, and account them as assets in the struggle to allow people to be "free
to clhoose," these characteristics make promarket ideology a perfidious part-
ner in any electoral coalition.
Reform liberals and social democrats discovered in the seventies that the
welfare state as an answer to capitalism's inequalities works well enough
when there is growth to finance real opportunity for the middle class. Pros-
perity allows vanity and conscience to be served simultaneously. When re-
sources contract and the business cycle goes awry beyond the curative capaci-
ty of the milder forms of Keynesian intervention, then the politics of the
welfare state divide the middle and lower classes.74 In the United States, the
majority turn into tax rebels suspicious of the claims of the poor, and the
special interests clamor for competitive position. As Andrew Gamble points
out in the British context, the trade unions become the scapegoats and the
inability to break away from the international market system dooms the
chances of maintaining the customary patterns of reward within British soci-
ety.75 Amid the insecurities of the downturn, as Rousseau might have pre-
dicted, politics becomes a seeking for mass reassurance, and the real interests
of the dominant class provide the policy agenda.
In the eyes of many critical theorists, the rebirth of conservative capitalism

74 See Linda Medcalf and Kenneth Dolbeare, Neopolitics (New York: Random House, 1985),
50-51. Cf. Kenneth Dolbeare, Democracy at Risk (Chatham, N.J.: Chatham House, 1984), xii-
xiii.
75 Andrew Gamble, Britain in Decline: Economic Policy, Political Strategy, and the British
State (Boston: Beacon Press, 1981), 186-87.

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 RISE OF CONSERVATIVE CAPITALISM 267

signals the failure of the "class compromise" that relied on economic growth
along with moderate reforms to deal with inequality by lifting up those on the
bottom.76 To the extent that it is truly libertarian in policy, conservative
capitalism also means the disestablishment of traditional elites, the randomiz-
ing of cultural values, and the subordination of all aspects of society to
materialism and short-term self-interest.77 As for the power of the market to
put the economy to rights, the presence of competition does not mean that the
will and the resources are in place to meet the challenge. That (relatively
restrained) forms of government intervention in Britain failed to produce an
economic renewal doesn't mean that the market will. The fault may be in
myriad other factors, not least the rigidities of the capitalist class itself.78
As conservatives advance the banner of the marketplace in the hope of
restoring the prospects for continued class preference, the logic of the market
sorts through its capitalist patrons, enriching many, forcing out some, mean-
while destabilizing communities and disrupting lives. The freedom of self-
interested choice that capitalism offers is not in the end congenial to a conser-
vatism that sees stability as necessary. Thus the advocacy of the market brings
to the surface the kinds of tensions within conservative capitalism that we
have seen here over income security and social policy. However, these are the
concerns mainly of conscience or of the fear of remote consequences.
The real splits are felt when, as in Britain, industry is denationalized and
placed in the hands not of traditional elites, but rather of international cap-
italists holding little or no loyalty to nation, class, or the other ties of custom,
mutual interest, and association that organize conventional politics. Thus
Mrs. Thatcher's most profound crises to date have involved sales of British
concerns to European and American consortia-consistent with market logic,
violative of traditional sentiment.
Meanwhile Reagan has floated massive deficits through foreign borrowing
that has undermined the value of the dollar and brought with it the displace-
ment of customary commercial and industrial relations in communities across
the country.79 Farmers, businessmen, and small manufacturers, whose inter-

76 This is the general argument of Bowles and Gintis, Adam Przeworski, and Immanuel
Wallerstein and others. Cf. Helene Slessarev, "Two Great Society Programs in an Age of
Reaganomics" (Paper presented to the Midwest Political Science Convention, Chicago, April
1984), 3-5.
77 Cf. British traditionalist Roger Scruton, The Meaning of Conservatism (Totowa. N.J.:
Bares and Noble Books, 1980), 127-28, and American traditionalist Russell Kirk, "The
Problem of Community," in his A Program for Conservatives (Chicago: Regnery, 1962), ch. 6,
esp. 140-42.
78 This argument is developed by Ben Fine and Laurence Harris in The Peculiarities of the
British Economy (London: Lawrence and Wishart, 1985).
79 According to Federal Reserve Board data, the annual net acquisition of United States assets
by foreigners has more than tripled in the period 1980-85. Cf. Andrew Gamble's distinction
between "liberal political economy" and "national political economy" in Gamble, Britain In
Decline, 133 et passim.

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268 KENNETH R. HOOVER

ests are historically at the heart of the Republican Party, have watche
ulators profit while their own positions are ever more effectively cha
by increasing international competition, giant mergers, and even for
based takeovers. The loss of support for Reagan and Thatcher in their
tive legislatures continues even as the need for symbolic reassurance
tains each leader's personal popularity.
For the present, the hybrid of conservative capitalism allows conser
to present themselves both as defenders of the past and as modernizers
casting those on the Left off as failed deviationists.80 That, and the p
gains for the incomes of the traditional elite, keep the movement in m
even while the traditionalist element of its ideological base appear
eroding.
The capacity of ideologies to provide an anchor for class identity through
myths concerning "ensembles"-or "exploitation"-based on class dif-
ferences confronts, in modern capitalism, a force fundamentally indifferent to
the continuity of personal identity.81 While socialists and progressives pro-
vided liberal capitalism a scenario for the preferred identity of the reformers
and the disadvantaged, traditionalists have given to conservative capitalism a
sense of class identification with the establishment. Capitalism, by promoting
entrepreneurship as the only truly legitimated role, celebrates a transitory
figure ever at risk of displacement-thus undermining its class alliances
whenever it becomes too closely realized in policy.
Similarly, both liberals and conservatives have flirted with versions of
populism as a way of recouping the support of those dismayed by reformist
do-goodism and elitism on the one hand, and economic royalism on the
other.82 The "authoritarian populism" Stuart Hall observes in Britain is
evident as the New Right in the United States. Yet politics is not alone a
matter of identity, nor of hegemonic intent-the realities of economic results
intrude in ways that mythology cannot conquer, though it surely can respond
in powerful definitions of the nature of the problem.
We have, of course, sketched only a few of the dynamics of identity and
class in which ideology becomes both cause and effect in the context of
capitalist politics. The intention is to fill in a part of the larger picture that has
been obscured since the twenties when conservatism enjoyed its last period of
open ascendancy.

80 Cf. Patrick Wright, On Living in an Old Country (London: Verso New Left Books, 1985).
81 For a fuller exploration of the relationships between identity and politics, see Kenneth
Hoover, A Politics of Identity (Urbana: University of Illinois Press, 1976), esp. chs. 5, 6.
82 To use Stuart Hall's terms, there is a limit to how far the class-to-party nexus can be
dissolved into a government-to-people conception without engendering a reaction for both eco-
nomic and sociopsychological reasons. See Hall's thesis concerning "authoritarian populism" in
"Moving Right," Socialist Review, no. 55 (1981), 113-37. Cf. Vigurie, The Establishment vs.
the People; Gamble, Britain in Decline, 145.

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