The bankrupt Queen of the Third Way Rachel Reeves' moral economy will take no prisoners

In all these cases there was a plan, or something like one. There was, furthermore, a reasonably clear set of boundaries: an idea of where the writ of the state planners should run, and where it should end — usually at the factory door.

New Labour, of course, had its own Third Way. It was disarmingly simple. In 1997, Britain was, by some stretch, the most laissez-faire major economy in Europe. The British Third Way, then, simply meant creaming off its surplus to pay for new and expanded public services. This was hardly sophisticated. It was no MITI. But it had a tight logic: the fortunes of the City of London, bound up with the fortunes of the NHS.

But it was not to last. Britain’s Third Way meant a free market, with exceptions. This equilibrium did not hold, and the exceptions soon began to consume the host. For this there were three reasons.

For one, post-1997 Britain never evolved a defence of inequality. It was a market economy, but it could never come up with an answer as to why some prospered under it while others did not. This had much to do with the cultural forces uncorked by New Labour, which were levelling in the extreme. Ideas of the natural inequality of man, or the inequality of deserts, did not survive the long rattling decades of Red Nose Day, Britain’s Got Talent, and compulsory football sweepstakes.

Nor did it ever evolve an explanation for failure. Third Way Britain in its decline was not so much a market economy, but something much cruder: “UK plc.” This meant that every corporate bankruptcy was held up as an indictment of the managers. Even in the high summer of Osbornomics in 2015, “Business Secretary” Sajid Javid was expected to appear at the insolvent Redcar steel works and own up — but for what exactly few could quite say.

To this, add the cultural monopoly of the state broadcaster, a strange anachronism unique to Britain. The result was, as far as the economy was concerned, a permanent state of alarm, condemnation, recrimination and moral outrage. An economy directed by the personal whims of Piers Morgan. It had a dull hostility to wealth and enterprise. But being entirely anti-intellectual, it was just as suspicious of the state’s ability to direct this enterprise.

Mistrustful of politics and politicians, it was instinctually opposed to any change from above. Nigel Lawson’s monetarist reforms, or the decision to abandon the Corn Laws, would not have run. Indeed, the refrain from the breakfast shows was that economic issues were being treated as “political footballs” and should be handed over to a quango. A quango, of course, being exactly the kind of unprincipled melange of public and private that everything was now tending towards.

This was no longer a market economy. It certainly wasn’t a planned one. It was instead what E.P. Thompson called the pre-modern “moral economy”, run on crude ideas of communal obligation, just deserts, and forced generosity. It has no theory of state intervention, but will only suffer just as much private enterprise as is necessary to fund public services. Even the various centre-right governments after 2010 could only really justify free markets on such grounds.

The moral economy has no worked-out idea of what belongs to the market, and what belongs to the state. The only imperative here is community consensus, an idea of fairness. The result was an escalating series of erratic and unprincipled interventions to enforce this consensus.

Cheap moralism is its stock in trade. The government should step in to stop people being overcharged for theatre tickets. The football Super League must be broken up, and there must indeed be a “right to football”. Thomas Cook must be bailed out by the taxpayer, lest its customers be stranded abroad. An industry has profited from war, but instead of any system of regulation, there must instead be an abrupt one-time confiscation of its guilty riches. It, at the same time, meant the sham pragmatism of “value for money” (in civilised countries, this is referred to as “an audit”), which led to a public sector so mired in procedure that nothing can be procured at all.

It has a faith in the mystical power of iconvestment, or “Government working with Business”. This is not meant to yield any kind of return. These are investments made to restore some idea of inter-regional or communal fairness. The potential of certain places or groups is untapped, it is said — largely because of the ill will of the private sector. Investment, then, is the way to restore this balance within a system that is increasingly seen as zero-sum.

At the same time, post-1997 Britain has never accepted that public investment, which is not conducted on an open capital market, always lends itself to special favours and contracts for pals. Real corporatist economies like China bow to this fact. But not Britain, which clamoured for investment, but then immediately despaired of its results, accused the bursars of corruption, and called for them to be hauled in front of tribunals.

There is a low-level din of constant pointless mobilisation. Your time is never quite your own. Always lurking just outside the corner of the collective eye is the idea of conscripting the young — conscription for its own sake. Get them down the farm, or dragoon them to clean up after your nan, or, as prime minister Rishi Sunak recently put it, to learn cyber and leadership (in a rare act of grace, the two were not combined to form “Cyber Leadership”).

The highest statement of the moral economy is found in the stakeholders: the idea that politics, and the economy, should be run according to the needs of designated interests and Communities. But even this understates things. Post-1997 Britain was pathologically averse to “either-or”; it insisted in every case on both-and, and it was so continuously shocked and angered when this failed to do the trick. A market economy, though Social.

It had all the miseries of wage labour, but few of the individual freedoms that normally mitigate it. It made much of the idea of entrepreneurship, but could not even get over the trope of Dodgy Developers, and so never built any housing, or railways, or reservoirs. In practical terms, it seemed at every turn to have been chiefly set up to maintain the value of the great pension funds.

Such an evacuated system was left very vulnerable to challengers. So it proved. One of Jeremy Corbyn’s earlier phrases was: “A society where everyone takes care of everyone else.” This was simple enough. But having dealt in these kinds of empty chestnuts for the past 25 years, it was a phrase to which the British Third Way no longer had an answer. It escaped Mr Corbyn, but only just.

The shrieking climax of the moral economy came with lockdown. Again, this had nothing to do with any supposed British tradition of statism; Japan and Sweden, two much more avowedly statist economies, did not follow such a course. Rather, lockdown in Britain was a true media-driven frenzy, very much following the pattern of the previous quarter century. Its opening act was to hurriedly throw out the standing plan for herd immunity, which had been developed by disease control experts.

Lockdown was a parody of all the ways in which the British economy had been developing since 1997. It also meant their final consolidation. The government was made completely responsible for the operation of the free market — including for its results. Wage labour carried on, but in a dull levelling atmosphere of righteous outrage, and forced solidarity. The howl of cronyism again went up, even though lockdown, which meant certain businesses closing and others remaining open by executive fiat, meant cronyism and special favours almost by definition.

Over the previous 25 years, the residual elements of laissez-faire had always been there to cover the costs of these kinds of pogroms. But with lockdown this finally snapped. £300 billion had been borrowed. There was no chance of any return on this spending; for all practical purposes the money had simply been incinerated. Ten years of fiscal retrenchment had been undone on a whim. Fiscal bean counting, “Treasury Brain”, had long been the only effective break on the moral economy. Lockdown has destroyed this tradition as well, with Chancellor Rishi Sunak being its final spokesman. In March 2020, it was now outre radicalism to ask how the total nationalisation of all wages was to be paid for.

Thus, the classic British Third Way only lasted for 10 years, from 1997 to 2007. What followed was a series of ever more wild and careening expedients until the system crashed in 2020.

This is the great context of Rachel Reeves’s rise to the Chancellorship. Lockdown debt constrains her utterly. She cannot invest; she cannot cut taxes. She cannot make economies elsewhere: that way is barred. Surveying the ruins, her only course is to fire up the moral economy anew, driving it on in a hunt for wreckers and assorted populists. This is the real meaning of “Securonomics”: a return to moral order after self-inflicted calamity.

Like the pre-Covid moral economy, it will be a policy of caprice, prosecution, and zero-sum. But this time there will be far less money to smooth everything over. Pension tax exemptions for NHS employees, and a hunt for lockdown profiteers. A Race Equality Act that will tender government contracts to favoured groups. The declaration that “globalisation is dead” because it has left communities behind and made Britain vulnerable to global shocks, along with a concomitant policy of onshoring. When combined with the promise to re-align with EEA rules, this will mean all of the remoteness of globalisation, though without even the cheap imports. It will be less a policy of “both-and” than “neither-nor”.

Government and business will continue to collapse into an indeterminate slurry. This is, of course, something that was already largely achieved with furlough. The state will not direct enterprise, but nor will it leave it alone; it will be held responsible for all its failures, and called to intervene when it succeeds too much. There will be the fake savvy of “engagement” with business, which will in practice mean the downsides of collusion but none of the pleasures of outright corruption. Shadow Business Secretary, Simon Reynolds, assures CEOs that he will personally “make the pitch” to their investors if their books should ever fail to balance.

Reevesism will speak to the vulgar anti-politics that has always been central to the British Third Way. The economy is so important that no blundering politician can be trusted to run it — either in a liberal direction or in a statist one. The only solution is to take it out of elected hands and submit all future budgets to the Office for Budget Responsibility (OBR), a quango. This will be the final stroke against Corbynomics — but also against Trussonomics.

As a result, no one will ever speak of Reeves as a rival to No. 10, as Gordon Brown and Rishi Sunak really were. Under Reeves, the old imperial treasury is finally to be broken up; and with it will go any real civilian control over economic policy. With this, economics in Britain will boil down to that basic impulse of Blairite society: the relentless hunt for social enemies.