In Search of Gladstonian Republicans

The liberalism of Britain’s great 19th-century prime minister is a model for the next conservative revolution.

By John Micklethwait and Adrian WooldridgeMay 30, 2014 6:55 p.m. ET

Few political parties have been better at reinventing themselves than the Republicans. But at the moment, when it comes to ideas, they are in a funk. American conservatives certainly know what they are against—most notably ObamaCare—but cannot agree on what they are for. The recent primaries only re-emphasized the gulf between the party’s big business and tea party wings. Thanks to President Obama’s weakness, the party might claw back the Senate this year, but, without a positive message, without a big idea, disaster beckons, yet again, in the presidential race in 2016.

Well, gather around Mitch McConnell and John Boehner (and Jeb Bush, Marco Rubio and Scott Walker ), and listen to what will strike you as a fairy tale. Imagine that the world’s superpower reduces the size of government by a quarter over the next 30 years, even as its population grows by 50%. Imagine further that the superpower performs this miracle while dramatically increasing both the quality of public services and the nation’s diplomatic clout. And imagine that the Republican Party leads this great revolution while uniting its manifold factions behind one of its favorite words: liberty.
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A caricature by Ape (Carlo Pellegrini) of British politician William E. Gladstone from English periodical VANITY FAIR. (Photo by Time Life Pictures/Mansell/Time Life Pictures/Getty Images)

Before politicians were telegenic.

Impossible? That is exactly what Britain, then the world’s superpower and pioneer of the new economy, did in the 19th century. Gross revenue from taxation fell from just under £80 million in 1816 to well under £60 million in 1846, even as the population surged and the government helped build schools, hospitals, sewers and the world’s first police force. The Victorians paid for these useful new services by getting rid of what they called “Old Corruption” (and we would call cronyism) and by exploiting the new technology of the day, like the railway. For these liberal reformers were the allies of the new commercial classes who were creating the industries that were transforming the world.

And they kept on cutting government for decades. William Gladstone, four times prime minister in the second half of the 19th century, believed in cutting taxes so that money could “fructify in the pockets of the people.” Confronted with socialist protesters who demanded “no taxation without representation,” the giant of Victorian liberalism replied that he believed in “no taxation” (something even Grover Norquist cannot match). He paid for his passion for social reform by a ruthless campaign against waste. The head of the Liberal Party prided himself on “saving candle ends and cheese-parings in the cause of the country,” opening up every branch of government to competition.

Messrs. Bush, Rubio and Walker may well have noticed an awkward word: “liberal.” But this was real liberalism—the classical small-government creed of Adam Smith and John Stuart Mill (and for that matter Milton Friedman and Margaret Thatcher ). The Victorians believed in a “night-watchman state”—one that left citizens as free as possible to pursue their own ends, provided that they did no harm to anyone else. Its watch words were liberty and efficiency.

Of course there are one or two differences between today’s Washington and Victorian London. Today’s Washington has accumulated trillions of dollars’ worth of entitlements for pensions. Victorian London did not have to worry about nuclear terrorism. But Gladstonian liberalism provides a remarkable template for the next conservative revolution.

First, rip out cronyism. Between 1815 and 1870 British Liberals replaced a government based on patronage, sweeping aside the special privileges for the East India Company, West Indian sugar makers and British landowners. Today the American right’s dirty secret is its love of big government, especially tax breaks for business (including sugar). The U.S. tax code has $1.6 trillion of exemptions, most of which go to the well-off.

Gladstone would get rid of them all—gradually, perhaps, with the concessions for health-insurance and mortgage interest—and in return chop income- and corporate-tax rates. Having helped dismantle Britain’s protectionist Corn Laws in the 1840s, he would be astonished that America still doles out $30 billion a year in agriculture subsidies and employs 100,000 people in the Agriculture Department.

Second, concentrate the state on what it needs to do. Why does the federal government own 900,000 buildings and 260 million acres of land? Why does it continue to run utilities? Why are so many American airports still in public hands? Gladstone would concentrate money on the poor, targeting the welfare state for the rich. More money goes to the top 5% in mortgage-interest deduction than to the bottom 50% in social housing. He would set about reforming entitlements to make sure that they are fundable, for example raising the retirement age to 70 in line with life expectancy (as other countries like Sweden have done).

Third, simplify government, particularly the numbers. In the early 19th century, British government accounts were incomprehensible, deliberately so. The aristocrats who ran the country wanted to conceal the fact that most government spending went to support their relations in the form of sinecures, church livings, pensions and ceremonial jobs. Gladstone insisted on standing before Parliament and explaining the budget in detail: If he couldn’t explain it to a gathering of his peers, then he knew that it was worthless. America’s current budget is so full of perks for vested interests that only lobbyists and their lawyers can understand it. The U.S. would hugely benefit from a bit of Gladstonian theater, with a Republican candidate promising to explain every dollar of spending in the State of the Union.

Fourth, take the state seriously. This is the tea party’s great shortcoming. The Victorians believed in “reform” as well as “retrenchment.” It was precisely because they wanted the state to be as small as possible that they put so much effort into making it work as well as possible. They introduced competitive exams for civil servants, rewarding the good ones with money and honors while sacking the bad ones. Gladstone would have approved of Singapore, where the state is tiny but the top civil servants get paid $2 million a year. The best way for the U.S. to avoid disasters like the current one in the Department of Veterans Affairs is to do a better job of hiring—and firing.

Fifth, put yourself on the side of business creation. Visit Silicon Valley, and you’ll find that Republicans are regarded as being out of touch, not least because of their approach to immigration. Gladstone was the ally of the new economic forces that were reshaping Britain, but he encouraged them by creating a level playing field. He was one of the architects of the great legal reforms that allowed anybody to form a limited-liability company. American conservatives should fight to make it easier to take companies public too, partly because that spreads popular capitalism.

Finally, make the state humble and dowdy. Gladstone, who even told his government to use cheaper writing paper, would have been horrified by the motorcades that sweep through Washington. He preferred to walk. A more contemporary role model for the Republicans is the current pope: Despite being just as much of a target for the assassin’s bullet as any American politician, Pope Francis has shed the trappings of state in favor of a simple old Ford. It is much easier to cut unnecessary spending if you don’t spend your life in a cocoon of privilege.

Do any Republicans come close to this? In Wisconsin, Gov. Scott Walker has tried to break the power of public unions in order to allow money to fructify in the pockets of the people. Jeb Bush has pioneered school and immigration reform and as the governor of Florida made life easier for the state’s entrepreneurs. Tea party Republicans such as Sens. Marco Rubio and Rand Paul have fulminated against crony capitalism. But so far nobody has been able to present a coherent vision of what the American state should do in a world that is being transformed by the Internet and shaken up by the growing strength of Asian giants. Ironically, the best way to formulate an American conservative vision might be to look back to a 19th-century Brit who marched under the banner of liberalism.

Messrs. Micklethwait and Wooldridge, respectively the editor in chief and management editor of the Economist, are the authors of “The Fourth Revolution: The Global Race to Reinvent the State.” just out from Penguin Press.