Theorists who stress the efficacy of the free market for economic and political freedom. The main principles of new‐right philosophy can be found in the works of Hayek and the American economist Milton Friedman. Some writers also consider J. M. Buchanan and the public choice school to be part of the new right. Buchanan's school differs in important ways from those discussed here, but shares its eighteenth‐ and nineteenth‐century liberal antecedents. The new right are ‘new’ not in the sense that their theories have no precedent. Indeed, they draw on Adam Smith and closely reflect the preoccupations of nineteenth‐century liberal thought. They can only be considered ‘new’ when contrasted with the ‘old right’ preoccupations with tradition, moderation, and support for the post‐war political consensus.
These theories had a strong influence on the political process from 1979 to 1992 particularly in Britain and the United States. Within the British Conservative Party Margaret Thatcher and her mentor Sir Keith Joseph led a faction which adopted new right thinking while in opposition. The conflict between ‘new’ and ‘old’ right can be clearly encapsulated in her successful assault on the Tory leadership. Her predecessor Edward Heath and his colleagues were sidelined and depicted as being an accessory in Britain's economic and political decline. Their commitment to the corporate consensus of the post‐war period was seen as the most damning evidence for Conservative failure to face up to harsh realities. For the new right this could only be done by an all‐out attack on those institutions that were seen to interfere with free market clearing. These included trade unions, the government itself, in terms of interventionist economic policy, and excessive state expenditure, particularly in terms of welfare payments. Monetarism, which emphasizes the need for strict control of the money supply to curb inflation, was also advanced as a main policy objective. A further, even more radical, aim was to eliminate socialism both as a philosophical doctrine and as a possible practical alternative to competitive capitalism.
Hayek's The Road To Serfdom, written in the early 1940s, and The Constitution of Liberty (1960) made a sustained attack on what he described as ‘state socialism’. Hayek equated socialism with central economic planning. However, he indicates that market mechanisms can only work properly in the right social and moral context. To this end, and ironically reminiscent of ‘old right’ thinking, he stresses the importance of tradition in passing on the cumulative knowledge and experience of previous generations.
The attack on trade union power has its theoretical basis in Friedman's critique of the supposed trade‐offs between lower unemployment and higher levels of inflation. Friedman argued that such trade‐offs were possible only on a short‐run basis. In the long run, the ‘non‐accelerating inflation rate of unemployment’ (NAIRU), or natural rate of unemployment, indicates the equilibrium real wage at which the labour that is voluntarily supplied matches the amount of labour that firms voluntarily employ. Any unemployment at the natural rate is therefore frictional and structural. For Friedman the latter can only be dissipated by reducing the natural rate itself by attacking those institutions which interfere with the supply of labour. Hence, trade union power is particularly targeted because it restricts the unemployed from offering to work at a wage lower than the one determined at the natural rate. Only when this power is reduced will the labour market become more competitive and the natural rate of unemployment be reduced.