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When I first lived in Britain, in the 1980s, it was the most polarized place I have ever experienced. The two dominant political parties did not just have widely divergent ideologies, one devoted entirely to the raw and naked market and the other to the total and all-encompassing state, but it was as if the Tories and Labour were separate races - each with its own wardrobe, accent, album chart and hairstyle. They were Morlocks and Eloi.

This weekend, as those two major parties stare at one another across an abyss of unfinished democracy, waiting to see whose punishingly small minority will be turned into a jerry-built government through a complex seduction of the third-place Liberal Democrats, we seem to be experiencing the end of the 20-year compromise that put the tribalism into the background and turned Britain into quite a different place.

The British are not like you and me, even if we share a language and culture and, in my case, an ethnicity and nationality. Their postwar experience, taking them first through terrible poverty and rationing, then through the government takeover and control of almost everything in the economy, then through the inevitable economic collapse that followed and finally into the denuded libertarianism of Thatcher, was a stark tour of the extremes of ideology and experience.

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They came out of this with two strong, and seemingly incompatible, instincts: On one hand, a taste for bold and sometimes dangerous levels of personal and economic liberty, and on the other a strong desire for the protection of large institutions of the state.

As a result, this is a country where one-fifth of all employable adults work for the government, where housing is still seen as something the state should provide; it is also a country where the foreign takeover and ownership of businesses occurs with no controversy whatsoever, where it is easier than any other place in Europe to start a business, where hard liquor, legal gambling and pornography can be obtained on every corner in every quiet residential neighbourhood.

Those two sides of the British ethos may seem incompatible, but they both share a common root: This country was not only the world's leading industrial manufacturer and foreign-trade exporter for centuries, but was also, not coincidentally, the world's mightiest empire and military force.

This wedding of the big state and the freewheeling market was the glue that held together British society, for all its terrible class divisions and imperial enslavements, for generations. It was only after the weaving-mill cities shut down and the colonial outposts were cast loose after the Second World War that the two sides of the national character began to divorce one another.

Amid the ugly wreckage of the post-Thatcher years, when this tribalism seemed poised to plunge Britain into another decade of fractious minority governments, the country's leaders - Tories, at first - began to explore ways to end the tribalism and find a new glue.

In 1995, the Conservative government of John Major commissioned the great social democratic political thinker Ralf Dahrendorf (who died last year) to find out how to forge a new settlement between the two tribes.

His report, which proved hugely influential to both parties, was titled "Wealth creation and social cohesion in a free society," and that could be the brand description of post-Thatcher Britain. It called for the free-market reforms that Gordon Brown and Tony Blair made famous: the independent, depoliticized Bank of England; the rigid low-inflation monetary policy; the use of private-sector companies to provide state infrastructure.

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But it also called for the big public-sector expansion that became a plank of the New Labour platform: the enormous increases in spending on schools, hospitals, universities and public health. (Notably, it also called for a heavier regulation of the financial industry, something that, tragically, did not happen.)

This big-economy, big-state tradeoff produced not just great economic success but also social gains: rates of violent crime that have plummeted to half their previous levels, along with a huge expansion of public health and literacy.

It took an economic collapse to shatter the reverie and unveil the flaws. Economic liberty had made middle-class people wealthier and turned immigrants into successful entrepreneurs, but it had done little for the mainly white former working class, the castoffs of that old industrial economy. And the great public-sector gains and health and education also bypassed this excluded class, who became the uneducated, obese, alcoholic welfare dependents of the right-wing "broken Britain" fantasy.

In this election, we saw both David Cameron and Gordon Brown shift from the politics of this 1990s settlement into something resembling the old tribalism: It is the state party and the market party once again. We are watching the government splinter into incompatible parliamentary fragments, because the old glue is no longer holding.

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