The most cherished dream of conservative Washington is that liberalism can somehow be defeated, finally and irreversibly, in the way that armies are beaten and pests are exterminated. Electoral victories by Republicans are just part of the story. The larger vision is of a future in which liberalism is physically barred from the control room - of an "end of history" in which taxes and onerous regulation will never be allowed to threaten the fortunes private individuals make for themselves. This is the longing behind the former White House aide Karl Rove's talk of "permanent majority" and, 20 years previously, disgraced lobbyist Jack Abramoff's declaration to the Republican convention that it's "the job of all revolutions to make permanent their gains".

When I first moved to contemplate this peculiar utopian vision, I was struck by its apparent futility. What I did not understand was that beating liberal ideas was not the goal. The Washington conservatives aim to make liberalism irrelevant not by debating, but by erasing it. Building a majority coalition has always been a part of the programme, and conservatives have enjoyed remarkable success at it for more than 30 years. But winning elections was not a bid for permanence by itself. It was only a means.

The end was capturing the state, and using it to destroy liberalism as a practical alternative. The pattern was set by Margaret Thatcher, who used state power of the heaviest-handed sort to implant permanently the anti-state ideology.

"Economics are the method; the object is to change the soul," she said, echoing Stalin. In the 34 years before she became prime minister, Britain rode a see-saw of nationalisation, privatisation and renationalisation; Thatcher set out to end the game for good. Her plan for privatising council housing was designed not only to enthrone the market, but to encourage an ownership mentality and "change the soul" of an entire class of voters. When she sold off nationally owned industries, she took steps to ensure that workers received shares at below-market rates, leading hopefully to the same soul transformation. Her brutal suppression of the miners' strike in 1984 showed what now awaited those who resisted the new order. As a Business Week reporter summarised it in 1987: "She sees her mission as nothing less than eradicating Labour Party socialism as a political alternative."

In their own pursuit of the free-market utopia, America's right-wingers did not have as far to travel as their British cousins, and they have never needed to use their state power so ruthlessly. But the pattern is the same: scatter the left's constituencies, hack open the liberal state and reward friendly businesses with the loot.

Grover Norquist, one of the most influential conservatives in Washington and the "field marshal of the Bush plan", according to the Nation magazine, has been most blunt about using the power of the state "to crush the structures of the left". He has outlined the plan countless times in countless venues: the liberal movement is supported by a number of "pillars", each of which can be toppled by conservatives when in power. Among Norquist's suggestions has been the undermining of defence lawyers - who in the US give millions of dollars to liberal causes - with measures "potentially costing [them] billions of dollars of lost income". Conservatives could also "crush labour unions as a political entity" by forcing unions to get annual written approval from every member before spending union funds on political activities. His coup de grâce is that the Democratic Party in its entirety would become "a dead man walking" with the privatisation of social security.

Much of this programme has already been accomplished, if not on the precise terms Norquist suggested. The shimmering dream of privatising social security, though, remains the great unreachable right-wing prize, and the right persists in the campaign, regardless of the measure's unpopularity or the number of political careers it costs. President Bush announced privatisation to be his top priority on the day after his re-election in 2004, although he had not emphasised this issue during the campaign. He proceeded to chase it deep into the land of political unpopularity, a region from which he never really returned.

He did this because the potential rewards of privatising social security justify any political cost. At one stroke, it would both de-fund the operations of government and utterly reconfigure the way Americans interact with the state. It would be irreversible, too; the "transition costs" in any scheme to convert social security are so vast that no country can consider incurring them twice. Once the deal has been done and the trillions of dollars that pass through social security have been diverted from the US Treasury to stocks in private companies, the effects would be locked in for good. First, there would be an immediate flood of money into Wall Street; second, there would be an equivalent flow of money out of government accounts, immediately propelling the federal deficit up into the stratosphere and de-funding a huge part of the federal activity.

Business elites

The overall effect for the nation's politics would be to elevate for ever the rationale of the financial markets over such vague liberalisms as "the common good" and "the public interest". The practical results of such a titanic redirection of the state are easy to predict, given the persistent political demands of Wall Street: low wage growth, even weaker labour organisations, a free hand for management in downsizing, in polluting, and so on.

The longing for permanent victory over liberalism is not unique to the west. In country after country, business elites have come up with ingenious ways to limit the public's political choices. One of the most effective of these has been massive public debt. Naomi Klein has pointed out, in case after case, that the burden of debt has forced democratic countries to accept a laissez-faire system that they find deeply distasteful. Regardless of who borrowed the money, these debts must be repaid - and repaying them, in turn, means that a nation must agree to restructure its economy the way bankers bid: by deregulating, privatising and cutting spending.

Republicans have ridden to power again and again promising balanced budgets - government debt was "mortgaging our future", Ronald Reagan admonished in his inaugural address - but once in office they proceed, with a combination of tax cuts and spending increases, to inflate the federal deficit to levels far beyond those reached by their supposedly open-handed liberal rivals. The formal justification is one of the all-time great hoaxes. By cutting taxes, it is said, you will unleash such economic growth that federal revenues will actually increase, so all the additional government spending will be paid for.

Even the theory's proponents don't really believe it. David Stockman, the libertarian budget director of the first Reagan administration, did the maths in 1980 and realised it would not rescue the government; it would wreck the government. This is the point where most people would walk away. Instead, Stockman decided it had medicinal value. He realised that with their government brought to the brink of fiscal collapse, the liberals would either have to acquiesce in the reconfiguration of the state or else see the country destroyed. Stockman was candid about this: the left would "have to dismantle [the government's] bloated, wasteful, and unjust spending enterprises - or risk national ruin".

This is government-by-sabotage: deficits were a way to smash a liberal state. The Reagan deficits did precisely this. When Reagan took over in 1981, he inherited an annual deficit of $59bn and a national debt of $914bn; by the time he and his successor George Bush had finished their work, they had quintupled the deficit and pumped the debt up to more than $3trn. Bill Clinton called the deficit "Stockman's Revenge" - and it domin ated all other topics within his administration's economic teams. With the chairman of the Federal Reserve Alan Greenspan himself speaking of "financial catastrophe" unless steps were taken to control Reagan's deficit, Clinton was soon a convert. He got tough with the federal workforce.

So-called virtues

George W Bush proceeded to plunge the budget into deficit again. Indeed, after seeing how the Reagan deficit had forced Clinton's hand, it would have been foolish for a conservative not to spend his way back into the hole as rapidly as possible. "It's perfectly fine for them to waste money," says Robert Reich, a former labour secretary to Bill Clinton, summarising the conservative viewpoint. "If the public thinks government is wasteful, that's fine. That reduces public faith in government, which is precisely what the Republicans want."

In 1964, the political theorist James Burnham diagnosed liberalism as "the ideology of western suicide". What Burnham meant by this was that liberalism's so-called virtues - its openness and its insistence on equal rights for everyone - made it vulnerable to any party that refuses to play by the rules. The "suicide" that all of this was meant to describe was liberalism's inevitable destruction at the hands of communism, a movement in whose ranks Burnham had once marched himself. But his theory seems more accurately to describe the stratagems of its fans on the American right. And the correct term for the disasters that have disabled the liberal state is not suicide, but vandalism. Loot the Treasury, dynamite the dam, take a crowbar to the monument and throw a wrench into the gears. Slam the locomotive into reverse, toss something heavy on the throttle, and jump for it.

Mainstream American political commentary customarily assumes that the two political parties do whatever they do as mirror images of each other; that if one is guilty of some misstep, the other is equally culpable. But there is no symmetry. Liberalism, as we know it, arose out of a compromise between left-wing social movements and business interests. It depends on the efficient functioning of certain organs of the state; it does not call for all-out war on private industry.

Conservatism, on the other hand, speaks not of compromise, but of removing its adversaries from the field altogether. While no one dreams of sawing off those branches of the state that protect conservatism's constituents - the military, the police, legal privileges granted to corporations - conservatives openly fantasise about doing away with the bits of "big government" that serve liberal ends. While de-funding the left is the north star of the conservative project, there is no comparable campaign to "de-fund the right"; indeed, it would be difficult to imagine one.

"Over the past 30 years, American politics has become more money-centred at exactly the same time that American society has grown more unequal," the political scientists Jacob Hacker and Paul Pierson have written. The resources and organisational heft of the well-off and hyper-conservative have exploded. But the org anisational resources of middle-income Amer icans . . . have atrophied. The resulting inequality has greatly benefited the Republican Party while drawing it closer to its most affluent and extreme supporters."

In this sense, conservative Washington is a botch that keeps on working, constructing an imbalance that will tilt our politics rightward for years, a plutocracy that will stand, regardless of who wins the next few elections. And as American inequality widens, the clout of money will only grow more powerful.

As I write this, the lobbyist-fuelled conservative boom of the past ten years is being supplanted by a distinct conservative bust: like the real-estate speculators who are dumping properties all over the country, conservative senators and representatives are heading for the revolving door in record numbers.

Plutocracy

The Democrats who have taken their place are an improvement, certainly, but for the party's more entrepreneurial leaders electoral success in 2006 was merely an opportunity to accelerate their own courtship of Washington's lobbyists, think-tanks and pressure groups staked out on K Street. Democratic leaders have proved themselves the Republicans' equals in circumvention of campaign finance laws.

Throwing the rascals out is no longer enough. The problem is structural; it is inscribed on the map; it glows from the illuminated logos on the contractors' office buildings; it is built into the systems of governance themselves. A friend of mine summarised this concisely as we were lunching in one of those restaurants where the suits and the soldiers get together. Sweeping his hand so as to take in our fellow diners and all the contractors' offices beyond, he said, "So you think all of this is just going to go away if Obama gets in?" This whole economy, all these profits?

He's right, of course; maybe even righter than he realised. It would be nice if electing Democrats was all that was required to resuscitate the America that the right flattened, but it will take far more than that. A century ago, an epidemic of public theft persisted, despite a long string of reformers in the White House, Republicans and Democrats, each promising to clean the place up. Nothing worked, and for this simple reason: democracy cannot work when wealth is distributed as lopsidedly as theirs was-and as ours is. The inevitable consequence of plutocracy, then and now, is bought government.

This is an edited extract from Thomas Frank's "The Wrecking Crew", published this month by Harvill Secker (£14.99)

© Thomas Frank, 2008