New Labour and the economy
For much of the last forty years Britain was perceived to be in decline and the UK model of capitalism to be failing. The unsuccessful modernisation programmes in the 1960s and 1970s led to a different turn of policy in the 1980s under the Thatcher Government, which sought to reconstruct the older UK liberal model, drawing inspiration from the US rather than from Europe. The Thatcher Government helped create conditions for a new political economy to emerge in Britain after 1992 which has provided a sustained period of economic growth and financial stability. Its reforms were consolidated and extended by the Blair Government. The article will discuss the historical trajectory of the British economy in the postwar years, and the choice between Europe and America. It will examine why the UK model is once again claimed to be a success, and whether it is sustainable. .
British post-war history has been dominated by decline. The English model of capitalism in the nineteenth century appeared to sweep all before it, and made Britain the most modern economy, the economy which Marx believed showed to others the image of their own future. But in the twentieth century and particular in the third quarter the British model came under widespread attack, criticism and disparagement. The deficiencies of the British model were laid bare, and numerous prescriptions advanced as to how it might be reformed to improve UK economic performance. Many of the projects for reversing British decline recommended an alternative national model as the exemplar which the British needed to embrace in order to establish a more successful economy. The widespread perception of Britain as the sick man of Europe' through the 1960s and 1970s made many cast envious eyes at the economies in other parts of Europe, in East Asia, and in North America. Britain it seemed had the wrong kind of capitalism, the wrong kind of state, certainly the wrong kind of unions and was rapidly moving to the abyss. As Sir Keith Joseph, one of Margaret Thatcher's closest allies, memorably put iti
The visible signs of Britain's unique course - as it slides from the affluent Western World towards the threadbare economies of the communist bloc - are obvious enough. We have a demotivating tax system, increasing nationalisation, compressed differentials, low and stagnant productivity, high unemployment, many failing public services and inexorably growing central government expenditure; an obsession with equality, and with pay, price and dividend controls, and immunities for trade unions; and finally, since 1974, top of the Western league for inflation, bottom of the league for growth.
Times have changed. Twenty five years on, decline as a theme in British political discourse has almost been banished, and the economy is no longer at the centre of political debate. There is a new triumphalism in British public pronouncements about the economy, reminiscent of the heady days of Thatcherism. At the height of the shortlived 1980s boom, the 1987 Conservative Party manifesto in the unmistakeable cadences of its Leader proudly proclaimed:ii
Remember the conventional wisdom of the day. The British people were ungovernable'. We were in the grip of an incurable British disease'. Britain was heading for irreversible decline'. Well, the people were not ungovernable, the disease was not incurable, the decline has been reversed.
But this was followed by a severe recession between 1989 and 1992, which saw unemployment rise by 1.5 million, the collapse of the housing market, plunging many houseowners into negative equity, and the ERM débacle. Twenty-five years on, however, Gordon Brown, Chancellor for eight years (the longest stretch since David Lloyd George at the beginning of the twentieth century) is indulging in a new bout of...