Harold James: Another Failed British Experiment
[Harold James is professor of History and International Affairs at Princeton University and Marie Curie professor of History at the European University Institute, Florence. His most recent book is The Creation and Destruction of Value: The Globalization Cycle.]
British politics has always been something of an experimental laboratory for the industrialized world. In the 1970s, Britain was where the preeminent postwar model of how to manage the economy collapsed. That model had been based politically on the creation of consensus, and economically on Keynesian demand management.
Today, the equivalent collapse has been of the "regulation-lite" regime in which a party that styled itself as "New Labour" accepted a powerful role for markets -- particularly for largely deregulated financial markets.
In the 1960s, Keynesian policies delivered the illusion that everyone was benefiting, with high levels of employment and significant wage growth. Britain was the coolest place on earth, boasting the Beatles and the Rolling Stones and the pastel fashions of Carnaby Street.
But Keynesianism involved continued fiscal expansion, with no offsetting monetary contraction. By the 1970s, it had brought to the United Kingdom large and ultimately unsustainable current-account deficits, high levels of inflation, and then political gridlock over what to do. Which group should be the first to make a sacrifice?...
Britain today resembles 1974 much more than it resembles 1979, when the Thatcher revolution set the country on a new path. There is again a major economic problem, the end of a credit-driven boom, and a threat to the banks (except that it all looks much bigger, owing to the financial system’s massive growth and internationalization). Both major political parties look tired, and at the same time as if they are competing to imitate each other. The choice appalls voters.
There is also an ominous resemblance to Italy in 1992, when both major parties of the previous 40 years, the Christian Democrats and the Communists, simply melted away in a mixture of corruption and intellectual failure....
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British politics has always been something of an experimental laboratory for the industrialized world. In the 1970s, Britain was where the preeminent postwar model of how to manage the economy collapsed. That model had been based politically on the creation of consensus, and economically on Keynesian demand management.
Today, the equivalent collapse has been of the "regulation-lite" regime in which a party that styled itself as "New Labour" accepted a powerful role for markets -- particularly for largely deregulated financial markets.
In the 1960s, Keynesian policies delivered the illusion that everyone was benefiting, with high levels of employment and significant wage growth. Britain was the coolest place on earth, boasting the Beatles and the Rolling Stones and the pastel fashions of Carnaby Street.
But Keynesianism involved continued fiscal expansion, with no offsetting monetary contraction. By the 1970s, it had brought to the United Kingdom large and ultimately unsustainable current-account deficits, high levels of inflation, and then political gridlock over what to do. Which group should be the first to make a sacrifice?...
Britain today resembles 1974 much more than it resembles 1979, when the Thatcher revolution set the country on a new path. There is again a major economic problem, the end of a credit-driven boom, and a threat to the banks (except that it all looks much bigger, owing to the financial system’s massive growth and internationalization). Both major political parties look tired, and at the same time as if they are competing to imitate each other. The choice appalls voters.
There is also an ominous resemblance to Italy in 1992, when both major parties of the previous 40 years, the Christian Democrats and the Communists, simply melted away in a mixture of corruption and intellectual failure....