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Governing Britain - New Labour

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by

Alex Sutton

on 22 October 2014

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Transcript of Governing Britain - New Labour

The Inheritance
New Labour
Rules!
The Third Way
The Outcome
Thatcher's attempt at monetarism
Leading to a discretionary, politicised
economic policy, which leads to a bust

Major uses ERM as central element of economic policy, depoliticises economy, mixed economic success.

Black Wednesday leads to an anti-inflationary economic policy, largely successful (inflation low) but with no real changes to the UK's fortunes (and damage now done to Conservative image).

Tories a spent force, deeply divided, (New) Labour win 1997 election (179).
Offered a 'third way' to government - between 'rampant
free markets' and 'tax and spend'... but what difference?

And how much of a break with the Labour party itself?
continual defeats for 18 years
'modernisation' and the space created by Thatcher/Major
a socialism of 'ends' not 'means'
the historical development of the Labour party itself
The Old Goals
Maintain social and political stability

Enhance the relative position of UK
within international system

Achieve and maintain a degree of governing autonomy (to be able to act)
A conclusion that 'policy rules' were
superior to discretionary management

Conservatives always seeking to avoid
politicisation of economic policy-making, as were previous governments

From 1997, New Labour introduce two FORMS of rule-based economic management:
operational independence for Bank of England
fiscal policy ('golden rule', 'sustainable investment')

Further 'hollowing out' of the state, a shift in the role of the state, maintenance of trade union reforms under Tories
Government must seek to combine 'economic dynamism' with
'social justice', in tandem with 'progressive' rhetoric

But... social inequality continued to rise under New Labour

Clear advantages for a government to adopt these measures though
a more skill, educated workforce enables the market to function more effectively
no need to rely on the state, people are better off
no need for direct intervention in the economy, greater autonomy for state managers

New Labour also sought greater engagement with Europe, emphasis on globalisation

State intervention, as the rhetoric goes, actually a futile exercise, making Britain less competitive, flexible
New Labour quite successful in depoliticising economy, creating sufficient level of
autonomy (until 2008). New Labour totally dominate UK politics, winning 3
consecutive General Elections (179, 167, 66)

But... major foreign policy problems, significant loss of trust in UK politics

Economic terms mixed, despite totally ignoring major global downturn in 2000:
low levels of inflation
economic stability of Labour policies
unemployment down a third (1997-2002) from 1990-1996
labour unrest, union membership at historically low levels
BUT
major manufacturing slump
lowest rate of GDP growth since early 90s
2002 largest drop in exports for 30 years, largest drop in investment since records began
The Legacy
The cause of BRED not solved...

From 2002-2007:
Highest rate of real interest rates in G7
2nd lowest industrial productivity
2nd highest rise in unit labour costs
2nd lowest level of investment

But the big problem... economic success/stability based on a massive increase in the overall level of debt, fueled by low interest rates and financial deregulation
ratio of household debts to assets grew by ~25% since 1999
consumer debt reaching the £1trillion mark
government debt also rising (27% rise from 2000-2006)
Tune in next week to find out what happens next!
Some Stats
Inflation: 3.1% (1997); 1.6% (2002); 4.3% (2007)

Real interest rates: 0.8% (2003); 1.7% (2007); G7 average 2%

Unemployment: 7.2% (1997); 5.4% (2007)

Business optimism lower than in 1997

Industrial production growth: 1.4% (1997); 0.38% (2007); G7 average 3.2%

Unit labour cost growth: 3.2% (1997); 1.1% (2007); G7 average 2.3%

Growth of real GDP: 2.9% (average); G7 2.4%; US 2.8%; Germany 1.6% but...

Productivity growth: 2.1%; US 2.6%; Germany 4.1%
Full transcript