It had to happen eventually. We all knew that the blairite/brownite driving force behind new labour would begin to slow stop and that then the whole "new labour" edifice would crash to the ground as redundant as the Berlin Wall.
Blair and Brown way back in the 90,s had cleverly stolen the centre ground of British politics to a British sort of neo liberalism. They weakened the link with Trade Unions, cosied up to industry and business, centralised control of the party control and re branded labour as "new labour", business friendly conserving the best of our market driven society but offering change to newly aspirant middle class and upper working class families.
The repackaging worked all too well, and left the Tories chewing on the bones of successive leaders who failed to take the "golden boys" on. They were more Thatcher than Thatcher working families credit fuelled consumer spending, consumer spending drove economic growth, services continued to be privatised and business was even invited into the education systems. The party seemed endless as the rich got even richer and inequality accelerated in New Labour. The neo liberal model seemed solid and even the Iraq war did not knock it off course.
Britain enjoyed its longest period of economic growth. It did not join the Euro and with its special relationship with the US retained a position as the worlds fourth largest economy. Great strides were made addressing poverty, proper funding to the NHS and Education. Could the party last for ever, Brown announced that we had conquered boom and slump economics. But time was running out the banks in pursuit of profit and new markets were dabbling as they always do in riskier and riskier markets. The Thatcherite/Reagan goal of the property owning democracy was leading them in the US and UK to lending at the margins to those whose lives were turbulent. As big industry looked to globally source and manufacture employment for those at the margins became rocky and they defaulted on mortgage payments. The collapse of the US sub prime market triggered the burst of a speculative bubble that rocketed around the world. Debts racked up in all home lending institutions. A global recession followed and the after shocks can now be seen ripping into Euro land as Spain, Portugal and Greece struggle to keep afloat.
What went wrong. Way back in the late 1960,s two economic approaches faced off amongst economists. Monetarists led by Milton Friedman believing the sate should restrict its activities to regulating money supply providing the poor with negative income tax, privatising public services and allowing market forces to iron out inequalities and distortions in the market system.
The opponents were Keynesian economists believing governments must plan economic growth and that regulation and state intervention was necessary to ensure the evils of unemployment and political extremism were kept out of nations.
The young "monetarists" were the rebels and they were politically seductive to neo conservatives in the US and UK. The US though the CIA undermined government after government through South America, supported right wing fascist regimes and imposed "monetarism"!!!! Privatising public services, reducing welfare payments and allowing US companies full rein....The results were a depressing failure. South America did not grow it became poorer with deeper problems than before.
Free Market economy facing off those who would plan economic development and regulate business. Who would win? Well actually niether because there are other variables in the model. That is globalisation and monopolies. There is a tendency within the free market towards ever increasing monopolies that distorts the free market........even government spending distorts the market. The result is that the market is not quite as free as we think it is!
Global companies can manipulate government. There is an established pattern that it the upswing of economic growth government deregulates and stimulates corporate growth and profit, then at the apogee there is over speculation, bubbles burst and as business and trade declines government re regulates to encourage better corporate behaviour.
The behaviour of the banks was therefore synonymous with previous collapses of the trade cycle and an earlier intervention by government in the UK and US could have helped limit the serious damage. But government had danced way to close corporate power and totally missed the danger signs.
Everyone knows that profits can also be made by removing costs. If you can externalise costs you increase profits. The conglomerates and global companies can do this in many ways, pollution, supporting injustice, right wing regimes...in all thgese ways they externalise cots of a product as a cost we all have to pay at later date......................ie climate change
The costs of bailing out banks and financial institutions will be less new housing, less schools, less NHS and a variety of other services plus less spending power in our pockets.
The collapse of the neo classical economic model was completed when even Milton Friedman its arch architect suggestsed that public utilities such as Banks, Transport, Health, Education, Housing and Transport may not be best served by being in the private sector. There was a case to run them in the interests of the community as whole.
"New Labour" crudely welded together populist monetarist themes, achieved a great deal and ultimately like Thatcher paid a Sharp price for getting it wrong. What of the future? Well no one would suggest that we abandon the concept of a mixed economy or suggest a moribund centralised command model for the economy.that failed across eastern Europe. But the concept of an economy in which the government operates to ensure fairness to all by regulating the big corporations and providing good public services is a lot more palatable than the laissez faire models that we have all see,
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