End Of Austerity And The Adoption Of Liberal Economic Policies

Britain’s Conservative government of Theresa May has apparently adopted the economic platform of the Democratic party in the United States in what amounts to the end of the failed austerity policies of David Cameron and George Osborne. Philip Hammond, May’s Chancellor of the Exchequer, announced the government’s new spending plans on Wednesday and the important features included a rise in the minimum wage and welfare payments, providing additional aid for child care, and a significant investment in infrastructure and new housing. At the same time, Hammond also officially abandoned the prior government’s oft-adjusted pledge to balance the budget by 2020, simply saying that it would happen as soon as practical. Hammond admitted that the national debt would actually rise to over 90% of GDP in the next year. Despite these immediate stimulus measures, Hammond stated, “real earnings growth will consequently fall close to zero next year”, primarily because the falling pound due to Brexit will actually add 2% to consumer prices over the next two years.

Hammond’s proposals could have virtually been lifted word-for-word from Hillary Clinton’s campaign site, despite now being proposed by a Conservative government. As opposed to Osborne, Hammond seems to understand the need for traditional Keynesian stimulus in the face of a contracting economy. But, as he even he admits, this will allow those who are “just about managing”, as the government calls them, to simply tread water in the next year.

In the US election, Trump managed to co-opt some traditional Democratic positions, specifically protecting American workers from the effects of globalization and investment in infrastructure. In many ways, May and her government are now effectively co-opting some traditional positions taken by Labor. That this has happened speaks to how weak both Labour and Democrats have been at protecting what should be part of their core constituencies. Part of this is simply that structural issues in the global economy have helped decimate manufacturing in both the US and the UK. But both Labour and the Democrats were far too lax about the devastating effects of globalization and became too enamored and enmeshed with the financial industry. In particular, Labour and Miliband’s decision to essentially run their last election campaign as Conservative-lite created the opening that May is now exploiting. In the US, Trump and the Republicans are only too willing to take credit for the improvements in the economy that Democrats had to fight tooth and nail to achieve. To be clear, there are still vast areas of disagreement between liberals and conservatives in both the US and UK, especially in the area of the privatization of the public, as demonstrated by the Conservatives desire to privatize the NHS and even the BBC and the Republicans’ proposal to privatize Medicare. But, in certain areas of economic policy, conservatives seem only too happy to finally adopt some economically sound liberal positions. Too bad neither the Democrats nor Labour will actually get the credit they deserve.