The Legacy of the Crash

by Terrence Casey

  Montgomery, Lori (2008) ‘Obama Team Assembling $850 Billion Stimulus’, Washington Post, 19 December.

  National Journal (2011) ‘Obama Declares “The Rules Have Changed”’, 25 January. New York Times (2008) ‘Statement from G-20 Summit’, 15 November.

  O’Grady, Sean (2009) ‘Public Finances: Darling’s Impossible Battle to Climb a Mountain of Debt’, Independent, 10 December.

  OECD (2009) OECD Economic Outlook – Interim Report, ‘Chapter 3 – The Effectiveness and Scope of Economic Stimulus’ (Paris: OECD), www.oecd.org/, accessed 7 April 2011.

  OECD (2009a) OECD iLibrary – Government at a Glance 2009 – General Government Expenditure by Level of Government, www.oecd-ilibrary.org/, accessed February 25 2011.

  OECD (2009b) OECD Economic Surveys – United Kingdom (Paris: OECD).

  Pfiffner, James (2009a) ‘Presidential Transitions’, in George C. Edwards III and William G. Howell (eds), The Oxford Handbook of the American Presidency (Oxford: Oxford Handbooks Online), pp. 85–107.

  Pfiffner, James (2009b) The Strategic Presidency: Hitting the Ground Running (Homewood: The Dorsey Press).

  Pollard, Sidney (1970) The Gold Standard and Employment Policies between the Wars (London: Methuen).

  Pontusson, Jonas (1995) ‘From Comparative Public Policy to Political Economy: Putting Political Institutions in their Place and Taking Interests Seriously’, Comparative Political Studies, 28(1), 117–47.

  Rawnsley, Andrew (2010) The End of the Party (London: Viking-Penguin).

  Schultze, Charles L (1992) ‘Is There a Bias Toward Excess in US Government Budgets or Deficits?’, Journal of Economic Perspectives, 6(2), 25–43.

  Seager, Ashley (2009) ‘Borrowing Cost at Historic 1% – But Will it Ease the Pain?’, Guardian, 6 February.

  Skidelsky, Robert (2009) Keynes: Return of the Master (New York: Public Affairs). Skowronek, Stephen (1982) Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (Cambridge: Cambridge University Press).

  Weir, Margaret, and Theda Skocpol (1985) ‘State Structures and the Possibilities for “Keynesian” Responses to the Great Depression in Sweden, Britain, and the United States’, in Peter B. Evans, Dietrich Rueschemeyer and Theda Skocpol (eds), Bringing the State Back In (Cambridge: Cambridge University Press).

  TheCityUK (2011) Economic Contribution of UK Financial Services 2010, www.thecityuk.com/, accessed 9 March 2011.

  World Bank (2010), Data – Exports of Goods and Services (% of GDP), http://data.worldbank.org/, accessed 9 March 2011.

  Part II

  Post-Crash Political Trends

  6

  Divided in Victory? The Conservatives and the Republicans

  Tim Bale and Robin Kolodny

  Introduction

  Although its provenance is uncertain (being variously attributed to Oscar Wilde, George Bernard Shaw and Winston Churchill), the observation that the US and the UK are two nations divided by a common language is often – perhaps too often – repeated. When it comes to politics, however, it is easy to see why. Anyone delving into conservative commentary on the challenges posed (and the opportunities presented) by the current financial and economic crisis finds plenty of transatlantic lessons being drawn. Whether the shining examples and dire warnings to which they direct our attention would recognize themselves as such is another matter. For instance, according to one American conservative (Buchanan, 2010):

  Before the Tea Party philosophy is ever even tested in America, it will have succeeded, or it will have failed, in Great Britain. For in David Cameron the Brits have a prime minister who can fairly be described as a Tea Party Tory. Casting aside the guidance of Lord Keynes – government-induced deficits are the right remedy for recessions – Cameron has bet his own and his party’s future on the new austerity. He is making Maggie Thatcher look like Tip O’Neill.

  This is not quite how things are seen on the other side of the Atlantic. Indeed, according to one of the shrewdest and best-connected conservative commentators in the UK, it is imperative that Cameron, and those supporting him, not fall into the temptation that they have anything to learn from (let alone anything to teach) the populists across the pond. Writing at around the same time (D’Ancona, 2010), he reminded his readers that:

  The Tory tradition owes more to chipper decency than to glassy-eyed state-smashing: this is the country of [former Monty Python member turned travel writer] Michael Palin, not Sarah. Yes, the Tea Party is a riveting spectacle, and, one suspects, a gift that will keep on giving. But as a model for political action, fiscal reform or electoral strategy it is about as much use as the proverbial chocolate teapot.

  Clearly, the two commentators are at opposite ends of the conservative continuum. Nevertheless, their very different takes on the same situation remind us that we cannot take the supposed affinity between the US Republicans and the UK Conservatives for granted. This chapter sets the electoral performance and the broad policy platforms of the two parties since 1979 in the context of the so-called special relationship between the two nations in which they operate. It then focuses on how and on what the parties campaigned in 2010, as well as on the results of that campaigning, before finishing with a discussion of what their responses to the age of austerity do and don’t have in common.

  Maybe special but rarely partisan: the US–UK relationship up to 1979

  The so-called special relationship between the US and the UK neither is, nor ever has been, inevitable, but it has been significant (Dumbrell, 2006). The quality of that relationship does not seem to have been affected much by which party was in power on either side of the Atlantic. Even after the Cold War confirmed the two states as allies, there were still tensions, but they were rarely if ever complicated by partisan considerations. The Americans (then under a Republican president) refused to back the British (then governed by the Conservatives) during their ill-conceived adventure to snatch back the Suez Canal in 1956. The British (by that time governed by Labour) did the same to the Americans (initially under a Democratic president) when it came to Vietnam. Differences on individual issues, however, proved less important than a shared commitment to a liberal capitalist international order, underpinned, at least until the 1970s, by global institutions – the United Nations (UN), the North Atlantic Treaty Organization (NATO), Bretton Woods, the International Monetary Fund (IMF), and the General Agreement on Tariffs and Trade (GATT) – that US and UK governments of whatever stripe had together helped to create. The Republican Party has seemed to have more in common with the Tories than with Labour, whose links with the trade unions and enthusiasm for welfare spending arguably mean they have more in common with the Democratic Party. However, as President John F. Kennedy and Prime Minister Harold Macmillan demonstrated, a Democrat in the White House could cooperate with a Conservative in Downing Street. Conversely, as Harold Wilson and Lyndon Johnson, and then Edward Heath and Richard Nixon, showed a few years later, there was no guarantee that prime ministers and presidents of supposedly like-minded parties would see eye to eye.

  In sync? Thatcher, Reagan and beyond

  Wilson’s successor, Labour premier Jim Callaghan, seems to have got on particularly well with his Democratic counterpart, Jimmy Carter. But the rapport established between Callaghan’s successor as prime minister, Margaret Thatcher, and the man who in 1980 snatched the presidency from Carter, Ronald Reagan, was something else altogether. United in their belief that government was more often the problem than the solution, and convinced that a tougher line needed to be taken against the Soviet Union, Thatcher and Reagan were cast as ideological soul mates. The relationship between the UK and the US, while it could never be one of equals, and while there were bound to be occasional tiffs (the American invasion of Granada perhaps the most embarrassing), became closer than it had been since the Second World War and at least as close as it was later to become during the Blair–Clinton and Blair–Bush eras.

  The British, it should be said, had been under no il
lusion – especially after Suez – about who was boss, but understood, nevertheless, that they brought something to the party in terms of the legitimacy and support they could lend to American foreign policy. Thatcher, however, was much more of a true believer. Regardless of whether Reagan or any of his colleagues were completely convinced there was much more to the deal beyond mutual self-interest, Britain’s first female prime minister was genuinely convinced that there was ‘a union of mind and purpose between our peoples, which makes our relationship truly a remarkable one’ (Thatcher quoted in Jones, 1997, p. 1). The substance of such remarks, if not their style, marked something of a return to the Churchillian tradition (the ‘English-speaking peoples’ and all that) after years of more authentically Tory pragmatism – pragmatism tinged, it must be said, with just a touch of condescension and even latent anti-Americanism, be it of the English nationalist variety personified by Enoch Powell or the European-destiny version exemplified by Edward Heath. Thatcher’s line also reflected a growing conviction – ironically, one that first became evident among the young advisers who had helped Heath while in opposition in the mid 1960s – that the UK would be better off (both in the literal and the figurative sense) if it were more like the US. As Europe came to be seen by more and more Tory MPs and commentators as a sclerotic, pacifist, corporatist, even semi-socialist dinosaur, the United States – dynamic, flexible, low-tax, low-spend – was increasingly seen as a role model whose economic system, though not its political system, was the one not just to watch but to emulate. The defeat of the Soviet Union only served to confirm this impression, the fact that it had been achieved in part by budget-busting defense spending conveniently forgotten in the rush of mutual self-congratulation. After all, hadn’t both the Republicans and the Conservatives managed to win three general elections on the trot?

  Headline election results, however, can be misleading. In the UK, substantial parliamentary majorities can be won on a relatively low vote share, particularly if the opposition performs poorly, while in the US, legislative elections often tell a more nuanced story than the results of presidential races (see Table 6.1). Certainly, the early and mid 1990s should perhaps have given any overly-triumphant Republicans and Conservatives pause for thought. When the economic chickens came home to roost, George Herbert Walker Bush lost to Bill Clinton (thanks in part to Ross Perot who won 19 percent of the national vote – mostly at Bush’s expense) and the Conservatives, having won a last gasp reprieve in 1992 by dumping Thatcher two years earlier, were soundly beaten by Labour in 1997. But rather than wondering whether the Reagan–Thatcher recipe was really right for a new era, both the Republicans and the Tories took a while to opt for a supposedly more centrist alternative. Before George W. Bush came along, posing as a ‘compassionate conservative’ in order to deny Al Gore a victory in 2000 that should have been his for the taking, the Republicans shifted more to the right, a strategy that worked for them in their previous legislative triumph in 1994. Before David Cameron came along, the Conservatives made no sustained attempt to do anything different (Bale, 2009). Consequently, they were out of power for 13 years. During those 13 years, however, America continued to be a source of fascination and inspiration for the Tories – this despite the close relationship enjoyed by their nemesis, Tony Blair, not only with Clinton (who was famously unimpressed by stories that the Conservatives had tried to help out the Republicans in 1992 by trying to dig up dirt on his time in the UK during the 1960s) but also, in the aftermath of 9/11, with Bush.

  Table 6.1 Percentage of votes and seats by party, UK House of Commons, 1979–2010

  *Liberal/SDP Alliance 1983–87; Liberal Democrats from 1992.

  The Conservatives: from Thatcher to Cameron1

  Instead of seeing their victory (albeit with a small parliamentary majority) at the 1992 election as a lucky escape and a signal that the electorate were looking for ‘a kinder, gentler’ Conservatism to emerge in the wake of Thatcher’s replacement by John Major, the Tories believed they had been given a green light to carry on where she had left off. Plans were unveiled to privatize state-run concerns that even she had considered best left in public hands, most notably coal, rail, and the postal service. Meanwhile, there would be no going back on the introduction of internal quasi-markets in health care and education. Such initiatives would almost certainly have attracted widespread public opposition anyway. In the autumn of 1992 speculative pressure on the pound sterling forced the UK government into a de facto devaluation against other European currencies – but not before it had sacrificed its credibility and billions of dollars trying to avoid the inevitable.2 But when combined with the evident failure of the Major government to control and protect the value of the national currency, to beat the recession, and to persuade even its own supporters to back its foreign (specifically its European) policy, the loss of confidence in the Conservatives’ competence, compassion and credibility was as profound as it was swift. Worse still, Labour had at last managed to light upon a leader – Tony Blair – who was not only capable of projecting all three of these vital qualities, but who had plenty of personal charisma too. By 1997, the economy had begun to recover strongly but only at the cost of increases in taxation and stringent control of spending on electorally crucial areas like schools and hospitals. In any case, it was, as far as most voters were concerned, too little, too late. The electoral mood had swung away from concern about an overweening state towards the need to shore up and renew vital public services. Labour, promising to combine economic dynamism and social justice, romped home to a landslide victory.

  There had, for the best part of a decade, been a mismatch between the centrist instincts of the voters and the neoliberal convictions of the party – a mismatch that had been disguised by Thatcher’s ability to synchronize the electoral and the economic cycles and Labour’s inability to present itself as a credible alternative. This would have been obvious had the Conservatives conducted a proper post-mortem after their defeat in 1997. Instead, they blamed the latter on their internal divisions over Europe and the fact that they had been forced by economic necessity to stop cutting taxes and selling off state assets (and the fact that there was little left to sell). Convinced that voters would soon see through Blair and New Labour, the Conservatives threw themselves straight into a leadership contest out of which emerged William Hague – a right-winger who believed that all the party had to do was to stop arguing about Europe, distance itself from the financial and sexual scandals that had tainted its last few years in office and return to the Thatcherite true path. A handful of Conservative strategists, and a few colleagues, warned that this might not be enough, but their ‘modernizing’ and more centrist message fell on deaf ears, in part because those around Hague, fearing for their leader’s position, regarded dissent as an ideological and personal betrayal. The modernizers were either sidelined or simply left politics altogether, reduced to watching what amounted to a slow-motion train crash as Hague tried to attract support by taking populist positions on immigration, crime, and Europe.

  Another trouncing at the polls in 2001 terminated Hague’s tenure, but things got no better under his immediate successors, Iain Duncan Smith, who lasted just over two years, and Michael Howard, who led the party to a third election defeat in 2005. Despite some fumbling nods by Duncan Smith to the ‘compassionate conservatism’ of George W. Bush – something Hague had briefly toyed with but never really developed (see Ashbee, 2003, pp. 43–4) – neither he nor Howard (both of whom were convinced Thatcherites) were able to convince skeptical voters that the party had moved away from the right-wing nostrums of the 1980s and 1990s. Though Blair’s image had taken a battering after the decision to join the US in invading Iraq, and despite concerns that the huge amounts of cash that he and his Chancellor, Gordon Brown, had poured into health and education had not always provided value for money, voters still refused to take the Conservatives seriously.

  Three election defeats finally persuaded the party that it could no longer go on lik
e this. In December 2005 it elected a new leader, David Cameron, who, whatever his private beliefs about the role of government, was determined to signal to voters that the party would be moving back into the center ground where elections in Britain tend to be won or lost. Policies that smacked of contempt for the public sector were abandoned. The party’s commitment to the state-funded National Health Service (NHS) was trumpeted. And, as part of this attempt to ‘decontaminate the Conservative brand’, Cameron, although proclaiming the importance of family values, stressed his commitment not just to the environment and to international aid, but to equal treatment for sexual and ethnic minorities. Old favorites like Europe, immigration and crime did not disappear altogether (they did, after all, resonate with large numbers of floating as well as Conservative voters) but they were spoken about in a new, self-consciously reasonable tone. Cameron encountered some resistance but not much – mainly because, after a temporary blip as Brown replaced Blair as Labour leader and prime minister, the strategy seemed to be paying off, at least insofar as opinion polls were a reliable guide.

  The Republicans: from Reagan to the Tea Party Movement

  The character of the contemporary American party system is set fundamentally by the different approaches each major party took over the nature of government intervention in the economy after the Great Depression. Franklin Delano Roosevelt and the Democratic Congress passed the New Deal legislative program, creating government jobs to reduce the debilitating unemployment caused by the economic crisis while shoring up the nation’s infrastructure. The Democratic Party dominated the national government (with brief exceptions in the 1950s) until 1968. In this time period, Democrats became firmly identified with creating the modern American welfare state – especially social security for the aged, widowed and disabled, and Medicare, nationalized health insurance for the elderly. Democrats became the willing champions of working-class white Americans, and the more reluctant allies of lower-class African-Americans. Paradoxically, the southern region remained solidly Democratic until 1994, mostly out of the lingering anger toward the Republican Party over the Civil War in 1861–65. Republicans, in the meantime, were resistant to the idea that government could or should mitigate the business cycle, though by the 1960s most of them had embraced the spirit if not the form of social security and Medicare. Both programs could be seen as logical remedies to deficiencies in the marketplace, namely its inability to offer the elderly (and others unable to re-enter the workforce) economic remediation in dire circumstances.