What will the financial crisis mean for politics?
We do not yet know how much the financial crisis will destabilise the ‘real’ economy where most people live and work, (usually in complete ignorance of what the recipients of big City bonuses actually do), but there is no doubt that we are in for a rough ride.
The UK economy has performed relatively well on most measures – particularly employment – in recent years. But that does not make us better suited to weather the current crisis. The UK more than any other major European economy has embraced the finance sector as an engine of growth ever since Margaret Thatcher switched on her own hadron collider in the form of the City’s deregulatory big bang. That makes us more vulnerable, not less. If, as Ashley Seager predicts in the Guardian, current events leads to a new recognition of the importance of other sectors that can only be a good thing.
But will the financial crisis also destabilise the political consensus? There is something distinctly odd about the shift to the right in party allegiance at a time when the right’s economic certainties of deregulation and free markets are coming unstuck big time.
It was always a caricature to say that previous Labour governments were against markets, but it is true that after the 1983 defeat there was considerable interest in how market mechanisms could be used to secure progressive outcomes. London’s congestion charge and the interest in green taxes are to some extent the result of that debate. But those discussions were an attempt to add extra tools to Labour’s governing tool-kit – not replace what was already there.
But since then state action and regulation – to extend the metaphor probably a little too far – have become rusty and hidden at the bottom of the tool box because no-one quite knows how to use them, other than for a quick bodge.
Yet it is clear that the roots of the financial crisis lie in a strategic lack of regulation. The US government has once again proved that everything in the USA is always bigger and best by their nationalisation of Freddie, Fannie and AIG. Other issues that we face such as countering global warming will require regulation and state action. The wide support for a windfall tax among ordinary voters (55 per cent to 30 per cent according to Channel Four’s recent YouGov poll) is a recognition of this by ordinary voters.
We are careful not to get drawn into the day-to-day ups and downs of party politics and personalities on this blog, but it may just be the key to political success might be recognising that some of the consensus of recent years no longer works.