Power and Elections #5: The Death of the Neoliberal Tide
Analysing the breakdown of the neoliberal tide
Catch up on the previous piece in this series here
(NB: the terms cycle - tide - consensus are interchangeable in this piece - read PE#2 for a deeper definition)
A complete explanation of power and its relationship to elections within the UK system is impossible. We hope this series has achieved a more holistic and long-term way to analyse ‘why’ things happen in our political system, instead of just focusing on ‘what’ happens. Ending in our final two parts, TPI explores the death of neoliberalism and the beginning of a new tide.
Phil Tinline’s brilliant work on The Death of Political Consensus (2022) is an apt example of our theory in practice: cycles of political-economic consensus (we call them tides) which last for roughly 40 years and then breakdown – going through a decade or so of crisis – ending in a new consensus. The new tide is always a reaction to the flaws of the old tide: an antidote to the ageing ills of a country. However, to forge that antidotal politics, the country has to go through a crisis to find that answer: the last 15 years in the UK has been just that.
Neoliberalism in the UK
It's a bold statement to suggest the very political-economic foundation of our system is disintegrating faster with every passing moment. Surely the superiority of capitalism, bankers, global businesses and general oligarchy (rule of the rich) is secure – possibly even on the rise? The answer is no.
Founded in the depths of the 1970s crisis, neoliberalism was designed to solve the issue of rampant inflation, overpowered unions and negligible productivity / growth. Neoliberalism’s remedy was based on the powerful benefits of market and individual competition to jolt failing industries into life. The cycle has lasted so long because it has broadly worked for enough people. But as the memories fade of 1970s chaos, and sharpen on 2020s polycrisis, its foundations are in fatal trouble.
Neoliberalism has two key strengths in the UK:
1. Through the competition and resources of the market neoliberalism is very good at fostering innovation, and thus, economic growth WITHOUT causing high inflation.
2. Neoliberalism is also effective at spreading wealth through ‘enough’ of the population (usually the middle class) who then continually reelects ‘neoliberal’ governments and thus the power of the tide is maintained.
The previous tide, Keynesianism, centralised power not with the individual but with tools of the state and nationally owned bodies – in doing so aiming at full employment and a more socialist style of capitalism. With neoliberalism, however, the individual and market is supreme.
Seeds of the Breakdown 1979-2010
Since Margaret Thatcher (1979-90) identified and adopted Neoliberal politics as her powerful new tide, every PM since has continued it: John Major (1990-7), Tony Blair (1997-2007), Gordon Brown (2007-10), David Cameron (2010-16), Theresa May (2016-19), Boris Johnson 2019-22), Liz Truss (2022) and Rishi Sunak (2022-present). Some, like Blair, Brown and Johnson, have wanted a somewhat larger role for the state, increasing spending on public services, for example – but the individual and the market (and not the community or society) was still, ultimately, supreme in their politics.
However, neoliberalism is at the end of its life; dominant for over 40 years, a correction is due. Since the 2008 'great recession’, neoliberalism has been in crisis in the UK, with wages stagnating and productivity slowing. After 2008, Quantitative Easing (essentially printing non-inflationary money through bond purchasing) was the world's response to failing markets but David Cameron’s government failed to use this money to recalibrate the economy (e.g through capital spending on infrastructure and skills). Cameron mistook the next crisis as one of failing to pay down debt – like Greece – and cut government spending to reduce the deficit. A forgotten section of the population became radically disillusioned with this Cameronite austerity approach of funnelling money into the market-favoured south (due to the City of London), regardless of long-term economic – or moral – arguments.
Before Cameron’s Austerity, this forgotten group, largely in the North, Midlands and Wales, had had their communities destroyed by Thatcher’s cuts and privatisation (selling of nationally-owned business-communities). Under Thatcher’s reforms, growth was generated at any cost – in doing so destroying the industries which many of these towns and cities relied on. Few jobs and retraining schemes were set up to rejuvenate these places, especially as young people began to leave in search of better education and pay, particularly being drawn to London at the expense of regional towns. The market was set free – with growth restored.
While more redistributive policies returned under Blair and Brown, their governments were indifferent to the side-effects of neoliberalism. In particular: higher immigration, increased EU integration and globalised supply chains / industry were accepted as inevitable. While all policies produced strong growth, these factors catalysed the appeal of populism – with jobs and opportunities disappearing due to hyper-globalisation, and further EU integration causing ‘uncontrollable’ higher immigration.
In short, neoliberalism began its downfall in three stages: firstly, the fallout of Thatcherite economics, then the effects of hyper-globalisation (Blair + Brown) and finally Cameron’s austerity. The decline in living standards and inequality triggered by Cameron’s austerity only ignited these long-term issues of the left behind – adding to a feeling of a lack of control. As mentioned previously, neoliberalism was working for ENOUGH people to support the continuation of small-state policies, but not some. The left behind were created – with large economic and electoral impacts.
Neoliberalism’s Electoral Death: The Left Behind 2015-2019
The ‘enough’ group of those benefiting from neoliberalism / recent neoliberal governments (e.g pensioners, middle- upper class, homeowners) has dwindled, leaving the left behind as the most influential swing group in controlling power and elections in the UK – and key to neoliberalism’s electoral death.
How many voters need to benefit to keep neoliberalism stable and in power? UK electoral politics (FPTP) is a mysterious balancing act between winning enough voters outright while not annoying too many. Angering too many voters will result in a fatally high opposition vote which can deny a majority – an ‘anything but you’ vote.
Cameron’s 2015 victory was the left behind’s first jab at the neoliberal status quo. While Cameron won with 36% of the vote, this was only because the left behind’s vote share was split between the Tories (who had promised a EU referendum in order to win) UKIP on 12% and Labour on 30%. Labour retained the ‘red wall’, a key battleground area of left behind voters, denying the Tories the majority they would later gain in 2019. The result was inconclusive, then, with ‘enough’ – but not many – voters still benefiting from neoliberalism. These voters were guarded from the worst effects of austerity (London and metropolitan areas voting for the Conservatives) while Labour retained ancestral loyalties of Red Wall voters.
The first victory for the new left behind was the 2016 Brexit vote (see PE#3). The left behind united through the ‘take back control’ message – succinctly conveying this group’s anger, particularly at economic inequality and concerns of national identity and immigration, evident in the three stages above. Brexit has since hurt the establishment – dividing the ruling neoliberal party (Conservatives) while limiting UK neoliberalism’s key strengths ‘the market’, no longer able to take advantage of the EU’s abundant trade.
In 2017, Theresa May’s new message of ‘Brexit means Brexit’ failed to translate into power, with the left behind again split inefficiently in 2017 between Labour and the Conservative party. Jeremy Corbyn touched on principles of economic redistribution but failed on nationalism and general competence, while May vowed to amend the national effects of neoliberalism through Brexit but failed on her economic offer – even if she made the first inroads into the left behind in the Red Wall (see graph). Consequently, the 2017 election denied either party true power. The failure of the establishment to deliver the left behind’s Brexit, partly a consequence of this election, contributed to the strongest backlash yet: the 2019 election.
Boris Johnson was elected on a pledge of nationalism (Get Brexit done) and economic redistribution and reform (levelling up), combining the two strands that previous leaders of the main parties had articulated separately. The result was the destruction of the ‘red wall’ – the epitome of the left behind group. This was the first time the new tide began to form – but Johnson’s indecision, incompetence and scandals, as well as his party’s division between the old tide of free-market neoliberalism and the newly forming redistributive tide meant that real change failed. More importantly, however, neoliberalism’s electoral demise was only the beginning of its end.
Neoliberalism’s polycrisis end: 2019-2024
Neoliberalism’s true end began with a wave of polycrisis. To start, the Covid-19 pandemic – in part caused by hyper-globalisation. As the UK shutdown, once again QE was used by the UK government – stimulating stocks and investment groups (pensions etc) to keep confidence in the market. The individual based policy of furlough was somewhat redistributive but a simple pump; a missed opportunity for growth-fuelling redistribution matched with reform. Both policies kept the economy afloat through neoliberalism’s two strengths, but failed to recalibrate for the future. The ease of QE had imbued a laziness in the political establishment.
The effects of Covid-19 and the Ukrainian war has illustrated the fundamental key flaw in the neoliberal’s insistence on the market and globalisation: inflation. The UK, while not as reliant on Russian energy, has felt the shock the worst. High inflation has destroyed the ability to do QE – reliant on low interest rates. The UK – no longer able to use QE to paper over the cracks of a decaying economy nor rely completely on hyper-globalisation for growth – is more vulnerable than ever to global shocks and events. When the subsequent cost of living crisis came, the UK had no money nor infrastructure to deal with it. Simply deregulating the market and ‘releasing’ the individual for 40 years has created a key weakness in the country: the government has forgotten how to innovate nationally.
The last hurrah of the tide was evident in the Trussonomic trip on the depleted neoliberal drug – a catastrophic example of neoliberalism’s slow death, both in terms of economics and power (see SOP#10). Strikes are now back, and decades of missed rejuvenation have left the UK population’s skills, general infrastructure and economy in tatters – creating staffing crisis in public sectors and a decade of low growth (productivity). As Adam Tooze states, the UK is “deconverging” from the G7 in a way never seen before. All these factors have now accumulated into a horrific cost of living crisis (2022-3) – only compounding the UK’s recession into a mini-depression.
Duncan Weldon neatly links the polycrisis era of 2008-2020s:
“The problems run far deeper than a bad year or two. The acute living standards crisis of the early 2020s follows a slow-burning productivity crisis since the 2008 crash. British productivity growth, the ultimate driver of higher GDP and living standards, has been abysmal.”
Conclusion
Through a decade of economic polycrisis (since 2008) It has become clear that building economies based purely on market principles fails when the market becomes more volatile, and the UK starts to look less enticing for investors (political crisis and Brexit). It also doesn’t work when that market relies on one section of the country – London and the South-East – to generate growth. Nor does a focus on the individual work when many individuals are underutilised and underskilled: left behind. Again, this economic inequality and decline is not just morally questionable but economically incoherent. More significant: it is electorally unworkable.
Tragically neoliberalism’s get out of jail free card – free borrowing through QE – is now gone. Not available for either a new tide or rejuvenating neoliberalism itself. The most frustrating thing about the government in the UK is that this pool of free investment was never properly used for the last 16 years; never a fund for investment but instead a tool to paper over government failures or bail out bankers. Stimulating the stock market may have created some growth in the private sector, but the water – inevitably – has failed to fully trickle down.
So, neoliberalism no longer benefits ‘enough’ people, while the left behind has only grown through Covid-19 and the subsequent cost of living crisis. Electorally, it is dead. Economically, it is defunct. So, what comes next? And who in power has realised this?