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Recovery? Who wants a recovery of neoliberal capitalism?

There is No AlternativeSince the last world war, now 70 years ago, there have been only two seismic events in the West which have changed the course of politics. One was the counter-revolution at the end of the 1970s against Keynesian economics and social democracy, and that ushered in the free market fundamentalism that dominated the Western economies and much of the world beyond for the next 3 decades. The second was the global financial crash of 2008-9 which over the ensuing decade has driven the deepest recession for a century.

The former transformed the prevailing ideology whilst the latter, arguably the most devastating economic catastrophe since the Wall Street crash of 1929 which inaugurated the misery and despair of the 1930s, has produced no such reaction. Many reasons have been asserted for this, but probably the most poignant is the absorption of the radical and Left parties into the neoliberal concordance during the time of its triumphalism when deregulated markets and the Washington consensus seemed impregnable. That world is now broken beyond repair. Yet that hasn’t stopped the political and economic establishments of all parties from striving mightily to restore it. But that is not only impossible, it’s also irrational.

The world economy was growing at about 3% a year per capita in the ‘bad old days’ of widespread regulation and ‘punitive’ taxation for the rich in the 1960-70s, but in the last 30 years when unfettered markets dominated it has grown at only half that rate. In Britain the average annual per capita income growth in the 1960-70s was 2.4% when the country was allegedly suffering from the ‘British disease’, but since 1990 after Thatcher had supposedly cured the country of the disease and fought heroic struggles in the 1980s, income growth even before the crash has fallen to just 1.7% a year.

The decade and a half of uninterrupted growth, low and stable inflation, and falling unemployment after 1992 was not, we now know, a sign of the magic of neoliberal doctrines, but rather of their deeply flawed dependence on consumption-driven boom and bust. On every other key criterion too – competitiveness, inequalities of wealth, economic imbalances, and social and environmental standards – Britain fared much worse in the 30 years following the Thatcherite counter-insurgency after 1980 than in the 30 years of managed capitalism that preceded it.

Party conference next week is the perfect opportunity to make that case loud and clear. Ed Miliband aspires to ‘responsible capitalism’, which is certainly not what all the political parties seem resigned to – the reconfiguration of the broken down neoliberal version. But he needs to spell out in some detail what he means by it. In that vacuum which still remains unfilled I have just published a new book, The State We Need: Keys to the Renaissance of Britain which sets out comprehensively what that alternative scenario would look like.

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