A Major Crisis? the Politics of Economic Policy in Britain in the 1990s

Article excerpt

Werner Bonefeld, Alice Brown and Peter Burnham

A Major Crisis? The Politics of Economic Policy in Britain in the 1990s

Dartford, Aldershot, 1995, pp.240

ISBN 1-85521-544-6 (hbk) 40.00

ISBN 1-85521-550-0 (pbk) 15.95

Reviewed by John Foster

'Grey', 'characterless', 'technocratic' are adjectives often associated with Britain's current prime minister, John Major. In A Major Crisis Bonefeld, Brown and Burnham ask what, if anything, was new about Britain's Conservative governments after the fall of Thatcher in 1990. While their answer to this general question is not totally convincing, one phenomenon for which they do supply a very plausible explanation is the greyness of the new prime minister.

The authors anchor their analysis within two traditions. One is that of International Political Economy; the other Open Marxism. They argue that virtually all analyses of British politics under Thatcher have been flawed by their undue concentration on Britain. The focus on Thatcherism as a national event has obscured an equally important dimension of analysis: that of Britain as a 'node' within a rapidly changing global capitalist economy-and hence subject to forces within an international political economy that were in many respects common across all advanced industrial economies.

The authors propose three periods in the development of the post war global economy: dollar-based Keynesian expansion until the late 1960s; slower growth through the 1970s and 1980s sustained in part by much harsher labour regimes; deflationary stagnation with only patchy growth in the 1990s. This periodisation is not particularly novel, but the authors do have some interesting points to make-particularly about the so-called monetarism of the second period, and on the contradictions which brought it to an end.

Governments of the time presented their policies as ones of economic orthodoxy, balancing the books and tight money. The reality, the authors argue, was the opposite. There were certainly deflationary policies. Full employment was abandoned, and anti-trade union laws permitted a general tightening of working class belts. In the UK and the US particularly, the rate of exploitation increased sharply. But governments were far from being fiscally prudent. There was what the authors call an inverse Keynesianism: instead of expanding credit during recessions, governments in the 1980s did so during periods of expansion. And this, say the authors, was a consequence of a critical change in the international economy: financial deregulation and the growth of a market in speculative currency. In Britain, the most deregulated market of all, a single day's trading in the late 1980s was sometimes equivalent in money value to half that of the British GNP. Governments competed for shares of this trade, and economic growth became increasingly dependent on credit-based service and property sectors. In consequence, governments, banks and companies built up vast debt mountains that slowly toppled over, amid mounting inflation, between 1987 and 1991. It was this that initiated the third period and the launch of the grey prime minister.

The paradox of the second period had been the combination of the appearance of prosperity and growth with the slowdown in productive investment. In Britain the contrast was particularly marked and the decline in productive competitiveness severely aggravated problems of corporate and state indebtedness. Initially the Tories' big money show and an expansionary service sector enabled the government to adopt a tone of triumphalism in its assault on organised labour and the public sector: strong government was necessary to end the Big State. …