The global financial crisis of 2008 embodied the biggest shock to the capitalist system since the Great Depression. Crises on this scale have historically produced large transformations. The 1930s crisis destroyed the gold standard and eventually ushered in the Bretton Woods settlement. The 1970s ‘stagflationary’ crisis unravelled the compromise of post-war capitalism and was followed by a far-reaching project of neoliberal restructuring. Many observers expected a similar transformation to occur in the wake of the 2008 crisis . The decade which followed the crash has been one of profound turbulence. But whether this ‘post-crisis’ conjuncture will give rise to a new capitalist order remains an open question.
There is evidence of both continuity and change within post-crisis capitalism . On the one hand, deep public expenditure cuts, sustained real wage decline and welfare retrenchment intensified across many advanced capitalist states. Neoliberal policy ideas proved markedly resilient whilst inequality intensified (Schmidt & Thatcher, 2013). However, important shifts were also afoot in this post-crisis era. Central banks engaged in sustained programmes of ‘loose’ monetary policy, exemplified by sustained low interest rates and the unorthodox monetary policy of Quantitative Easing (Green & Lavery, 2018). Despite these efforts, low growth and the danger of deflation endured as threats to the advanced capitalist order. At the same time, anti-establishment forces and political parties on both the right and the left emerged, challenging some of the core tenets of the pre-crisis order (Blyth & Matthijs, 2017; Watkins, 2016).
This book focuses on the case of British capitalism after the crisis . It examines the extent to which British capitalism has been transformed by the 2008 crash and its aftermath. Four distinct phases of development can be identified in the prelude to and the fallout from the 2008 crisis in Britain. First, between September 1992 and the 2008 crash, the British economy underwent a phase of relatively sustained economic expansion. During this period, unemployment fell, inflation remained low and economic output expanded at a steady annual rate. At the height of this period, political elites claimed that Britain’s liberalised market economy demonstrated how economic dynamism and sustained non-inflationary growth could be secured under conditions of globalisation. In 2006, the then-Chancellor of the Exchequer, Gordon Brown , infamously proclaimed that ‘boom and bust’ had been effectively abolished under his watch. Tight counter-inflationary policy, ‘light touch’ regulation of the financial services sector, labour market flexibilisation and ‘prudential’ macroeconomic management had produced, he claimed, a period of sustained and apparently stable economic expansion within Britain.
With the 2008 crisis , this phase of economic expansion came to an abrupt halt. From March 2008, the UK entered the deepest economic downturn which it had experienced in the post-war period. Subsequently, under the newly formed Coalition government, Britain narrowly averted a ‘double dip’ recession in 2012. Economic growth throughout this period was consistently low. This phase of protracted economic stagnation had a profound impact on the structure of the British economy. Between 2008 and 2013, productivity growth flatlined, as the UK recorded its worst productivity performance in over 45 years (Jones, 2013: 2). Private investment fell by 10.5% between 2010 and 2013 (Lee, 2015: 23), whilst public investment simultaneously collapsed by 40% (Van Reenen, 2015: 3). Real wages fell by 10% between 2008 and 2015, meaning that Britain experienced the largest real terms wage cut of any European economy with the exception of Greece (TUC, 2016). At the same time, attempts to eliminate the budget deficit—the annual amount of borrowing required to finance the difference between government revenues and expenditure—were consistently frustrated due to weak tax receipts and lower than expected economic growth. Sixteen years of economic ‘boom’ were followed—contrary to the expectations of New Labour’s ‘Iron Chancellor’—by the largest ‘bust’ which the British economy had experienced since the Great Depression.
Throughout the latter half of the 2010–2015 parliament, it appeared that the British economy had finally entered into a phase of economic recovery . By the spring of 2013, relatively strong GDP growth became established once again, registering at 1.7% in the second quarter of this year. This increase was then sustained for eight successive quarters, such that by April 2015, GDP per capita finally returned to its pre-crisis peak. On a range of headline economic indicators, the British economy began to strongly outperform many comparator states within the European Union (EU) . Employment increased markedly—the Coalition government claimed by around 2 million—making Britain, in the words of the Prime Minister David Cameron , the ‘jobs factory of Europe’ (Cameron, 2015). By 2015, the budget deficit—although not abolished as had been initially promised by the Chancellor George Osborne —had been reduced by half. Confidence seemed to be returning to the British economy, as consumer spending increased and business investment began to pick up. After half a decade of relative stagnation, the British economy had returned—or so it was claimed—to a renewed wave of economic expansion and private sector-led growth.
The Coalition had implemented a deep programme of public expenditure cuts. But in the aftermath of the 2015 election, it appeared that the crisis had been contained. Growth and employment were rising. The architects of Britain’s austerity experiment—the Conservative Party under David Cameron and George Osborne —unexpectedly secured a parliamentary majority. Under the surface, however, a new wave of turbulence was emerging. Cameron had committed to holding an ‘in-out’ referendum on the UK’s membership of the European Union (EU). In 2016, the British electorate voted to ‘leave’ the EU, ending forty years of membership and pitching the UK into a prolonged period of political and constitutional crisis . In its aftermath, Cameron resigned and was replaced by Theresa May . The May government committed to a ‘hard’ Brexit , leaving the Single Market and the Customs Union, ending the jurisdiction of the European Court of Justice and ending budgetary contributions to the EU. Statist interventionism re-emerged in the early phase of the May government, as she sought to colonise seats in Labour’s heartlands (Pabst, 2017). At the same time, the Labour Party —under the leadership of Jeremy Corbyn —advanced a populist left economic programme which secured a high level of support during the 2017 general election. A distinctive post-crisis British politics had emerged. A decade after the 2008 crisis, a potential transformation in British capitalism was in the making.
Theorising Continuity and Change in British Capitalism
The four phases of development outlined above provide the temporal backdrop to this book. Throughout, the first phase of development, from 1992 to 2008, will be referred to as the ‘pre-crisis conjuncture ’. The second, third and fourth phases, from 2008 to 2018, will be referred to as the ‘post-crisis conjuncture’. The core objective of this book is to determine the extent to which Britain’s model of capitalism in the post-crisis conjuncture embodied a continuation of or a rupture with the model of capitalism which had been in place throughout the ‘pre-crisis conjuncture ’. The extent to which institutional or policy change can be identified of course depends on which policy area or institutional complex one isolates in one’s analysis (Marsh & Stoker, 2010: 228). Insofar as the existing l...