The Legacy of the Crash Page 3

  Great challenges, of course, offer great opportunities. The crash followed decades of (in the view of many now discredited) neoliberal economic reforms championed forcefully by the parties of the right, Conservatives in Britain and Republicans in the US. Progressive leaders, having spent those decades railing against the dangers of unfettered capitalism and the retreat of the state, would be expected to be well placed to charge boldly into this political breech. To be sure, this prospect was going to be more difficult in the UK given that the Labour Party, the professed party of the left, had governed for ten years while embracing the market; they could hardly blame their problems on the Tories. The 2010 general election thus saw a strong swing to the Conservatives, albeit not quite enough to give them an outright majority. For a time, however, it looked as if the US was heading in more resolutely progressive direction as Barack Obama comfortably won election in the midst of the crisis. With increased Democratic majorities in Congress he was able to pass the stimulus package, health care reform, and financial market reforms. Yet public revulsion over the bank bailouts (even if initiated under George W. Bush) and the advancement of what was portrayed as ‘socialized medicine’ produced a backlash, manifest in the conservative Tea Party movement (see Chapter 8 by Arthur Cyr). The ‘shellacking’, as President Obama put it, of the Democrats in the midterm elections saw the ebb of the progressive tide. With unemployment stuck at 9 percent and an approval rating below 50 percent, the ability of Obama to reunite his electoral base from 2008 is hardly certain (although the dearth of competitive Republican challengers to date helps). In short, rather than an anti-capitalist sentiment sweeping away the political proponents of free markets, what we find instead in both the United States and Britain are volatile electorates who have been inclined toward candidates of the right as of late. Thus perhaps the most intriguing paradox of post-crash politics is why the left has done so poorly in an environment tailor-made for their message.

  The answer to this puzzle is threefold, elaborated by Graham Wilson in Chapter 7. For one, rightly or wrongly, public opinion largely blames government and politicians rather than the executives of the financial industry for the catastrophe. More importantly, left-leaning governments are hindered by the constraints that markets place on political choice. Drawing on the analysis of Charles Lindbloom (1977), Wilson notes that the privileged position of finance in the US and UK forced political leaders to serve their needs. Barack Obama and Gordon Brown may have been loath to hand over enormous government checks to bankers who had proven themselves so irresponsible, but unless they were willing to see the collapse of the financial system, devastating ordinary citizens, they had no choice. To make matters worse, they then were blamed for the economic damaged caused by the bankers. Still, those center-left politicians were not just victims of circumstance in Wilson’s view; they equally have been incapable of articulating an alternative vision. For Brown this would have required a reversal of both policy and rhetoric. The New Labour project was premised on increasing economic growth, especially by supporting the financial institutions of the City of London. Obama was better placed to aggressively pin the blame on financiers and their Republican protectors, but that would have gone against his ideal of being a ‘post-partisan’ president. The net result is that Labour and the Democrats offer little more than softer versions of the policies advocated by their opponents. Meanwhile progressive left organizations outside of the major political parties, particularly labor unions, have been relegated to rearguard actions to resist the austerity measures being imposed to deal with the fiscal calamity. Wilson speculates as to possible strategies for the revival of the left, but the path to electoral success remains unclear. In the rubble of the crash, the left continues to sift aimlessly, seemingly incapable of designing a substitute for the neoliberal edifice.

  Politics being something of a zero-sum game, the downfall of the left has been a boon to the right. Since the crash the Conservatives are now in government, albeit in coalition with the Liberal Democrats, while the Republicans regained in the 2010 midterm elections many of seats they had lost in the annus horribilus of 2008. Tim Bale and Robin Kolodny chronicle these successes (Chapter 6) and the nature of the Conservative-Republican ‘special relationship’ going back to its zenith under Thatcher and Reagan. The comparable trajectories of the recent ascendance of the Tories and the Republicans are countered by some conspicuous ideological distinctions. David Cameron consciously and explicitly moved his party to the political center, with a strong emphasis on convincing voters that the National Health Service (NHS) was safe in Conservative hands. Republicans, conversely, found their voice in opposition to Obama’s healthcare plan and rode the more extremist Tea Party movement to victory.9 There has been something of a convergence since the 2010 elections as both parties have focused on the need for sharp reductions in spending to rebalance the books to address ballooning national debts. Conservatives and Republicans alike have staked a position that the voters, recognizing the urgency of the fiscal predicament, will reward them for being the ones willing to deliver needed frugality.10 Whether voters will be so supportive when theoretical reductions turn into genuine cuts is another question.

  Based on the evidence that Michael Brogan presents in Chapter 10 from the last elections the answer derives from the interaction of economic performance and voter partisanship. Voters were angry about the state of the economy and, excluding dedicated Labour or Democratic partisans, wanted to punish the incumbent parties. But the voting decision was a two-step process that Brogan labels ‘aggrieved acquiescence’. Rejection of the incumbents for their economic management did not automatically translate into support for the Conservatives and Republicans. In line with this observation, Bale and Kolodny note that the crisis forced the Tories to shift their focus from ‘sharing the proceeds of growth’ to the need to cut the deficit, undercutting their image among the wider electorate as a safe alternative to Labour. This helps us to understand the inability of the Conservatives to win an outright majority in the House of Commons in 2010 – and may provide comfort to those supporting Obama’s reelection in 2012. It equally highlights the challenge facing the Labour Party and Republican nominees for the White House. Discontent may not be enough to win enough votes; an alternative strategy that appeals to the broad middle of voters is needed as well.

  The 2010 British general election also produced the greatest surprise of post-crash politics: a Coalition government. It is the first since the Second World War and an ideologically ‘unnatural’ coalition of Conservatives and Liberal Democrats at that. As Arthur Cyr reviews in Chapter 8, for a brief moment during the campaign it looked as if the Lib Dems might fulfill the promise of their predecessor Social Democratic Party to ‘break the mold of British politics’ as their new and telegenic leader Nick Clegg scored a clear victory in the eyes of most pundits in the first pre-election premier debates, pushing up the party’s poll numbers. The public love affair proved instead to be a brief flirtation, as their leaders’ debate performance did not convert into extra votes for Lib Dem candidates. On election day they came up well short of their expectations, actually losing five of their previous 62 seats. With Cameron’s Conservatives also falling short, Clegg was put in the position of kingmaker nonetheless. Despite the closer ideological affinity to Labour, Cyr contends the Lib Dems went into a coalition with the Tories because they were more likely to be able to deliver on their promises, including the potential to achieve the Liberal Democrat’s Holy Grail: electoral reform. The coalition agreement included a promise to hold a referendum to replace the current first-past-the-post system for Westminster elections with an alternative vote system.11 The Conservatives held to their promise, although in the end the measure was decisively rejected by over two-thirds of the voters in a referendum on 5 May 2011. Despite a good deal of acrimony between the coalition partners over the tenor of the Alternative Vote (AV) campaign, they seem to have weathered this rough patch and look capable of maintaining the political marriage a
s committed in the coalition agreement, through the end of this parliament in 2015.

  On the American side, the economic crisis and the policy responses to it generated the Tea Party movement, their rise recounted by Cyr. A decentralized grassroots movement rather than a proper political party, the Tea Party is the latest incarnation of a longstanding strain of American populism going back to the Jacksonian era. The commonality of all American populist movements is the defense of ‘the little guy’ against the malignant influence of ‘bigness’, be they Big Government, Big Business, Big Oil, Big Banks, and so on. To the benefit of the Republican Party, Tea Partiers aimed their vitriol against ‘Big Government’ in the guise of the Obama administration rather than ‘Big Business’. How much influence Tea Party activists will have on the 2012 Republican primaries remains to be seen, but as Cyr notes the historical tendency is for the ideas and interests of third parties to be enveloped into the platforms of the two major parties. This is at one with the broader tendencies identified by Nicol Rae and Juan Gil (Chapter 9) for US political parties to become more ideological and polarized over the last 50 years. For much of the post-war period scholars of American politics looked with envy to the more centralized, mass party British system, lamenting the disorganized, decentralized, state-dominated American parties. By Rae and Gil’s appraisal social forces have pushed American parties into something of a de facto convergence on this model, as heightened social cleavages and party polarization serve to mimic the function if not the form of mass parties. At the same time Britain retains the mass party structure while both the Conservative and Labour parties have seen a sharp decline in membership as socio-economic class has receded as a defining political cleavage. This element of convergence aside, the UK system has also seen the rise of regional parties and, especially with the inclusion of the Liberal Democrats in government, the emergence of a meaningful multiparty system.

  Beyond political trends, public policy issues loom large. Integral to the debates over fiscal retrenchment is the issue of health care, examined by Alex Wadden in Chapter 11. With rising costs and an aging population, health care is set to gobble up an increasing portion of government resources in both countries. Upon assuming office, President Obama aimed to succeed where Bill Clinton had failed: in passing a comprehensive health care reform. The debate over what would become the Affordable Care Act (ACA – derided as ‘Obamacare’ by its detractors) dominated the first 18 months of the current administration. The plan sought to both bring millions of uninsured Americans into coverage and reduce the overall costs of health care by ‘bending the cost curve’. Its net impact remains to be seen, but as Wadden notes, the prospects look better for expanding coverage than containing costs. Either way, the program has not increased in popularity since its passage as Democratic supporters had hope. A Gallup poll taken in early 2011 showed that 46 percent of Americans favored its repeal. On the British side socialized medicine in the form of the NHS has such deep-seated and widespread support that the Conservatives specifically promised to protect it from spending cuts in their 2010 manifesto. Once in office, however, Secretary of State Andrew Lansley produced a White Paper calling for relatively radical reforms, pushing more spending decisions down to the General Practitioner (GP) level. At the time of this writing (summer 2011) the government is backtracking on many of these reforms and their exact plans for the NHS remain uncertain. Regardless, Wadden reminds us that, given its overall cost and the fact that it touches on basic societal values, health care will remain an intense political issue for years to come.

  The primary focus of this volume is domestic rather than foreign policy, yet the financial crisis hit at a time of war, with both Britain and America engaged in battle in Iraq and Afghanistan. Chapters 12 and 13 explore how the executives in both states have managed this challenge, with emphasis on their relations with other institutions. George W. Bush and Tony Blair were, in different ways and at different times, accused of erroneously abusing executive power to prosecute these wars and the larger ‘war on terror’. John Owen and Mark Shephard examine the extent to which this concentration of executive power and discretion has been continued or checked by the new administrations in power. Owens and Shephard found that while the Obama administration and Cameron government may have adopted a softer tone, the accretion of executive power in relation to the war on terror continued unabated, even increasing in some areas. The fear of terrorism remains high and both the White House and Downing Street are committed to taking decisive action to combat it when appropriate, a point illustrated by Obama’s ordering of the mission to kill Osama bin Laden. Neither President Obama nor Prime Minister Cameron have shown any intention of ceding authorities already accrued by their predecessors.

  Congress and Parliament may remain relatively supine in the face of their respective executives’ claim to prosecute the war on terror without limits. In contrast Richard Maiman sketches how both nation’s judiciaries have been increasingly assertive in challenging executive authority. Structurally the two judicial systems are quite different. The independent US Supreme Court has an established record of ruling on the constitutionality of the actions of the other branches of government. Historically the Appellate Committee of the House of Lords, otherwise known as the ‘Law Lords’, has not played this role in the British system. The transformation of the Law Lords into a separate Supreme Court has coincided with an increase in the prominence of judicial voices in debates regarding the proper limits to executive power. This increased sense of empowerment may not have quite transformed the British Supreme Court into the co-equal players that are their American counterparts. Both judiciaries nevertheless share a determination to erect legal limitations to claims of unfettered authority in regards to combatting terrorism – hardly surprising in the US, but highlighting the continued advance of a ‘rights revolution’ in the UK.

  In the concluding chapter, Terrence Casey attempts to provide some coherence to the broader social, economic, and political trends evident in this ‘age of austerity’. A rising material standard of living, to include home ownership, has long been central to the ideal of the ‘American Dream’ as well as Britain’s identity as a ‘property owning democracy’. The gnawing fear is that this most recent crisis was not just a cyclical downturn that can be countered by appropriate policies, but indicative of structural flaws in the basic operation of the economy. The rivers of debt, both public and private, still coursing through our economic system mean that we will have to grapple with constrained choices, at least for the foreseeable future. But what of the longer-term? Are we facing a future of diminished expectations? If we are drifting into stagnation, how might this affect our respective societies? How will this affect the life prospects of those growing up in such an environment? Such concerns can be assuaged, of course, by a return to strong growth. Can the growth model upon which both America and Britain have relied for the last three decades, guided by a free market ideology and heavily invested in the financial sector, again deliver the desired prosperity, and stability? If a new economic model is needed, what might it be? And what are the political implications of these economic trends? To date the traditional nostrums of neither the left nor the right have resonated strongly with American or British electorates, both of which remain deeply apprehensive toward the future. The major economic crises of the last 100 years – the Great Depression and the ‘stagflation’ of the 1970s – proved to be political watersheds, ushering in new eras. In this crisis, transformative political movements have so far been noteworthy for their absence. How will this current crisis alter the disposition of ideological and political forces? Are we on the cusp of another new political era, or will we see a return to the status quo ante? What will the politics of this age of austerity look like?

  Speculating on the future trajectory of current trends is something of a fool’s errand, to be sure. (Or, given the subject matter, it might be better to use the boilerplate of financial product advertising: ‘past performance is not an ind
ication of future results’.) The crisis that swept through global financial markets in the fall of 2008 has undoubtedly had social, political, and economic affects that are both profound and long-lasting. Some of these are identifiable in the three years that has elapsed since the crash. Others remain obscured by our own proximity to events and will only be revealed with the passage of time. As such it is still too early for a volume like this to provide a truly comprehensive appraisal of the legacy of this crisis. At the same time, enough time has elapsed and enough dust has settled, as it were, to begin to start making an assessment of the aftermath, determining which elements of our political and economic systems remain stable, which have been changed indelibly, and which perhaps teeter on the brink of some still unforeseen transformation. The Legacy of the Crash is our attempt, through our individual and collective efforts, to provide a foundation for understanding these events as they continue to unfold in the years to come, with the hope that others may be guided as to how to best respond to these challenges. Without doubt, our two great nations have been tested much more severely in the past, but these are still great burdens. Let us hope that we may soon, to borrow Winston Churchill’s inspirational words, find a way to again move our societies into the ‘broad, sunlit uplands’ of prosperity and stability.