Pathology Without Crisis? The Strange Demise of the Anglo-Liberal Growth Model

Government and Opposition

Volumn 46, Issue 1, 2011, Pages 1-31

  Hay, Colin ^a  

^a NONE

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EID: 78650118797     PISSN: 0017257X     EISSN: 14777053     Source Type: Journal    
DOI: 10.1111/j.1477-7053.2010.01327.x     Document Type: Article

References (68)

1. This is a slightly revised version of the Government and Opposition/Leonard Schapiro Memorial Lecture delivered at the annual conference of the Political Studies Association, Edinburgh University, 29 March I am extremely grateful to Helen Thompson and Matthew Watson for their characteristically insightful comments and suggestions on an earlier version of this lecture. Needless to say, they should be absolved of all responsibility for the argument that I here seek to defend.2010
2. Robert E. Lucas, 'Macroeconomic Priorities', American Economic Review, 93: 1 (2003), pp. 1-14. On the disavowal of the business cycle and the dangerously pro-cyclical character of macro-economic management in Britain since 1997, see Colin Hay, 'Credibility, Competitiveness and the Business Cycle in Third Way Political Economy', New Political Economy, 9: 1 (2004), pp. 39-57; Colin Hay, 'Managing Economic Interdependence', in Patrick Dunleavy, Richard Heffernan, Philip Crowley and Colin Hay (eds), Developments in British Politics 8, Basingstoke, Palgrave2006
3. Andrew Gamble, 'British Politics and the Financial Crisis', British Politics, 41: 1 2009450-62
4. 4Colin Hay 'Crisis and the Structural Transformation of the StateInterrogating the Process of Change', British Journal of Politics and International Relations131999317-44
5. Colin Hay 'The "Crisis" of Keynesianism and the Rise of Neoliberalism in Britain', in John. L. Campbell and Ove K. Pedersen (eds), The Rise of Neoliberalism and Institutional Analysis, Princeton, Princeton University Press2001
6. Erik Jones'They Have No Idea Decision-Making and Policy Change in the Global Financial Crisis', LSE Europe in Question Discussion Paper 4, London20094
7. Antonio Gramsci, Selections from Prison Notebooks, London, Lawrence & Wishart1971276
8. In fact, for reasons that we will come to presently, I do not think these techniques are well described as Keynesian; but the point, for now, is that this is how they are typically characterized - a description which has arguably contributed to the Conservatives' queasiness about them
9. On the 'new financial growth model' see Andrew Gamble, The Spectre at the Feast, Basingstoke, Palgrave, 2009; and on 'privatized Keynesianism' see Colin Crouch, 'What Will Follow the Demise of Privatised Keynesianism', Political Quarterly7942008476-87
10. Of course, with the benefit of hindsight, we might now question whether the inadvertent chancing upon such a growth dynamic was quite as benign and fortuitous as it certainly appeared to be until 2007. On the new model of growth as a product of contingency rather than design, see especially Colin Crouch, 'Privatised Keynesianism: An Unacknowledged Policy Regime', British Journal of Politics and International Relations1132009382-99
11. Colin HayGood Inflation, Bad Inflation: The Housing Boom, Economic Growth and the Disaggregation of Inflationary Preferences in the UK and Ireland', British Journal of Politics and International Relations1132009461-78
12. Colin Hay'What's in a Name? New Labour's Putative Keynesianism', British Journal of Political Science3712007187-92
13. Herman Schwartz'Housing, Global Finance and American HegemonyBuilding Conservative Politics One Brick at a Time', Comparative European Politics632008262-84
14. Herman Schwartz and Len Seabrooke, 'Varieties of Residential Capitalism in the International Political Economy: Old Welfare States and the New Politics of Housing', Comparative European Politics632008237-61
15. Matthew WatsonConstituting Monetary Conservatives via the Savings HabitNew Labour and the British Housing Market Bubble', Comparative European Politics632008285-304.
16. Helen ThompsonThe Political Origins of the Financial CrisisThe Domestic and International Politics of Fannie Mae and Freddie Mac', Political Quarterly801200917-24
17. I am indebted to Matthew Watson for conversations on this point.
18. See, for instance, Thomas Wainwright, 'Laying the Foundations for a Crisis: Mapping the Historico-Geographical Construction of Residential Mortgage Backed Securitisation in the UK', International Journal of Urban and Regional Research3322009372-88.
19. See, in particular, Adair Turner, 'The Financial Crisis and the Future of Financial Regulation', The Economist's Inaugural City Lecture, 21 January2009
20. Wainwright, 'Laying the Foundations382
21. Markus K. Brunnermeier, 'Deciphering the Liquidity and Credit Crunch 2007-2008', pp. 80-1. Journal of Economic Perspectives231200977-100
22. Brunnermeier, 'Deciphering the Liquidity and Credit Crunch'92
23. 18 On 'asset-based welfare' and the economic assumptions on which it is predicated see, in particular, Alan Finlayson, 'Financialisation, Financial Literacy and Asset-Based Welfare', British Journal of Politics and International Relations1132009)400-21
24. Alan FinlaysonCharacterising New LabourThe Case of the Child Trust Fund', Public Administration861200895-110
25. Matthew WatsonPlanning for a Future of Asset-Based Welfare? New Labour, Financialised Economic Agency and the Housing Market', Planning Practice and Research241200941-56
26. Matthew Watson'House Price Keynesianism and the Contradictions of the Modern Investor Subject', Housing Studies2532010413-26
27. Rajiv PrabhakarAsset Inequality and the Crisis', Renewal174200975-80
28. See also Watson, 'House Price Keynesianism
29. Crouch, 'Privatised Keynesianism'; Colin Hay, Jari Matti Riiheläinen, Nicola Jo-Ann Watson, 'House Price Keynesianism Smith and Matthew Watson, 'Ireland: The Outlier Inside', in Kenneth Dyson (ed.), The Euro at Ten: Europeanisation, Power and Convergence, Oxford, Oxford University Press2009
30. Gamble, The Spectre at the Feast19-20
31. Paul MasonMeltdownThe End of the Age of Greed, London, Verso200984
32. On which see D. Sornette, R. Woodward and W-X. ZhanThe 2006-2008 Oil Bubble: Evidence of Speculation and Prediction', Physica A: Statistical Mechanics and its Application388820091571-6
33. R. K. Kaufmann and B. UllmanOil Prices, Speculation and Fundamentals Interpreting Causal Relations Among Spot and Futures Prices', Energy Economics, 31 2009550-8
34. Paul DavidsonCrude Oil Prices: Market Fundamentals or Speculation?', Challenge5142009110-18
35. Mazen LabbanOil in Parallax: Scarcity, Markets and the Financialisation of Accumulation', Geoforum4142010541-52
36. see also George Soros, interview, Financial Times, 22 January2008
37. This would, for instance, seem to be the argument of Patrick Minford, who suggests that European monetary authorities tend to gauge their credibility in terms of their capacity to respond to 'headline' inflation, whereas their US counterparts feel confident in focusing more narrowly on , p. 50.'core' inflation. There is undoubtedly something to this, a key aspect of which is likely to be the significant influence exerted on world oil prices by US demand (and hence US monetary policy). Patrick Minford, 'The Banking Crisis: A Rational Interpretation', Political Studies Review81201040-54
38. Indeed, it was also likely to result in a fire sale of mortgage-backed securities denominated in sterling.
39. For a far more detailed analysis, see Hyun Song Shin, 'Reflections on Northern Rock: The Bank Run that Heralded the Global Financial Crisis', Journal of Economic Perspectives2312009101-19
40. see also Gamble, The Spectre at the Feast25-6
41. On downward stickiness in housing prices, see K. E. Case, J. M. Quigley and R. J. Shiller, 'Comparing Wealth EffectsThe Stock Market Versus the Housing MarketAdvances in Macroeconomics5120051-32
42. Hay, 'Good Inflation, Bad Inflation471
43. Jim TomlinsonSick but Not Dying', Political Studies Review81201067-72
44. Martin WealeCommentaryGrowth Prospects and Financial Services', National Institute Economic Review, 20720093-9
45. see also Willem Buiter's evidence to the House of Commons Treasury Select Committee, 21 July2009
46. Weale, 'Commentary'3-8
47. For a typically measured and balanced assessment, see Colin Thain, 'A Very Peculiar British Crisis? Institutions, Ideas and Policy Responses to the Credit Crunch', British Politics442009)434-49
48. see also Gamble, The Spectre at the Feast, esp108
49. Hugh PembertonMacroeconomic Crisis and Policy Revolution', Renewal174200946-56For a rather different view, see David Coates, 'Chickens Coming Home to Roost? New Labour at the Eleventh Hour', British Politics, 4: 4 (2009), pp. 421-33.
50. 33 See, for instance, Paul Krugman, The Return of Depression Economics and the Crisis of 2008, London, Penguin2008185
51. See also Pemberton, 'Macroeconomic Crisis'46
52. See, for instance, Mervyn King, 'Finance: A Return from Risk', speech to the Worshipful Company of International Bankers, Mansion House, London, 17 March2009
53. Mervyn King, 'Speech', University of Exeter, 19 January2010
54. For examples see David Marsh, 'The Future of Politics', British Politics412009117-26
55. Mason Meltdown10
56. albeit in a slightly different context, Robert Wade, 'Financial Regime Change?', New Left Review, 5320085-21
57. Or at least what passed for a Keynesian growth model in the UK at the time
58. Gamble, 'British Politics and the Financial Crisis'459
59. David CameronOur Whole Country is Crying Out for Change', speech, 25 January2010
60. Conservative Party, A New Economic Model: 8 Benchmarks for Britain, London, Conservative Party2010
61. Conservative Party, A New Economic Model3
62. A model whose own imminent demise was, of course, famously pronounced more than a decade ago. It is perhaps also worth noting that those economies characterized by export-led growth models, such as the German, have in fact tended to suffer deeper recessions than economies in the Anglo-liberal heartlands. This is not altogether surprising, since the demand on which they principally rely comes from the Anglo-liberal core. On the (earlier) demise of Modell Deutschland, see especially Wolfgang Streeck, 'German Capitalism: Does it Exist? Can it Survive?', New Political Economy221997237-57
63. Simon Kirby and Ray BarrellProspects for the UK Economy', National Institute Economic Review, 209200942-59
64. On the role of the housing market in the rise and demise of the Irish variant of the Anglo-liberal growth model see Hay et al., 'Ireland: The Outlier Inside
65. Bank of England, Financial Stability Report, London, Bank of England, December20097
66. Hay, 'Good Inflation, Bad Inflation', esp473-7
67. The impact of speculation in oil markets actually operates very much like an (albeit lagged) business-cycle-linked tax on oil use - when demand in the world economy rises, so oil prices are artificially inflated by speculative dynamics, and when demand falls they are artificially deflated by the withdrawal of such speculation. As this perhaps suggests, and perverse though it may seem, speculation in oil markets has arguably done far more to ration oil consumption in the last decade than any international agreement on energy use. That does not, of course, prevent it from being a major impediment to the resumption of Anglo-liberal growth - though it does suggest that if we were less tolerant of Anglo-liberal growth models, we might be more tolerant of speculation in oil markets (or, better still, to a form of taxation on oil use tied to the price of oil futures) as a mechanism for oil rationing (and one which also has the benefit of being counter-cyclical).
68. See Colin Hay, Nicola Jo-Ann Smith and Matthew Watson, 'Beyond Prospective Accountancy: Reassessing Hay et al., 'Ireland: The Outlier Inside'.the Case for British Membership of Single European Currency Comparatively', British Journal of Politics and International Relations812006101-21