A triumph of failed ideas European models of capitalism in ... - Journal

Reinforcing neoliberalism: crisis and austerityin the UKDamian Grimshaw and Jill Rubery1. IntroductionThe financial crisis in 2008 was to a large extent the product of the UKmodel of capitalism, centred around financial services, credit-led boomsand deregulated markets. This increased the UK’s vulnerability to thecrisis, but the UK’s was also protected compared to other Europeancountries from the follow-on sovereign debt crisis, notably by itsposition outside the Euro area (Eurozone) and its relatively long datedgovernment debt (which means less frequent debt resale). The changesin the UK model introduced by the coalition government elected in2010 therefore represent at least in part a free political choice – that is,not directly dictated by the financial markets or by the European CentralBank – but they do not represent a political choice mandated by theelectorate. Labour lost but the Conservatives did not win the electionoutright and many of the changes they have made contradict manifestocommitments. This chapter assesses the actual or planned changes inthe UK model since the crisis under three headings. We first considermacroeconomic policy before and during the crisis and now in theausterity phase. Second, we look at the approach taken to welfare andthird, the approach to governance and the provision of public services.2. Macroeconomic policy, banking crisis and responseIn the run up to the crisis, the UK economy was governed by a set ofprinciples similar to the one that governs the USA. The neoliberalmacroeconomic policy approach firmly rejected the Keynesianism of the‘golden age’ post-war period and instead emphasised the pursuit of lowinflation, limited state assistance to firms and industries, shareholdervalue, deregulation of product markets and liberalisation of capital flows.A triumph of failed ideas – European models of capitalism in the crisis 41