Portal de Periódicos da CAPES

Credibility, competitiveness and the business cycle in ‘third way’ political economy: a critical evaluation of economic policy in Britain since 1997

2004; Taylor & Francis; Volume: 9; Issue: 1 Linguagem: Inglês

10.1080/1356346042000190376

1469-9923

Colin Hay,

Housing, Finance, and Neoliberalism

Click to increase image sizeClick to decrease image size Notes Philip Arestis & Malcolm Sawyer, 'The Economic Analysis Underpinning the "Third Way"', New Political Economy, Vol. 6, No. 2 (2001), pp. 255–78. See, for instance, Anthony Giddens, The Third Way and its Critics (Polity, 2000), p. 37. Here Giddens makes but one reference to new Keynesian economic thought. This he treats as synonymous with 'third way' political economy. Sadly he refers, in so doing, to ideas that are both profoundly antithetical to new Keynesian economics and that Labour has made clear it categorically rejects—in, for instance, its proposals for a new Bretton Woods. On new Keynesian economics, see, for instance, B. Greenwald & J. Stiglitz, 'New and Old Keynesians', Journal of Economic Perspectives, Vol. 7, No. 1 (1993), pp. 23–44; D. Romer, 'The New Keynesian Synthesis', Journal of Economic Perspectives, Vol. 7, No. 1 (1993), pp. 5–22; and J. Bradford de Long, 'The Triumph of Monetarism', Journal of Economic Perspectives, Vol. 14, No. 1 (2000), pp. 83–94. As Matthew Watson makes clear, these proposals only make sense if it is assumed that 'capital markets display a natural tendency to equilibrium' such that 'speculative dynamics do not unnecessarily prejudice market outcomes'. See Matthew Watson, 'Sand in the Wheels, Or Oiling the Wheels, of International Finance? New Labour's Appeal to a "New Bretton Woods"', British Journal of Politics and International Relations, Vol. 4, No. 2 (2002), p. 201. Giddens' error, it seems, originates in an earlier article on New Labour's new Keynesianism by no less a commentator than Will Hutton. See Will Hutton, 'New Keynesianism and New Labour', Political Quarterly, Vol. 70, No. 1 (1999), pp. 97–102. Ed Balls, 'Open Macroeconomics in an Open Economy', Scottish Journal of Political Economy, Vol. 45, No. 2 (1998), pp. 113–32; see also The Chancellor, Gordon Brown's Mais Lecture, 19 October 1999. Cited in Jonathan Kirschner, 'Inflation: Paper Dragon or Trojan Horse?', Review of International Political Economy, Vol. 6, No. 4 (1999), pp. 609–18 (see p. 611); see also Greenwald & Stiglitz, 'New and Old Keynesianism'. Colin Hay, 'Negotiating International Constraints: The Antinomies of Credibility and Competitiveness in the Political Economy of New Labour', Competition and Change, Vol. 5, No. 3 (2001), pp. 269–90. Colin Hay, 'The Invocation of External Economic Constraint: A Genealogy of the Concept of Globalisation in the Political Economy of the British Labour Party, 1973–2000', European Legacy, Vol. 6, No. 2 (2001), pp. 233–49. Balls, 'Open Macroeconomics'; see also HM Treasury, Reforming Britain's Economic and Fiscal Policy: Towards Greater Economic Stability (Palgrave, 2002). F. Kydland & E. C. Prescott, 'Rules Rather than Discretion: The Inconsistency of Optimal Plans', Journal of Political Economy, Vol. 8, No. 3 (1977), pp. 473–92; and, on political business cycles, Alberto Alesina, 'Macroeconomic Policy in a Two‐Party System as a Repeated Game', Quarterly Journal of Economics, Vol. 103, No. 3 (1987), pp. 651–78. Kirschner, 'Inflation', pp. 612–13. David Coates & Colin Hay, 'The Internal and External Face of New Labour's Political Economy', Government and Opposition, Vol. 36, No. 4 (2001), p. 460. S. Bond & T. Jenkinson, 'The Assessment: Investment Performance and Policy', Oxford Review of Economic Policy, Vol. 12, No. 2 (1996), pp. 1–29; Michael Kitson & Jonathan Michie, The Political Economy of Competitiveness: Essays on Employment, Public Policy and Corporate Performance (Routledge, 2000); and Matthew Watson & Colin Hay, 'In the Dedicated Pursuit of Dedicated Capital: Restoring an Indigenous Investment Ethic to British Capitalism', New Political Economy, Vol. 3, No. 3 (1998), pp. 407–26. See also Ciaran Driver, 'Fine Words Spin No Yarn: Capital Investment in the UK', New Economy, Vol. 9, No. 4 (2002), pp. 230–5. De Long, 'The Triumph of Monetarism', pp. 83–4; Greenwald & Stiglitz, 'New and Old Keynesianism'; and Romer, 'The New Keynesian Synthesis'. But see N. G. Mankiw, 'Real Business Cycles: A New Keynesian Perspective', Journal of Economic Perspectives, Vol. 3, No. 3 (1989), pp. 79–90. Of course, New Labour may accept the argument put forward by some influential commentators, practitioners and theorists that the USA offers a 'new economy' model of sustainable non‐inflationary growth leading to the permanent elimination of the business cycle. See Matthew Watson, 'Embedding the New Economy in Europe: A Study of the Institutional Specificities of Knowledge‐Based Growth', Economy and Society, Vol. 30, No. 4 (2001), pp. 504–5. However, enticed by such a logic it may well be, it is nonetheless difficult to reconcile this fanciful delusion with the Chancellor's commentary on the British economy as offered in successive budget speeches since 1997. Arestis & Sawyer, 'The Economic Analysis', p. 259; John Grieve Smith, There Is a Better Way: A New Economic Agenda (Anthem Press, 2001), p. 14; and John Westergaard, 'Where Does the Third Way Lead?', New Political Economy, Vol. 4, No. 3 (1999), p. 430. Grieve Smith, There Is a Better Way, p. 14. For a more lengthy treatment, see Colin Hay, 'Macroeconomic Policy Coordination and Membership of the Single European Currency: Another Case of British Exceptionalism', Political Quarterly, Vol. 74, No. 1 (2003), pp. 91–100. Grieve Smith, There Is a Better Way, p. 16. R. Layard, S. Nickell & R. Jackman, Unemployment: Macroeconomic Performance and the Labour Market (Oxford University Press, 1991). See also Driver, 'Fine Words Spin No Yarn'. See, for a useful review, Nicholas Crafts, 'Post Neo‐Classical Growth Theory: What Are Its Policy Implications?', Oxford Review of Economic Policy, Vol. 12, No. 2 (1996), pp. 30–47. Stephen Byers, speech to the Mansion House, 2 February 1999. Tony Blair, 'Foreword', DTI White Paper on Fairness at Work (HMSO, 1998). Coates & Hay, 'The Internal and External Face', p. 463. See, for instance, Grieve Smith, There Is a Better Way; and Jamie Peck, 'Getting Real with Welfare‐to‐Work: Hard Lessons from America', Renewal, Vol. 7, No. 4 (1999), pp. 39–49. Ewert Keep & Ken Mayhew, 'Vocational education, training and economic performance', in: T. Buxton et al. (eds), Britain's Economic Performance (Oxford University Press, 1998), p. 379. It is difficult, then, to see this seeming public spending explosion as heralding a decisive change in economic thinking on the government's part. The decision to cede operational independence to the Bank of England is a case in point—as, arguably, is the government's more recent foreign and security policy with respect to Iraq, where lack of public support has failed to dissuade the government from the policy track it has chosen. Balls, 'Open Macroeconomics'; and HM Treasury, Reforming Britain's Economic and Fiscal Policy. See Hay, 'Macroeconomic Policy Coordination and Membership of the Single European Currency'. Hay, 'Negotiating International Constraints'. Bob Anderton & Ken Mayhew, 'A comparative analysis of the UK labour market', in: Ray Barrell (ed.), The UK Labour Market: Comparative Aspects and Institutional Developments (Cambridge University Press, 1994), p. 37. Additional informationNotes on contributorsColin Hay Colin Hay, Department of Political Science and International Studies, University of Birmingham, Edgbaston, Birmingham B15 2TT, UK. Colin Hay, Department of Political Science and International Studies, University of Birmingham, Edgbaston, Birmingham B15 2TT, UK.