Shortly before the 1979 general election, Labour’s prime minister, Jim Callaghan, warned of a “sea-change in politics” in favour of the anti-welfare agenda of Margaret Thatcher. Today there is much speculation of a similar ‘philosophical shift’ away from the anti-state, neoliberal politics of the past decade, a view reinforced by last month’s budget.
The past century has already seen two tectonic about-turns in governing philosophy. The first was the post-1945 social democratic experiment and the second was the Thatcherite counter-revolution from the early 1980s. It is this second type of politics that the pundits think is on its way out.
There is no question that COVID-19 has had a galvanising impact on the role of government, with elements of the pro-market, anti-state rule book being torn up in favour of an unprecedented, for peacetime, state response to support jobs and incomes, and a hike in public spending and levels of tax. But do these shifts herald a more fundamental change in direction or a mere political tweak, a temporary, pragmatic response to a national crisis? As Robert E Lucas, one of the Chicago-based high priests of the post-1980s market revolution, once observed, ‘we are all Keynesians in a foxhole’.
