1920s
After the First World War, Europe’s economy was devastated. The world looked to the US for recovery, but from 1921 to 1933, three successive Republican presidents (Harding, Coolidge, and Hoover) chose to privilege the rich getting richer at the expense of everyone else. Corporate bosses paid less and less in tax while their exploitation of workers went unchecked. Even as the productivity of workers in manufacturing went up by 32% (1923-1929), their pay only increased by 8%, while company profits rose 62%. By 1929, 0.1% of Americans controlled 34% of all savings, and 80% of the population had no savings at all.
1930s
Corporate profiteers kept pushing prices up, and as wages lagged further and further behind, people were driven to borrowing more than ever. Many were also enticed to gamble by buying shares which appeared to be a quick way of making money. But by the early 1930s, vast numbers could not afford to pay back their loans, consumer demand plummeted, and share prices began to spiral down – the Great Depression had arrived.
The British economist, John M. Keynes, diagnosed the problem as one which could only be solved by a sustainable boost to demand – in other words, not by individual borrowing, but by the government investing national funds (via public projects and services) into resources for individuals who could then buy goods and services which would in turn create jobs to sustain consumption and generate tax revenue to replenish national funds. Democrat President Franklin D. Roosevelt’s New Deal in the US demonstrated how Keynes’ approach would work in practice in reviving the economy. He also backed the Glass–Steagall Act (1933) which introduced regulations to prevent irresponsible lending by financial institutions that might lead to a banking crisis.
1940s
The UK was in a dire economic position after the Second World War. Labour won power under Clement Attlee and adopted the Keynesian approach that prioritised investment in supporting the general population and reviving the economy. With the creation of the NHS, a large-scale house building programme, and provision of social security, the standards of living began to climb significantly.
1950s-1960s
The Keynesian consensus in the US and the UK continued to improve their economic performance. After Labour returned to office under Harold Wilson in 1964, its support for technical education and development of infrastructure helped to turn the record balance of payment deficit of £800 million under the Conservatives into a healthy surplus.
1970s-1990s
The Arab-Israeli War of 1973 led to a global oil crisis and disrupted the economies in many countries. New Right advocates such as Thatcher and Reagan took the opportunity to reject Keynesian ideas and pushed the neoliberal agenda of tougher controls over worker unions, drastic cuts to public services, and extensive deregulation of business practices. In 1986, Thatcher’s Conservative government deregulated the financial sector – opening the door to irresponsible lending that would jeopardise personal savings. This was followed by US Republicans who secured the passing of the Gramm-Leach-Bliley (GLB) Act of 1999 to similarly remove cautious restraints on banks and investment firms.
2000s
Labour under Tony Blair and Gordon Brown followed Keynesian approaches again and their investment in education, health, policing led to notable rise in prosperity, the highest satisfaction rate with the NHS, and reduction in crime levels. But neither they nor Democrat President Clinton in the US, reversed the Conservative/Republican-led financial deregulation which still allowed merged financial institutions to lend irresponsibly and risk ordinary savers losing all their money, and in 2008, that caused the financial crisis.
2010s-2020s
In the UK, the Conservatives pretended the global financial crisis was caused by Labour’s public spending when it was actually brought about by the neoliberal deregulation introduced by the political right. Gaining power in 2010, they pushed aside the Keynesian approach and imposed austerity that kept wages low, cut public services severely, pushed more people into poverty, and drove the economy further into recession. Weakened by Brexit, the UK under the Conservatives was further hit by the Covid pandemic and the wider cost of living crisis, and without any coherent strategy to revive the economy in line with Keynesian thinking, the country is trapped by rising inflation, falling wages, widespread hunger, business collapses, and decimated public services.
For the last 100 years, the Conservatives have been the party of economic incompetence.
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For more details, see Against Power Inequalities: a history of the progressive struggle, by Henry Tam: https://www.amazon.co.uk/Against-Power-Inequalities-progressive-struggle/dp/1499144636
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