After Lehman Brothers tumbled, leaders fell like dominoes. Recession unleashed a raging chaos—and its political legacy is only now becoming clearby Tom Clark / July 19, 2017 / Leave a comment
Crunch. Crash. Austerity. The saga has dragged on for a decade, and its real victims can be found at a food bank, not strolling out the back door of a parliament building or a presidential palace. But the political destruction left in the path of the economic tornado is remarkable nonetheless.
In Europe’s stricken fringes, premiers fell like dominoes. In Greece, it was Papandreou, Papademos, then Samaras; in Italy, Berlusconi, Monti, Letta, then Renzi. The Portuguese voters meted out electoral hemlock to José Sócrates, while in Ireland Brian Cowen became such poison that he had to quit as Fianna Fáil leader before polling day, a sacrifice which did nothing to put the country in a merciful mood: the dominant party of the Irish Republic since its formation was pushed to the brink of survival. In Greece, the once-mighty social democrats of Pasok tumbled, perhaps irretrievably, over the edge.
The French economy did not take quite the same battering, but its electorate is never slow to vent fury. And indeed, President Nicolas Sarkozy soon enough bit the dust, making way for François Hollande, who duly became so unpopular that it was eventually obvious, even to him, that there was simply no point in running again. When the next elections came, neither the Socialists nor the mainstream Conservatives were on the track in the final sprint to the Élysée, a race between a neo-fascist and a liberal upstart with disdain for the old parties and breathtaking self-belief. The National Assembly is now packed with politically rootless representatives in a new party that bears his initials. Were he not an avowed liberal, we’d be alarmed.
In Britain the big squeeze, and the big disgruntlement that went with it, did for first Gordon Brown, and then in time—and through a referendum—David Cameron too. At first glance, however, our party system may have appeared to have withstood the crisis: in the recent election, the traditional Labour/Conservative duopoly was well-entrenched. But look again—the whole basis of politics has been shaken.
The parliamentary expenses revelations of 2009 were bound to generate headlines, but because all those receipts for moat-clearing and six-packs of sausage rolls emerged at the depth of the downturn, when so many voters were feeling the pinch, there wasn’t just indignation, but real fury. There was also a vague yearning for a cleaner “new politics.” It has continued to this day without ever settling on any firm objectives, beyond the impulse of “out with the old.” Just look back over the 2010s—a decade which still has a quarter to run—and reflect. First Cleggmania, and then the Clegg crash, were both a symptom of a nebulous conviction that things had to change. So, too, was the sudden arrival, and the equally-sudden disappearance, of Ukip as a serious force—not to mention Scotland’s nationalist turn. And indeed, the arrival of a perennial leftist outsider at the top of the Labour Party.
Not so long ago, politics was decidedly narrow—reassuringly dull, if you like. Tony Blair’s sunny centrism was regarded as such a winning formula that the choice for his rivals was deemed to be: imitate or die. But now New Labour is buried, as is its original American inspiration—the Clintonite New Democrat machine. Not that the Republican establishment is in better shape. It, too, has been ravaged, first by a fanatical tea party grassroots revolt, and then by the billionaire with the toddler temperament who has ended up in the White House. Yes, one can still point to islands of relative stability in the west, most notably Germany. Angela Merkel and the broader establishment have thus far survived the disruption, though even there, nationalists have surged for the first time since the Second World War. The wider picture is of rising resentment among the voters, and continuous tumult at the top. Ten years of stagnant economics have made politics electric. All that was solid has melted into air.
“Opinion was not moving in any uniform way; instead it was polarising”
Some countries were more severely ravaged by the recession than Britain, particularly in terms of jobs—employment never collapsed as much as output here, and it bounced back strongly too. But the quality of work became an issue like never before. Who knew, back in 2007, what a “zero-hours contract” was? Permatemping, forcibly reduced hours and the replacement of employed posts by “freelance contractors” fuelled a new insecurity at the bottom of the heap after 2007-8. Some of these things were notably slow to shift when growth returned—not passing “cyclical” features of a downturn, then, but new structural features of working life in the unglamorous corners of UK PLC.
It was, however, not the new insecurity but another gripe that posed the biggest political problem, since it went all the way up the scale—a long squeeze on living standards; the most serious, on some calculations, since the Napoleonic War. Even after wages eventually stabilised in private firms, the misery shifted to state employees through a rigid public pay cap. Put it all together, and Britain’s workforce has felt a severe pinch. This has done nothing for the mood, and thus in the UK—as around the world—the first instinct at the ballot box is to take down the rulers by a peg or two. When, in the EU referendum, a chance to kick against the rules of the whole political game was offered, voters seized that too.
For politicians, all this means that their careers are harder, but what matters more for wider society is whether this mood of revolt is pushing policy in any consistent direction. A great deal of ink has been spilled on the new nationalism that is in the ascendancy in capitals from Washington to Warsaw. This is undoubtedly one feature of the hour, and it hardly needs saying—after the Brexit vote—that Britain is not immune. Economic resentment is pervasive, and one reaction is, as always, pointing the finger at foreigners. Should this continue, it could obviously take international relations in a dangerous direction.
Just as important, however, is the question of how hard times play out politically at home. When the crunch first bit, nobody knew. The Brown government half-dared to hope that the crisis might give rise to a “progressive moment,” providing it with the same sort of opening that the Great Depression had afforded to Roosevelt. For the Tory opposition, by contrast, the shadow chancellor George Osborne made the opposite bet, judging that in the face of the storm, most voters would run a mile from big visions and collective schemes, preferring to hunker down, cling to what they’d got, and avoid being landed with a big welfare bill to bailout the hardest-pressed minority. Before the crash, Osborne had made a great show of matching New Labour’s spending promises. Once it hit, he abruptly reverted to much older phrases: “the cupboard is bare,” even “sound money.” It brought to mind grainy black-and-white images of stern-faced chancellors from before the war.
Who was reading the politics of the slump right? History offered no clear guide. Back in the 1930s, anthropologists moved into the Austrian village of Marienthal, which was ruined when the local mill slammed its doors, and their famous study found evidence of both social solidarity and social withdrawal—some neighbours, though impoverished themselves, would notice hungry children next door and bring them a bowl of soup; others would snitch on one another to the dole office for tiny transgressions such as busking with a harmonica while drawing relief. The response being squeezed really can go either way.
Before 2007-8, solidarity had been tending to win out in more recent downturns. When unemployment jumped by a million in the early 1990s, the British Social Attitudes survey recorded that fewer voters felt benefits were inducing indolence; fewer thought those who got welfare didn’t need it; and more were willing to pay higher tax for social services. Those who had kept their jobs glanced at the lengthening dole queues and reasoned “there, but for the grace of God, go we.”
But when, for my 2015 book Hard Times, I interrogated similar data covering the Great Recession, I found that the mood had shifted in the opposite direction in both the UK and the United States. In these vastly unequal societies, it had become pretty easy to tell in advance who was going to need help in a downturn, which unravelled the old “social insurance” argument for pooling risk. After 2007, support for redistribution, willingness to pay tax, and empathy with the vulnerable all plunged. As Channel 4’s Benefits Street was followed by Channel 5’s Gypsies On Benefits & Proud, leaked targets revealed jobcentres were aiming to “sanction” quotas of benefit claimants, and the prevalent mood did indeed seem to be “hunker down and hold on to what you’ve got.” The Osborne analysis secured further vindication when—after presiding over five years of retrenchment—the Conservatives were returned with an unexpected overall majority in 2015.
But under the surface of the same data that charted this overall drift to the right, a more complex picture was evident. Opinion was not moving in any uniform way; instead it was polarising. In Britain and America alike, the large minority that—by dint of objective circumstance, or subjective self-assessment—were financially exposed were not losing faith in collective social protection. Rather, they wanted more of it—for the state to ride to their rescue. A new gulf in attitudes was opening up. One YouGov survey in 2013 found 71 per cent of those Britons who were feeling the squeeze of austerity at a personal level believed that Osborne’s cuts were being meted out unfairly, twice as many as the 35 per cent of those who came through unscathed. That is a sharper chasm in attitudes than you’d expect to find in comparing Labour and Conservative voters. Even in America, where partisanship is these days so bemoaned, the gap between Republicans and Democrats on such questions was less marked than that between those who had borne the brunt of the slump, and those who had escaped.
“Polarisation can pose serious challenges to governments getting anything done, as Washington has long demonstrated, and London may soon discover”
So although there was indeed a drift to the right on average, it concealed two movements in divergent directions. There was a sharper swing against collectivism among the relatively more fortunate majority, who had became acutely concerned about being asked to stump up extra tax, but also a sharp swing in the opposite direction among those who were down on their luck.
The remorseless squeeze of the last decade has sharpened all the old distributional conflicts—between generations, social classes, savers and borrowers, workers and workless. No longer could Third Way slogans plausibly pretend that prosperity and “progress,” whatever that might be, could transcend such social cleavages. If you’ve been wondering why politics has got more divisive recently—with the simultaneous rise of Bernie Sanders and Trump in the US, and of Jeremy Corbyn and the Brexit Tory right in the UK—then here is the place to look.
Let’s go back to all those leaders who tumbled after the crisis. Was there any obvious pattern in who fell? Did the new polarisation aggravate the turmoil? And, if so, does that give any clue about which ideological direction politics could head in next? Disgruntlement at “the guys who were driving the car when it crashed” was the first and most obvious cause of revolt and, as Labour discovered in 2015, a party could pay a high price on this count for quite a time after leaving office. This impulse pushed against all incumbents whether centre-left (Brown, Socrates, Hollande) or centre-right (Sarkozy, Samaras, and—in the Brexit vote—Cameron). One recipe for chaos.
In certain circumstances, however, polarised views on the economy can also fuel political chaos. That won’t if the haves and have-nots are dug in behind rigid class lines. In that case, the great bulk of votes will be in the bag long before election day. But things are very different if identities are more fluid. If some people shift from fretting about hanging on to what they’ve got, and decide they’ve got nothing left to lose, then the appetite for shaking things up increases. And that is, perhaps, the way this last decade has unfolded.
At first, the great worry was unemployment, which the relatively prosperous realised was unlikely to affect them. Latterly, however, attention has shifted to the slow but unremitting squeeze on wages, which has applied right the way up the pay scale. This is the context in which, very gradually, more people came to identify with those on the economically vulnerable side of the great divide—a context that helps explain how the predicted Conservative landslide failed to materialise in June.
Before 2015, the Cameron government swung the axe at myriad social benefits and met with little resistance. But almost immediately after they won that year, things changed. First it was tax credit cutbacks that ran into a revolt, then disability payments, and now, suddenly, it is just about every tough spending decision, from school lunches through to pensioner perks.
After so many lean years, more of the country is in a mood to empathise with those at the hard end of such choices, and (reasonable) moves to ensure that the middle classes take their share of the cuts—such as the prime minister’s failed attempt to means-test pensioners’ fuel allowances—are only encouraging that. Fewer people are inclined to grab on to what they’ve got, bolt the door and hope the rest of society will go away. An unexpected Labour surge at the election was one sign of this; another is the very latest release of BSA data which recorded a sharp uptick in concern about the plight of the poor, and a new willingness to contemplate paying more tax for social services.
An immediate revolt against incumbents, whoever they may be, was the first reaction to the crash. But it could be that polarisation will prove to be the more enduring legacy of the ten-year squeeze. It can pose serious challenges to governments getting anything done, as Washington has long demonstrated, and London may soon discover. It is, however, a very different proposition from the straightforward drift to the right that, just two or three years ago, looked to be what the recession had wrought.
For a decade, squeezed voters have been making their leaders quake. Only now, however, is the true nature of their post-crisis rage becoming clear. Kicking against the government of the day, whoever it happens to be, is a very different matter from an austerian yen to push government as a whole out of the way.