'This crisis spells the end of the free market consensus
The credit squeeze is set to trigger the end of the boom that has shaped our times. Politics is going to change with it.
Seumas Milne The Guardian
New Labour has led a charmed economic life for the past decade. Britain's ejection from the European exchange rate mechanism in the early 1990s and a unique set of international conditions helped deliver a record that earlier generations of British politicians could only have fantasised about. Whatever other disasters and scandals they could be held responsible for, the economy was always Tony Blair and Gordon Brown's secret weapon: the "longest period of sustained economic growth since records began", low inflation, rapid job creation and a strong boost to public spending, all at the same time. The fact that it has also been a story of rising inequality, stubborn unemployment and ballooning levels of debt - and has depended on the international financial system's toleration of a huge trade deficit to sustain it - has until now barely shifted the perception of economic success. That has been the crucial backdrop to the me-too politics of recent years and the free market consensus that underpins it. It is also, of course, the record that finally propelled Brown into 10 Downing Street.
But there can now be no doubt that such halcyon days are coming to an end. What kicked off in the US earlier this year, in the shape of the sub-prime mortgage lending crisis, has now spread like gangrene across a deregulated global financial system, imposing a vice-like squeeze on the very credit cushion that has hitherto kept the US and British economies afloat. In Britain, it has already led to the collapse of Northern Rock and the first run on a British bank since the Victorian era. But the impact will certainly go much further, particularly in an economy so lop-sidedly dominated by the financial sector. Already, the house price collapse and prospect of mass repossessions is tipping the US economy towards full-blown recession. In Britain, which now has the highest level of personal debt of any industrial country - at £1.4 trillion, larger than national income - the expectation must be that the economy is heading in the same direction. As the full impact of the credit crunch makes itself felt, the house price bubble is bound to deflate further. That in turn will cut demand, bringing with it a painful economic slowdown at the very least.'
Lees verder: http://www.guardian.co.uk/commentisfree/story/0,,2226539,00.html
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