It’s Not Dead Yet

British Prime Minister Gordon Brown still occupies 10 Downing Street, but the eulogies for his party's New Labour philosophy are already being written. Last month, Brown's Labour government sparked an outcry with its proposal of a new 50 percent tax rate on every pound sterling of income over £150,000. In response, Conservative leaders swiftly proclaimed the death of New Labour, the moderate and market-friendly program pushed by former prime minister Tony Blair. They claimed Labour was reverting to its old hostility to the wealthy, and press headlines spoke of a return to the politics of envy and class war that reeked of the rancorous, confrontational Thatcherite 1980s and earlier.

But if that's the case, the British public looks like reluctant warriors. New Labour preserved and built on much of the Margaret Thatcher inheritance, stressing the value of private enterprise and wealth creation as the most efficient means of achieving the economic growth that would pay for a mild redistribution of the nation's earnings and better-funded public services. And there are few signs that it is turning back now—or that anyone wants it to. Talk of a return to Labour's old ways is "scaremongering," says Jessica Asato of the Labour pressure group Progress. "We are not going back."

Consider: taxes paid by the rich—slashed under Thatcher—may be set to rise 10 points to 50 percent, but they're still modest compared with the 1970s, when the highest marginal rates under Labour topped 90 percent. Nor has Labour abandoned the sell-off of state-owned industries, a cornerstone of the Thatcher program. There was extreme hesitation about the nationalization of the banks, and even in today's antimarkets mood, the government is planning the partial privatization of the Royal Mint, makers of Britain's coinage, and the Post Office. Labour has done little to undo Thatcher's work in breaking the power of the trade unions.

The rhetoric of some leading ministers would also still find favor with Thatcher admirers. Defending last month's budget, Business Secretary Lord Mandelson, a key architect of the New Labour project, spoke of a continuing commitment to "aspiration and reward." Put simply, the core elements of the Thatcherite settlement, later seen as a model by much of the European right, remain firmly in place. "Many of the changes she made are completely accepted across the spectrum," says Thatcher's former private secretary, John Whittingdale, now a member of the Conservative shadow leadership team. "It would be impossible to imagine any government seeking to reverse them."

The question, though, is why? Amid an economic downturn one might expect voters to turn to the far left and its promises of a cushier welfare state. Yet Britons seem inclined to stick with the kind of Thatcher-lite policies that arguably led to the downturn in the first place.

A partial answer lies in the absence of any new policy prescriptions from the left. The financial crisis has hastened a general drift toward consensus among the leading parties. European leaders may differ over the correct extent of the stimulus packages or the degree to which the state should support ailing industries, but there are few wide differences between the left and the right on the best way forward. "There is a huge convergence around liberal labor markets, liberal migration policies and high levels of public spending," says Simon Hix, a politics professor at the London School of Economics. "It is Thatcher plus Keynes."

European parties that have tinkered with a different formula, like the French Socialists, have so far been largely cast aside. Germany's Social Democrats also look set for a loss in the national elections later this year, as the party drifts to the left. Even the well-established third parties, such as the Liberal Democrats in Britain, have failed to develop radically different policies with mass appeal. Result: in most countries, voters looking for a left-wing alternative must turn to unelectable parties at the wacky extreme edge of politics.

Another reason for the surprising resilience of New Labour thinking is an awareness that when the economy sags, voters tend to look to parties aligned to business in the hope of practical solutions. Moreover, when cash is tight, middle-income earners may tend to prefer the prospect of lower taxes to higher welfare spending, which they would have to fund.

History also suggests that Labour would be unwise to turn back to its old model. In the past, prosperity has often encouraged voters to believe they can afford a dash of socialism. An optimistic economic climate after a decade of austerity helped Labour stay in power for much of the 1960s. But the ideas of the center-right appeal when times are hard. For instance, the ruinous state of the British economy bequeathed by an Old Labour government in 1979 brought Thatcher to power—a fact that has undoubtedly not gone unnoticed in these gloomy days by Brown and his New Labour government.

© 2009