They have proved conclusively that neo-liberal economics and healthy societies are incompatible. Time for new thinking.

In Britain, New Labour and the Conservatives had remarkably similar economic philosophies - free markets, lightly regulated banks, low taxation, letting wealthy individuals and corporations avoid paying their dues to Society.
New Labour under Gordon Brown supported free markets and at the same time increased spending on public services to improve health and education to Northern European levels, whilst also seeking to reduce poverty and inequality. This amounted to "Mission Impossible" and the New Labour social project self-destructed, torpedoed by inefficient spending, the collapse of the banks and tax evasion.
The last 30 years of Thatcherism and the New Labour "project" have shown that neo-liberal free markets and a cohesive and healthy society are not compatible.
Britain and America top the developed country league tables for inequality and low social mobility. Both countries have deprived under-classes that are often stuck in ghettoes of poverty, poor education and health. These disgraceful facts are not just a problem of social justice - they are a gross economic burden. One American analyst described the uneducated underclass as the equivalent of a permanent economic slump.
Now the economic chickens have come home to roost a completely new economic and social philosophy is needed.
The Conservative- led coalition is showing little sign of understanding this, but maybe the after-shocks of the financial crisis will stimulate a new dialogue about a prosperous and more equitable society that can emerge from the ashes.

But ..... The current political dialogue in Britain and America is an unedifying and sterile blame-game about the past.

Conservative leader of the UK coalition government David Cameron strongly supported by Finance Minister George Osborne have decided to heap all the blame for financial meltdown and consequent fiscal deficit on Gordon Brown and New Labour for allowing "crazy" public spending and failing to control the banks' greed and speculative frenzy. Their recipe is a vigorous programme of austerity, designed to please "the Markets".

In Britain, Thatcher, Cameron, Blair and Brown had very similar economic philosophies - just look at the evidence...

Here are a few reminders of where Cameron and Brown were coming from not so very long ago. If a week is a long time in politics, it seems two years or so is long enough for some politicians to totally reverse their stances.

Gordon Brown - a few selected reminders:

(Quotes taken with thanks from Andrew Rawnsley's Comment column in the "Observer" newspaper, October 19, 2010).

"Let's start with Gordon Brown in June 2005 giving the Chancellor's annual speech to the City at Mansion House. Addressing the bow-tied ranks of money-changers, he paid lavish homage to 'your unique innovative skills, your courage and steadfastness'. They had his personal thanks 'for the outstanding, invaluable contribution you make to the prosperity of Britain'."

"Brown surpassed himself when he returned in 2007 to deliver his final Mansion House speech as chancellor before he moved into No. 10 (became premier), 'A new world order has been created' he proclaimed, Britain was 'a new world leader', thanks to 'your efforts, ingenuity and creativity'.

He congratulated himself for 'resisting pressure' to toughen up regulation of their activities. Everyone needed to follow the City's 'great example' and emulate this 'high value-added, talent-driven industry'. 'Britain needs more of the vigour, ingenuity and aspiration that you already demonstrate' Thanks to their 'remarkable achievements', we had the huge privilege to live in an 'an era that history will record as the beginning of a new Golden Age'."

October 2008: Gordon Brown shocks the world by declaring that his 'Golden Age' was nothing of the sort, but was actually an 'Age of Irresponsibility'.

Brown's narrative also encompassed social justice - but actions fell well short of the words...

"Our values demand a genuine meritocracy for all British people, and I want to set out how in the coming decade we can unleash the biggest wave of social mobility since the second world war - to spread opportunity across society and to realise the aspirations of all those on middle and modest incomes. Social mobility is not an alternative to social justice - it is modern social justice.

I am proud of Labour's record in reducing poverty, improving public services and limiting inequality - in the last 13 years we have done more than any government to tackle poverty, and raised 500,000 children and 900,000 pensioners out of poverty".

David Cameron and the Conservatives:

Senior Conservatives have been marked by their close affinities to the world of finance, and the super-rich. The party and individuals have been, and still are, supported by: Hedge Fund managers, wives of hedge fund managers, private equity investors, investment bankers, wealthy tax dodgers and property magnates. Many Conservative politicians have been provided with large contributions towards the costs of running their private offices, some have derived large fees from speaking engagements to financiers' meetings and conferences, others have been provided with gratis rides in helicopters and private jets. They and some New Labour politicians were to be seen hob-nobbing in exotic locations with the very rich.

See Politicians and the finance industry on this website.

Here are a few reminders about his attitude to banking regulation for David Cameron, taken from Andrew Rawnsley's 2010 Observer article:

"David Cameron has had some fun at the expense of Gordon Brown, which might make you assume that the Tory leader had forseen - (as Gordon Brown had not) - that the great boom would all turn to dust. So, here is Mr Cameron in June 2006, offering his thoughts on 'the new global economy'.

He trumpeted 'the victory of capitalism, privatisation and liberalisation'. Not to be out-grovelled by Gordon Brown when talking about bankers, the Tory leader lauded the 'highly innovative' City as 'the biggest international finance centre in the world'. Mr Cameron happily noted that 'there are more than 550 international banks and 170 securities houses in London', (numbers that have now been subject to downward revision). The Cameron of this pre-bust vintage gave the credit for all that 'innovative' trading to 'critical Conservative decisions' when the Tories were in government. It proved that 'light regulation' and 'low regulation' were the 'keys to success'.

And in September 2007, Mr Cameron made a speech at the London School of Economics.

The financial markets were already experiencing what was then politely termed 'turbulence', but the Tory leader chose to amplify his thesis about the ascendancy of unrestrained capitalism. In a section entitled 'The End of Economic History?' he asserted:

"The Left advocated more intervention and government ownership. Those on the right argued for monetary discipline and free enterprise.

Over the last 15 years governments across the world have put into practice the principles of free enterprise and monetary discipline.

The result?

A vast increase in global wealth.

The world economy more stable than for a generation.

I'm proud that this is one of the few countries in the world where all serious candidates for high office support the principles of free trade and monetary discipline. Other countries - Germany and even America - have senior politicians who disagree with economic liberalism.

Not us.

Indeed the whole New Labour project was built on recognising and accepting the free market consensus.
So I will not exaggerate the differences between Gordon Brown and myself on the overall economic framework".
"The debate is now settled',

'Liberalism' had prevailed. The Left's silly idea that markets required tight regulation had been thoroughly discredited. Later, he contended that "our hugely sophisticated financial markets match funds with ideas better than ever before".

So in 2007, Mr Cameron's Conservatives were at one with New Labour in their support for free markets and lightly regulated banks as the foundations of economic prosperity and good public services.

Not to be outdone by his leader, Shadow Finance Minister George Osborne linked lightly regulated economies, low taxes and excellent public services; lauding an example for all to follow ....... Ireland:

George Osborne in The Times (February 23, 2006): Look and learn from across the Irish Sea

Economic stability must come before promises of tax cuts. If, over time, you reduce the share of national income taken by the State, then you can share the proceeds of growth between investment in public services and sustainably lower taxes. In Britain, the Left have us stuck debating a false choice. They suggest you have to choose between lower taxes and public services. Yet in Ireland they have doubled spending on public services in the past decade while reducing taxes and shrinking the State's share of national income.

And in 2011, after the meltdown of the investment banks and the collapse of the Irish economy ....

From David Cameron:

Cameron's Liberal Democrat partners in the coalition government are vociferously demanding radical reform of the banking system. Industry Minister Vince Cable, the only senior politician to forecast the banking disaster, wants investment and retail banking split and vigorous intervention to limit bonuses. Lord Oakeshott, a Lib Dem, recently wondered aloud whether the country was run by the banks or its democratically elected governments.

George Osborne, Finance Minister said on the same topics......Nothing much

David Cameron backed him up by saying...... Nothing much

The current political debates in UK and USA are sterile. In Britain they focus mainly on the faults of the previous government and the degree of austerity needed after the banking collapse.

They side-step the crucial questions that face all developed countries: What is a good Society and how can the economy serve its interests?

New Labour pandered to the rich and the banks. They depended on the stability of the banks to fund their modest programmes of social reform. The collapse of banks scuppered any possibilities of real progress. But the idea that pleasing banks, big corporations and the super-rich; letting them evade tax and create a more equitable society was pure fantasy.

The Conservatives left public services in a terrible condition in 1997. It has taken huge sums to bring the National Health Service from a financially starved basket case to the generally effective service that it is today. Of course much money was wasted along the way, proving that politicians cannot manage.

To compensate for austerity, David Cameron has invented the "Big Society", a space that will be filled by charities and individual volunteering. These will, it is hoped, fill the vacuum caused by the cut-backs in public services. At the moment the Big Society is little more than a sort of public relations stunt. What is hardly acknowledged is that communities depend heavily on institutions - Post Offices, schools, pubs, clubs, village halls, local charities and a vast network of helping and educational resources to regenerate deprived areas and keep them healthy. There is currently little recognition of this - in fact the opposite. Austerity is degrading community support and regeneration in deprived communities. In more fortunate communities informal mutual support already exists without any help from the Prime Minister.

To sum up

In Britain, New Labour and the Conservatives were too wedded to free markets to seriously address deep-rooted social problems.

In the United States, furious arguments about irrelevant issues block the possibility of mature dialogue about the direction of travel for US society.

Both counties need serious discussion about what kind of society the majority of people want - and the implications of getting there.

As always, some clues that may point the way are evident in other parts of the world. For example:

Michael Sandel, an American political philosopher, commenting on the contrasts between social mobility in Denmark, Britain and the USA, said with beautiful irony:

"The American Dream is alive, well - and living in Denmark".

Britain and America need to wake up and refresh their dreams in the cold light of day. I await the national dialogue with eager anticipation.

How free market economies got it wrong - and what to do about it
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