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Post-Crisis Anglo-Saxon Capitalism

Le capitalisme anglo-saxon après la crise
Christopher J. Nock et Catherine Coron

Résumés

L’expression française de « capitalisme anglo-saxon » est utilisée pour souligner les liens étroits existant entre le modèle économique britannique et celui des États-Unis. Cet article envisage ces liens dans une perspective dépassant la sphère politique et socio-économique pour inclure la dimension linguistique et culturelle en opposant le modèle anglo-saxon au modèle français et aux autres modèles. Il s’attache d’abord à identifier les principales caractéristiques du modèle anglo-saxon. Puis il analyse les réponses britannique et américaine à la crise de 2008-2009 afin de voir si elles présentent suffisamment de similitudes pour justifier le bien-fondé d’une référence à un même modèle. Il tente, enfin, de déterminer quelle a été la part de responsabilité du modèle anglo-saxon d’avant-crise dans l’avènement de la crise du capitalisme global déclenchée en 2008, et de voir si le capitalisme anglo-américain a réussi à renaître de ses cendres depuis 2010.

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  • 1 This line is taken from Shakespeare’s Much Ado about Nothing, Act I, sc. 3, l. 40.

“Will it serve for any model to build mischief on?”1

1In this paper we consider in particular the economic aspects of the pre-crisis Anglo-Saxon model identified in France. We also consider ongoing relevance of this Anglo-Saxon economic model given the current state of the world economy. We suggest that the notion of a peculiarly Anglo-Saxon economic model made particular sense during the neo-liberal phase which began in the early 1980s and stretched on through the era of globalization to the financial crisis of 2007-2008. In that period, strong similarities in economic approaches compounded the strong linguistic, cultural, and political ties between Britain and the U.S. Our contention is that the similarities – especially when observed from outside – made it meaningful to identify an Anglo-Saxon economic model that differed markedly from the French social model and other models. We then consider U.K. and U.S. responses to the financial crisis to determine if they have been sufficiently similar to merit the continued use of the “Anglo-Saxon” label at the economic level. The final question will be whether the Anglo-American capitalism has actually came “out of the ruins” as was claimed by the Economist on March 27th 2010. In this, we will consider the extent to which the pre-crisis Anglo-Saxon model – and its “dark side” – contributed to the current crisis of global capitalism. In short, we ask if this model did build unnecessary mischief on itself and the world. Or is this suggestion simply “much ado about nothing”?

An Anglo-Saxon Model?

2From British and American perspectives, the validity of an Anglo-Saxon model that hinges upon the supposed similarities between the U.K. and the U.S. is far from obvious. As The Economist has remarked:

  • 2 “Hail to the chiefs,” The Economist, 1 November 2007, 97.

Most Britons don’t like being tied to America. Most Americans can’t see what ancient Britain has to do with them. Yet, for outsiders the link between the English-speaking peoples was clear from the start: only a few years after the American Revolution, the French were sending back horrified reports that New England was new England in spirit.2

3Indeed, from the French perspective, the notion of a distinctive Anglo-Saxon world has become increasingly real, particularly as a consequence of World War II. As Martine Azuelos has noted:

  • 3 Martine Azuelos, “Britain and the United States as Drivers of Globalisation: Evidence r (...)

In France, reference to the ‘Anglo-Saxon world’, a world with values fundamentally different from the values characterizing the ‘French-speaking world’, is common in the media as well as in academic circles. In universities, ‘English’ departments do not specialize in the study of English or English-speaking literatures, as is the case in English-speaking countries. They devote to the study of the literatures, languages and cultures of the Anglo-Saxon, and even sometimes Commonwealth nations. Thus, while citizens of English-speaking nations may feel that they are, to quote G.B. Shaw, ‘divided by a common language’, to the French, the existence of an English-speaking or Anglo-Saxon world is a reality, which is generally traced back to the special relationship developed between the U.S. and Britain during World War II and which has endured ever since [...]These countries share a common language, a common history, a similar legal tradition (Common Law), democratic political systems and free-market economies.3

4Clearly, then, the term Anglo-Saxon refers to much more than mere economics. It includes all the impact of culture, language, history and politics. As such, if there is a distinctive Anglo-Saxon economic model it has been shaped by, and has developed under, the influence of these other factors.

5Indeed, in the immediate post-World War II period the notion of a distinctive Anglo-Saxon economic model was far less obvious than it would become thirty or so years later. Britain, bankrupted by the War, had to go cap in hand to Washington to seek the funds to help finance its reconstruction. This was not an easy process for the British. The delegation sent to Washington – which included J. M. Keynes – had thought that the Americans would willingly provide their main allies with interest free loans to rebuild and, indeed, to implement the manifesto of the post-war Labour government. As negotiations dragged on, some influential groups in Congress began to question the wisdom of using American money to fund a “socialist” U.K. government committed – amongst other things – to developing a publicly managed and funded healthcare system. In the end, the agreement that was reached involved significantly less funding than the British had hoped for, provided primarily in the form of interest-bearing loans. Indeed, those loans helped to fund a number of Labour policies that did not find much support in America at that time – the nationalization of key industries, wealth redistribution, a preference for universal welfare, and a desire to promote equal opportunities through direct state action. The post-war welfare state in the U.K. was a peculiarly British social-democratic affair driven from the political centre. In this period it was historical, linguistic, social and political ties that tended to define the Anglo-American relationship. Although similar trade and investment patterns could be identified between these two countries, key pillars of their economies differed significantly.

  • 4 In the present context “marketization” is used to refer in particular to the process of (...)

6This reality shifted dramatically in the 1980s. The British post-war economic model had come under significant strain as the 1960s had progressed. By the 1970s this model was clearly in trouble. Labour’s devaluation of the pound had to be followed by a request for direct help from the International Monetary Fund in 1976. The loan came with the usual IMF conditions for significant reductions in government spending and economic restructuring. This process did not run smoothly under Labour who came under pressure to implement policies that ran against the Party’s own ideological instincts and the interest of its traditional constituency. Thus, it was left to Margaret Thatcher’s Conservatives to rigorously pursue the demise of the U.K.’s post-war welfare state, and the first moves toward entrenching a new lean, mean market regime. Indeed, it was during Thatcher’s second term in office that the nature of the British economy and its society embarked upon a dramatic shift. Marketization,4 privatization and the deliberate undermining of the remnants of the post-war social-democratic model were influenced by ideas normally the preserve of the American right. Thatcher’s own instincts were clearly pro-American and anti-European.

  • 5 Desmond King & Mark Wickham-Jones, “From Clinton to Blair: The Democratic (Party) Origi (...)
  • 6 David P. Dolowitz et al., Policy Transfer and British Social Policy. Basingstoke: Open (...)

7At this stage, however, Britain’s brave new world was not obviously grounded in the American Dream. Indeed, Thatcher’s preference for free markets and disdain for welfare state arrangements were rooted in peculiarly British traditions stretching back at least to the Victorian laissez-faire era, and probably beyond. The Thatcher era marked the revival of a dormant strand in British social and economic thinking, not the wholesale import of American ideas and practices. Indeed, throughout that era, the British shift to the right did not promote any real convergence toward American socio-economic norms. At most, it paralleled – and was influenced by – a similar shift taking place in Reagan’s America. And, perhaps ironically, it was left to New Labour to facilitate the wholesale Americanization of Britain and its economy. The neo-liberal inflexion taken by New Labour resulted from a choice made after Bill Clinton’s Presidential victory in 1992. New Labour strategists recognized that the Party needed to gain votes from the middle class if it were ever to govern again. This could not be done by offering to return Britain to pre-Thatcher norms. Rather, it would be best to accept that Thatcher had been right on the economy but offer to repair the damage her neo-liberalism had done to the social fabric in innovative and market friendly ways. In this vein, for example, Clinton’s welfare-to-work reforms represented a convincing symbol. Accordingly, in his articulation of the Third Way, Tony Blair “insisted ... that European economies should draw their inspiration from the success of the United States, notably in terms of labour market flexibility”.5 Over time, this type of approach built an ideological proximity with America. This was to play a key role in an ongoing reform of the British economy that relied increasingly upon policy transfer from the United States rather than Europe.6 As a result of this ongoing process, it became increasingly apparent that a distinctive Anglo-Saxon economic model was taking shape.

An Anglo-Saxon Economic Model: pre-crisis convergence

8The economic reforms that took place under Thatcher did lead Britain into the neo-liberal phase and drew the U.K. economy closer to American and not European norms and practices. This process began in earnest after her second election victory in 1983. A series of events, policies and approaches contributed to this ongoing process. Her victory over the miners broke the power of large organized labour. Sales of council housing and the privatization of public utilities had the avowed aim of promoting an emerging “property owning democracy.” Ongoing labour reforms sought to promote flexibility – at least from the perspective of businesses that might need to expand and reduce workforces in the light of changing market conditions. As markets and the profit motive were lauded, public services became increasingly underfunded and were opened up to competitive tendering in the name of efficiency. People were encouraged to shift for themselves and become increasingly “self-reliant”. Those claiming state benefits came to be viewed with suspicion by the authorities who progressively sought to tighten the conditions for the granting of aid and to ensure that any ongoing right to benefit was merited. By the end of Thatcher’s time in power, work had become the only sure way to secure more than a most basic level of welfare. The pattern that emerged under Thatcher – labour flexibility, residual welfare, marketization, the emphasis on the profit motive and on self-reliance – certainly did merit the “neo-liberal” label. As did the economic “Big Bang” of 1986 which deregulated the financial markets and sought to secure London’s position as a major player in the rapidly changing financial sector. On balance, however, despite obvious American policy and ideological influences in the Thatcher period, the key aim was to respond to the particular failures of a distinctive post-war British economic model.

  • 7 This term was used on both sides of the Atlantic to refer to the American influence on (...)
  • 8 Gail Lewis, Sharon Gewirtz and John H. Clarke, Rethinking Social Policy, London: Sage P (...)
  • 9 See W. N. Coxall, Lynton Robins and Robert Leach, Contemporary British Politics London: Palgrave (...)

9By the time New Labour came to power in 1997 the leadership accepted that Thatcher’s reforms had been good for the U.K. economy. The suggestion now was that those economic reforms needed to be complemented by new policies that might address the supposed damage to the social fabric associated with them. A comprehensive restructuring of social, welfare and public policy – and their associated programmes – would promote arrangements that supported economic activity rather than draining it, and seek to increase efficiency savings through increased competition between suppliers of goods and services to the public sector. This process certainly did involve the import of American approaches either directly though policy transfer, or – in other areas – by seeking to adapt American approaches to British needs. Clinton’s welfare-to-work programme was, for example, imported wholesale. Some studies even identified a process of “Clintonization”7 to refer to this development. Workfare “tries to promote permanent innovation and flexibility in relatively open economies by acting on the supply side and to strengthen their competitiveness as much as possible”.8 And this sought to support the neo-liberal arrangements established by Thatcher in the U.K. New Labour adapted other American approaches to British conditions. A renewed emphasis was put on philanthropy and charity to take some of the strain off the public purse. Increasingly, New Labour sought to increase the supply base for the goods and services required by state policies and increase competition in tendering. Private companies, charities and public sector management were encouraged to bid for contracts. This was to lead to private companies – including American based ones – to bid to run schools, hospitals and even prisons. This process was further supported by the private finance initiative [PFI] and public private partnership [PPP] initiatives.9 As in all things, the ongoing emphasis was on “value-for-money” and efficiency promoted through competition in the market.

  • 10 See David Coates, “‘Darling, It is Entirely My Fault!’ Gordon Brown’s Legacy to Alistai (...)
  • 11 See Michael Jones, “Clinton’s Gunslingers Show Labour How To Shoot A Line,” The Sunday (...)

10More broadly, the emphasis on profit making went hand in hand with a commitment to light regulation in the labour market and the financial markets. As a consequence, inequality in Britain began to accelerate. For example, the ratio of top pay to average wages in the U.K. was 25 to 1 (25:1) in the mid-1980s under Thatcher. By 2006, after nearly ten years of New Labour government, it was 100 to 1 (100:1). In keeping with this, directors’ salaries in the Financial Times Stock Exchange (FTSE) 100 companies rose by 28 % in 2005 while average earnings rose only by 3.7 %. In the same year, bonuses in the City rose by 16 %.10 New Labour’s attitude to rising inequality was to suggest that it was acceptable – perhaps even laudable – insofar as it contributed to overall economic growth. Indeed, increasing inequality was now seen as part of a healthy competitive market economy providing incentives for increasing the economic activities of the “haves” and the economic aspirations of the “have-nots”. The Brave New World that New Labour was building upon the foundations of Thatcher’s Britain was increasingly mimicking the American Dream in word and in deed. More deeply, perhaps, there had clearly been an entrenching of American perspectives into the U.K. Government’s socio-economic thinking. Initially, this sprang from Labour’s links to the American Democratic Party. Some who would become important figures in the New Labour project spent much time in America on Fulbright and other scholarships, and a number directly observed Clinton’s Presidential campaigns.11 Under this influence, what came to distinguish New Labour from old Labour was the former’s ability to openly embrace markets and the material inequalities they promote as being to the general benefit of all in society.

  • 12 Accounts of active labour market policy are diverse. The International Labour Office ha (...)
  • 13 Anthony Giddens, The Third Way: The Renewal of Social Democracy, Cambridge: Polity Pres (...)

11What New Labour learnt from the U.S. Democrats was how to combine an acceptance of markets and inequality with a commitment to a form of “social justice”. This was a peculiarly American brand of thin social justice which tended to remain unconvincing in old Labour heads, but which allowed New Labour to use traditional Labour terminology – “social justice”, “equity”, “fairness” – in a new brazenly competitive, deeply unequal and highly competitive capitalist economic environment. Individuals who could were expected to meet their own needs through their labour market activity. Generally, they would be helped to do this by expanding employment opportunities in a lightly regulated free market regime. And individuals could be helped directly as New Labour sought to help the able into work and to stay there through active labour policies12 drawn from America. In effect, this summed up the idea of the Third Way promoted by both Blair and Clinton. More deeply, perhaps, there was an apparent embracing of a distinctive American liberal political philosophy most keenly signified by Gordon Brown’s ability to evolve from an ardent socialist critic of capitalism into New Labour’s Chancellor and then Prime Minister. This philosophy embraces a “belief in a ‘self-generated social solidarity mechanism’”.13 When properly encouraged, this mechanism can create widely supported limitations on the markets for certain goods and services, and promote a broader civic virtue. As such, a broadly competitive free-market capitalist market economy can sit happily side by side with certain restrictions and regulations and help promote social solidarity. This may account for Gordon Brown’s apparent belief that economic growth – rather than the management of inequality – is the key to promoting social cohesion and civic virtue.

  • 14 Ibid., 7.

12Indeed, under New Labour, economic growth was presented as a panacea. Growth was now inherently linked to the supposed reality of globalization. But this was a particular version of globalization driven primarily by the U.S. and accepted by the U.K.. Other countries, including some in the Anglo-sphere, remained unconvinced by this account and the U.S./U.K. prescription for dealing with the emerging global order. For New Labour, however, globalization offered exciting opportunities for growth, and growth would provide the resources to improve the programmes and services people needed. It would also lead to greater inclusion – a key factor in promoting great social solidarity. Growth could enable all this to take place while allowing the neo-liberal desire for a “freeze or even reduction of State expenditures thanks to a decrease of the ratio of public expenditures to GDP”14 to be fulfilled. Accordingly, despite major public spending increases in the fields of health, education, training and transport, U.K. public sector spending remained fairly stable as a percentage of GDP from the time New Labour came to power up until the onset of the financial crisis, as is indicated by table 1.

13These U.K. figures are broadly comparable with U.S. figures in the same period, although relative spending under New Labour tended to increase more than it did in Bush’s America. In large part, this development stemmed New Labour’s commitment to increase public spending – particularly in health care – to better reflect EU norms. Under New Labour there were also converging trends in economic philosophy, approaches to labour market policies and financial regulation, and the desire to constrain increases in public spending in relation to GDP in the U.S. and U.K.. The roots of this process lie originally in the Clinton years, but the reality of this Anglo-Saxon economic model seems to have continued through the Bush years.

Table 1. U.K. Public Spending (1999-2010)

Public sector current


expenditure


in real terms


(£ billion)

Public sector current


expenditure


(% of GDP)

1999-2000

427.6

34.4

2001-2002

462.5

35.3

2002-2003

484.0

36.0

2003-2004

508.8

36.7

2004-2005

531.5

37.6

2005-2006

553.9

38.0

2006-2007

561.1

37.6

2007-2008

576.3

37.6

2008-2009

590.5

39.4

2009-2010

618.7

42.7

2010-2011

631.7

42.9

1999-2008 % average increase

+3.3

2007-2008 % average increase

+5.3

1999-2011 % average increase

+8.5

Source: HM Treasury, Public Expenditures Statistical Analyses, 2011, 61.

14Indicators of this process include total government spending, unemployment figures, and employment policy. While these examples are far from exhaustive, they do give a fair indication of some key Anglo-American similarities which differ markedly from the French experience during the same period. Government spending as a percentage of GDP was stable in the U.S. in the 2002-07 period. It then increased as the financial crisis took hold. The case in the U.K. was slightly different as the percentage increased in the 2002-07 period as New Labour increased spending on public services. Nonetheless, U.K. Government spending remained well below that of France – which itself remained quite stable – and was more in line with the American norm:

Table 2. Government Spending in U.K, U.S., and France, 2002-2009 * (in % of GDP)

2002

2003

2004

2005

2006

2007

2008

2009

2002-09 increase

U.K.

36

36,7

37.6

38

37.6

37.6

39.4

42.7

+ 6.7

U.S.

35

35

35

35

35

35

37

42

+ 7

France

52.6

53.3

53.2

53.4

52.7

52.3

52.8

56

+ 3.4

* U.S. figures adjusted to reflect Federal and State spending

Source: U.K. Treasury <http://www.hm-treasury.gov.uk>, USGovernmentSpending.com <http://www.usgovernmentspending.com> and Insee <http://www.insee.fr>

15U.K. unemployment rates show a similar compatibility with the U.S. and a similar divergence with the French experience in the same time frame. In both the U.K. and the U.S., growth was supposed to provide the jobs to enable people to meet their own needs, reducing the pressure that might otherwise fall on the welfare purse. Neo-liberal labour activation strategies promoted comparable overall results. However, those strategies largely failed to improve the situation of young jobseekers under the age of 25 (see tables 3 and 4).

Table 3. U.K. Unemployment Rates: Young Workers vs. Total (1990-2012)

Category of workers

1990

2000

2003

2006

2008

2010

2011

2012

Workers under 25

10.1

11.8

11.5

14.4

14.1

19.1

20

21

Total unemployment rate

6.9

5.4

5.0

5.4

5.6

7.9

8

8.1

Source: OECD Employment Outlook, 2004, 2009, and 2011.

Table 4. U.S. Unemployment Rates (1990-2012)

Category of workers

1990

2000

2002

2003

2008

2010

2011

2012

Workers under 25

11.2

9.3

12.0

12.4

12.9

18.4

17.3

16.2

Total unemployment rate

5.6

4.0

5.8

6.0

5.8

9.7

9.1

8.2

Source: OECD Employment Outlook, 2004, 2009, and 2011.

  • 15 OECD, Employment Outlook, 2009.

16As can be seen in tables 3 and 4, between 2000 and 2008, the New Deal programme in U.K. and the TANF (Temporary Assistance for Needy Families) in the U.S. – key to each country’s labour activation policies – did not succeed in lowering unemployment among young people. Indeed, the unemployment rate for this group kept on increasing. In the U.K. this increase was from around 10 % in 1990 to 14 % in 2008, whereas the total unemployment rate decreased and remained stable at around 5.5 % over the period.15 Between 1990 and 2000, figures from the U.S. indicate a similar pattern in the unemployment of young people.

The Financial Crisis and Beyond – Converging trends

17As the effects of the financial crisis fed through into the real economy, U.S. and U.K. unemployment patterns continued to follow the same trends – which differed significantly from the French experience. In 2009, unemployment among under-25s increased by more than 4% in both the U.S. and the U.K. By then, it was clear that neo-liberal labour activation policies had largely failed to improve the overall employment situation for young people in both countries. In the relatively benign economic time before the financial crisis, far too many had failed to find their way into sustainable employment despite a range of tailored programmes designed to achieve just this. In October 2009, New Labour’s focus shifted from unemployment for the under-25s to the increasing number of long-term unemployed in this group, but mostly in other age groups. A new “Flexible” New Deal (FND) started addressing more particularly workers who had been receiving Jobseeker’s Allowance for 12 months (or six months in some cases). The statement: “If you do have to take part and refuse, you may lose benefits” was repeated in the explanatory document of this programme. This emphasized the “active” – and coercive – characteristic of this particular workfare scheme. New Deal programmes addressing other groups – the disabled, lone parents, partners, people over 50 and, strangely, musicians remained voluntary. Since the introduction of the FND, no new job schemes have been implemented by the British Coalition or Obama’s administration, suggesting that the ongoing crisis has overwhelmed the neo-liberal approaches to unemployment developed in the pre-crisis phase. As these policies and programmes failed to deliver on their own terms for the under-25s, the U.K. results for this group are now very close to the French experience (see table 5):

Table 5. Unemployment Rates for Workers under 25 in the U.S., U.K., and France (2009-2012)

2009

2010

2011

2012

U.K.

18.9

19.1

20.0

21.0

U.S.

17.6

18.4

17.3

16.2

France

22.8

22.5

22

23.8

Source: OECD Employment Outlook, 2011

18More broadly, neo-liberal convergence within an Anglo-Saxon economic model was indicated by the origins of the financial crisis that engulfed Anglo-American capitalism in 2007, and the strategies adopted to address the crisis. By April 2007, the warning signs of coming economic turmoil were turning obvious. At that stage, the key signifier was significant and increasing defaulting in the American sub-prime mortgage market. This problem originated in a policy pursued by the Clinton administration which had been retained and extended by G. W. Bush. The aim had been to extend home ownership in America to groups normally disadvantaged in the housing market. Up until 2004, this process had been supported by a period of low interest rates. However, between 2004 and 2006, U.S. interest rate rose from 1 % to 5.35 %, triggering a significant slowdown in the American housing market and defaulting in the sub-prime mortgage market. Reflecting the nature of the global market place, many American mortgages including sub-primes had been bundled up, sliced and diced, given high quality ratings, and sold on to financial institutions around the world. As a consequence, the collapse of the U.S. sub-prime market had an immediate negative impact on banks – and banking systems – around the world. Very quickly both Britain and the U.S. faced very similar economic situations. The direct links that had developed in the U.S. and U.K. financial and banking sectors generated the similar instabilities and dangers both sides of the Atlantic.

  • 16 Moral Hazard is defined by the IMF as: “In general, a feature of insurance that arises (...)

19The sub-prime crisis transmuted into a credit crisis and then a banking crisis in both countries. Extensive bail outs of banks and other financial institutions were hastily arranged. Toxic assets were mopped up. Much of this was done in co-ordination with other G20 countries on the grounds that, in the global era, Anglo-American problems posed a serious threat to the world economy. But the parallels between U.K. and U.S. policy responses to the ongoing crisis were particularly striking in this period, confirming the convergence that was apparent in the neo-liberal period. Centrally controlled interest rates dropped with a view to stimulating economic activity and reducing the strains on the banking and financial sectors. These approaches were roundly criticized by some U.S. and U.K. commentators as well as leaders in some other capitalist countries. From those within the Anglo-Saxon economic model, the key concern was over the notion of “moral hazard”.16 As people were told many banks and financial institutions were too big to be allowed to fail, it became increasingly obvious that many of them were also looking too big to bail out. Many of the risks these institutions had been taking now looked reckless, but bail outs meant that tax-payers and not the guilty would have to mop-up now the Wall Street and City parties had ended. Angela Merkel was particularly critical of this approach. In June 2008, she indicated her desire to see the EU challenge Anglo-American dominance of financial standards and even to develop its own rating agency. As she put it :

  • 17 Quoted in Lionel Barber, Bertrand Benoit and Hugh Williamson, “March to the Middle,” Fi (...)

Europe has developed a certain independence thanks to the euro. But of course, in terms of the rules, the transparency guidelines and the entire standardization of financial markets, we still have a strongly Anglo-Saxon-dominated system. The robust currency system of the euro has not yet secured sufficient influence over the rules governing financial markets.17

  • 18 Office for National Statistics, United Kingdom National Accounts The Blue Book, 2012, 2 (...)

20However, when the American authorities allowed Lehman to fail in September 2008 – considered a major error in the U.K. – the consequences of allowing moral hazard appeared direr than mopping it up. As a consequence both countries had to resort to increasing government spending to rescue the financial system. Both the U.K. and the U.S. gave the priority to their financial systems even though financial services sector contributed only to 9.3 % of British GDP in 2010, coming in fifth position after government education and health (19.9 %), distribution / transports / hotels and restaurants (18.0 %), production (16.1 %), professionals and support (11.6 %).18 The extent of U.S. and U.K. bailouts of the financial sector is indicated in table 6. Interestingly, despite Merkel’s complaints regarding moral hazard, one of the key government interventions that came close to the U.S. / U.K. approach – in relative terms – was that of Germany.

Table 6. Government Capital Investments in Financial Institutions ($ bn.)

Belgium

15.6

Britain

52.2

China

2.1

France

10.5

Germany

40.7

Japan

0.0

Luxembourg

3.7

Netherlands

17.9

Singapore

0.0

Spain

0.0

Switzerland

5.2

U.S.

317.5

Total

465.4

Source: Bloomberg, 2 February 2009

  • 19 See Les Échos, « Des modèles d’activité voués à changer” », 3 October 2011, (...)

21 As government spending related to saving the financial system increased, the neo-liberal economic creed in limiting government intervention to its lowest level was abandoned in both the U.S. and the U.K. While U.K. Government spending had started to increase in 2002 to improve public services, U.S. spending did not grow until 2009 when it increased dramatically. Although the U.K. and the U.S. did not follow the exactly same pattern of spending, both ended up with similar increases between 2002 and 2009. At that point, U.S. / U.K. government spending, in relation to GDP, converged towards that of the French model (see table 2). Indeed, prior to the transmutation of the European sovereign debt crisis into a possible European banking crisis, some British commentators were beginning to point to the French model as a possible template for rebuilding economic stability in the post-crisis era. However, the 2011 summer stock exchanges crash, which was caused by the announcement that the U.S. Government had lost its AAA credit rating as well as the European sovereign debt crisis, itself probably the biggest cause of instability in world financial markets, has shown the limits of the French financial system which is now also looking desperately for new operating models that give priority to operations on the financial markets instead of resorting to credit. 19In America huge public bail outs, increasing unemployment and home repossessions eventually sparked the “occupy” civil unrest taking place in Wall Street and beyond. The final area of significant convergence arising from the financial crisis in the Anglo-Saxon economic model has been the adoption of quantitative easing. Quantitative easing represents an unconventional method for increasing the money supply by using newly created money to purchase government bonds and other financial instruments – or, indeed, toxic assets – from financial institutions to increase liquidity with a view to increasing lending to business and in the mortgage market. The U.K. Government launched QE3 in July 2012, injecting another £50 billion into the economy with a grand total of £375 billion since March 2009. The problem has been that banks and other financial institution have tended to use this liquidity to secure their own positions and to seek profits in commodities and emerging markets. The main consequence of quantitative easing has tended to be the creation of bubbles in both of these sectors. The commodity bubble has also tended to stoke inflation which has compounded the expected inflationary effects of printing money.

Beyond the financial crisis – Diverging Trends

22As the crisis continued, and Governments changed in the U.S. and the U.K., ongoing responses to the unfolding economic situation began to diverge. Between 2008 and 2011 in America, the Obama administration tended to seek to prime the economy by increased public spending. Very large increases in many areas resulted in a 20 % increase in overall spending and a 184 % increase in the federal deficit. This eventually led to a downgrading of the U.S. Government’s credit rating. In the U.K., the Coalition Government pursued the path of austerity seeking to limit rising debt and Government spending. A key aim here was to protect the Government’s credit rating which became increasing important as the European sovereign debt crisis became entrenched and expanded. These developments are indicated by tables 7 and 8.

Table 7. Total U.S. Federal Spending by Function (2008-2011), in $ trillion

Function

2008

2009

2010

2011

% increase


2008-11

Total Spending

3

3.5

3.5

3.6

20.0

Pensions

0.7

0.7

0.8

0.8

14.3

Health Care

0.7

0.8

0.8

0.9

28.6

Education

0.1

0.1

0.1

0.1

0.0

Defense

0.7

0.8

0.8

0.9

28.6

Welfare

0.3

0.4

0.5

0.5

66.6

Annual deficit (in $ billion)

458

1 413

1294

1 300

183.8

Source: USGovernmentSpending.com <http://www.usgovernmentspending.com>, retrieved in September 2013.

Table 8. Total U.K. Government Spending by Function (2008-2011), in £ billion

Function

2008

2009

2010

2011

% increase


2008-11

Total Spending

576

624

663.1

684.4

18.8

Pensions

98.8

108.5

116.4

121.7

23.1

Health Care

102.3

108.7

116.9

120

17.3

Education

78.7

83

88.5

91.5

16.3

Defence

38.2

40.8

42.4

44.9

17.5

Welfare

86.9

95.6

107.6

109.5

26.0

Public Net debt

525

616

759.5

905.3

72.4

Source: ukpublicspending . co . uk <http://www.ukpublicspending.co.uk>, retrieved in September 2013.

23As a consequence of these diverging economic strategies the British economy contracted significantly in 2009. The 5.6 % reduction in GDP significantly exceeded the U.S. contraction of 3.9 % and was more than double the French figure of 2.5 %. The following year, U.K. growth at 1.5 % was slightly more than U.S. growth and just 0.1 % below the French figure. This was encouraging news for the U.K. Coalition Government until problems in the Euro-zone – stemming from the sovereign debt crisis – dramatically changed the economic situation and raised the threat of a further banking crisis involving primarily French, German and British institutions.

  • 20 See, for example, “SEC Charges China-Based Company and Top Executive with Inflating Fin (...)

24This development also indicates how U.S. and U.K. interests have diverged as a result of the ongoing crisis of capitalism. British concerns have become increasingly focused on events in Greece and the Euro-zone and the possible problems these pose for the British banking system and trade within the EU. While these events are also clearly of interest to the U.S., they are less immediate and pressing. Indeed, in this period, American attention has focused more upon relations with China. China has been accused of keeping the exchange value of its currency deliberately low to boost exports and reduce imports. In America this has come to be regarded as a deliberate Chinese strategy in what is now seen as a currency war. At the same time America wants China to purchase more of its debt – even though the inflationary tendency of quantitative easing will reduce its value in coming years. Finally, the American authorities have been investigating claims that Chinese companies listed on the NYSE have deliberately engaged in fraudulent accounting to increase the value of their stock.20 As such, America’s current focus seems to on managing the rising might of China in areas where this threatens America’s trade or financial stability. These are clearly not the immediate concern of the U.K.

25The China question and European sovereign debt problem both cloud the issue of the extent to which the Anglo-Saxon economic model might be blamed for the current state of the world economy. Certainly, much of the blame for the financial crisis of 2007-2008 and the banking crisis that ensued can be laid at this model’s door. The neo-liberal version of globalization pushed by pre-crisis America with uncritical British support led to practices that fundamentally undermined the Anglo-Saxon model itself and spread the misery of collapse around the world. Sloppy financial regulation – or, perhaps more accurately, inadequate enforcement – encouraged the growth of a casino brand of capitalism. When this looked successful, financial institutions from other countries pushed to get a seat at the roulette table. As it turned out, this spread unreasonable risk throughout many of the world’s banking and financial systems. The apparent economic miracle of the pre-crisis Anglo-Saxon model turned out to be built on the sands of cheap credit, an associated property bubble, and a broad misunderstanding of the risks attached to the new financial instruments deregulation had given rise to. The role of the rating agencies in spreading these risks throughout the Anglo-Saxon model and around the world also cannot be underestimated. Indeed, the Anglo-Saxon model certainly did build much mischief on itself and the world economy, but this seems not to be the end of the story. The rise of China, and its purchases of U.S. debt, is taken by some commentators as an indication that the pre-crisis world economy was out of balance in any event. If this is the case, then some of the ongoing problems in the world economy may be linked to a necessary realignment that would have had to occur at some point anyway. Further, the Euro-zone sovereign debt crisis, and the banking crisis this has now spawned – despite the role of the rating agencies – seems to have more to do with government over-borrowing and over-spending than any direct relationship to the recent problems associated with the Anglo-Saxon model. While, U.S. toxic assets seeped into European banks, large-scale purchases of Greek and other crisis country bonds were a somewhat different matter.

Conclusion

  • 21 The Economist, “Out of the ruins,” 25 March 2010, <http://www.economist.com/node/15772127>, retrieved on February 1</http>
  • 22 BBC News, “David Cameron: Rebalancing U.K. economy ‘slow and difficult,’” BBC News, 9 O (...)

26In March 2010, an article in The Economist suggested that the Anglo-Saxon economic model was coming “out of the ruins.”21 Since then, this has increasingly come to look like an over-optimistic appraisal. Indeed, in Britain the Coalition Government suggested in October 2012 that rebalancing the economy would be “a slow and difficult process”.22 Indeed, the U.K. economy – like that of many other developed economies – can be expected to go through a long period of stagnation that will likely include some shorter periods of contraction. This stagnation may even transmute into a prolonged period of stagflation as the effects of quantitative easing filter into the real economy. In Britain, as in America, the severity of ongoing economic problems has broken the fascination with the possibility of an ever more integrated and efficient neo-liberal global order working to the benefit of all. The U.S. and the U.K. – like most others – are now primarily concerned with addressing the particular problems confronting their own economies and citizens. Added to the current diverging policies between the two countries, the current inward-looking focus on both sides of the Atlantic suggests that the closely knit Anglo-Saxon model of the neo-liberal global age is now a thing of the past. Indeed, it would seem that there is still an awful long way to go in the current economic climate. As such, it remains to be seen if – in the long term – an Anglo-Saxon model will come to dominate again in the next phase of globalization that will likely follow the settlement of current world economic problems. If it does – or if it comes to be replaced – it is to be hoped that it will be a far less risky model that drives the next phase of globalization.

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Bibliographie

AZUELOS Martine, “Britain and the United States as Drivers of Globalisation: Evidence reconsidered,” in HO Tsai-man C. & Louella CHENG (eds.), Economic Dynamism in the Sinospheres and Anglospheres. Identities, Integration and Competition, Hong Kong: University of Hong Kong, Centre of Asian Studies, Occasional Papers and Monographs n° 61, 2010, 11-47.

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BARBER Lionel, Bertrand BENOIT, & Hugh WILLIAMSON, “March to the Middle,” Financial Times, 11 June 2008, <http://www.ft.com/intl/cms/s/0/bb9ca588-374f-11dd-bc1c-0000779fd2ac.html - axzz2eOE8TQd2>, retrieved on February 10, 2015.

BISHOP Patrick, CONNORS Carmel, & Charles J. G. SAMPFORD (eds.) Management, Organisation, and Ethics in the Public Sector, Aldershot: Ashgate Publishing, Ltd., 2003.

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HILTS Craig, “New Labour and the Role of the State,” The American Undergraduate Journal of Politics and Government, vol. 3, no. 2, 2003, 58-69.

HM TREASURY, Public Expenditures Statistical Analyses 2011, July 2011, <http://www.hm-treasury.gov.uk>, retrieved in July 2013.

HUDSON John & Stuart LOWE, Understanding the Policy Process: Analysing Welfare Policy and Practice, Bristol: Policy Press, 2009.

ILO (International Labour Office), Governing Body ESP Committee on Employment and Social Policy, Active Market Policies, November 2003.

IMF website, glossary <http://www.imf.org>.

JONES Michael, “Clinton’s Gunslingers Show Labour How To Shoot A Line,” The Sunday Times, April 27 1997, section 5, 3.

KAVANAGH Dennis, Thatcherism and British Politics: The End of Consensus?, Oxford: Oxford UP, 1990.

KING Desmond & Mark WICKHAM-JONES, “From Clinton to Blair: The Democratic (Party) Origins of Welfare to Work,” The Political Quarterly, vol. 70, no 1, 1999, 62-74.

LEWIS Gail, GEWIRTZ Sharon, & John H. CLARKE, Rethinking Social Policy, London: Sage Publications Ltd, 2000.

NOCK Christopher J., “What’s Wrong with New Labour?” Observatoire de la Société Britannique, n° 1, 2006, 157-172.

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Notes

1 This line is taken from Shakespeare’s Much Ado about Nothing, Act I, sc. 3, l. 40.

2 “Hail to the chiefs,” The Economist, 1 November 2007, 97.

3 Martine Azuelos, “Britain and the United States as Drivers of Globalisation: Evidence reconsidered,” in Tsai-man C. Ho & Louella Cheng (eds.), Economic Dynamism in the Sinospheres and Anglospheres. Identities, Integration and Competition, Hong Kong: University of Hong Kong, Centre of Asian Studies Occasional Papers and Monographs n° 61, 2010, 15.

4 In the present context “marketization” is used to refer in particular to the process of increasing competition in the public sector under Mrs Thatcher and John Major – often to prepare important elements of that sector for privatization. In part, this was signified by both the introduction of New Public Management [NPM] techniques and compulsory competitive tendering [CCT]. More generally, the process introduced “drives to boost efficiency and reduce the size of public sector programmes, the marketization of key public services, the tightening of entitlement rules for key social security benefits....” (John Hudson & Stuart Lowe, Understanding the Policy Process: Analysing Welfare Policy and Practice, Bristol: Policy Press, 2009, 49). Another useful reference on this is Dennis Kavanagh, Thatcherism and British Politics: The End of Consensus?, Oxford: Oxford UP, 1990.

5 Desmond King & Mark Wickham-Jones, “From Clinton to Blair: The Democratic (Party) Origins of Welfare to Work,” The Political Quarterly, vol. 70, no 1, 1999, 72.

6 David P. Dolowitz et al., Policy Transfer and British Social Policy. Basingstoke: Open UP, 2000.

7 This term was used on both sides of the Atlantic to refer to the American influence on British politics and was added to the Oxford English Dictionary in 2000. For instance in 1993, a reporter in London of the New York Times mentioned that “[T]he Labor Party ... is undergoing a rift over how far it should proceed with what is called ‘Clintonization.’” (John Darnton, 1993, “London Journal; Labor’s Problem: Must Beliefs Be Whitewashed?” New York Times, 23 January 1993 <http://www.nytimes.com/1993/01/23/world/london-journal-labor-s-problem-must-beliefs-be-whitewashed.html?pagewanted=print>, retrieved on February 10, 2015). In the United Kingdom, David B. Reynolds wrote that “this “Clintonization” of the Labour Party involved further centralization of leadership. Slick media campaigns have today become a substitute for serious grassroots activism.” (David B. Reynolds, Taking the High Road: Communities Organize for Economic Change, New York: M. E. Sharpe, 2002, 97).

8 Gail Lewis, Sharon Gewirtz and John H. Clarke, Rethinking Social Policy, London: Sage Publications Ltd., 2000, 174.

9 See W. N. Coxall, Lynton Robins and Robert Leach, Contemporary British Politics London: Palgrave Macmillan, Fourth Edition 2003, 334.

10 See David Coates, “‘Darling, It is Entirely My Fault!’ Gordon Brown’s Legacy to Alistair and Himself,” British Politics, vol. 3, no 1, 2008, 20.

11 See Michael Jones, “Clinton’s Gunslingers Show Labour How To Shoot A Line,” The Sunday Times, April 27, section 5, 3.

12 Accounts of active labour market policy are diverse. The International Labour Office has provided an account that best fits New Labour’s approach. The ILO notes that: “[...] active policies are contingent upon participation in such programmes in order to enhance labour market (re)integration. Typical passive programmes are unemployment insurance and assistance and early retirement; typical active measures are labour market training, job creation in form of public and community work programmes, programmes to promote enterprise creation and hiring subsidies. Active policies are usually targeted at specific groups facing particular labour market integration difficulties: younger and older people, women and those particularly hard to place such as the disabled.” (International Labour Office, Governing Body ESP Committee on Employment and Social Policy, Active Market Policies, November 2003, 3).

13 Anthony Giddens, The Third Way: The Renewal of Social Democracy, Cambridge: Polity Press, 1998, 11.

14 Ibid., 7.

15 OECD, Employment Outlook, 2009.

16 Moral Hazard is defined by the IMF as: “In general, a feature of insurance that arises when the provision of insurance increases the probability of the occurrence of the event being insured against, usually because the insurance diminishes the incentives for the insured party to take preventive actions. For example, banks may lend for riskier ventures than they otherwise would if they expect losses to be effectively covered by the government through deposit insurance or otherwise.” <http://www.imf.org/external/np/exr/glossary/showTerm.asp - 10>, retrieved on September 28, 2014. This is summed up by the Bank of England and the IMF as “the perception that international rescues encourage risky investments,” <http://www.cgdev.org/files/2772_file cgd_wp018.pdf>, retrieved on September 28, 2014.

17 Quoted in Lionel Barber, Bertrand Benoit and Hugh Williamson, “March to the Middle,” Financial Times, 11 June 2008 <http://www.ft.com/intl/cms/s/0/bb9ca588-374f-11dd-bc1c-0000779fd2ac.html - axzz2eOE8TQd2>, retrieved on September 29, 2014.

18 Office for National Statistics, United Kingdom National Accounts The Blue Book, 2012, 254.

19 See Les Échos, « Des modèles d’activité voués à changer” », 3 October 2011, 32.

20 See, for example, “SEC Charges China-Based Company and Top Executive with Inflating Financial Results through Phony Sales,” 4 September 2012, <http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171484366 - .Ui3aT79i5YJ>, retrieved on February 10 , 2015.

21 The Economist, “Out of the ruins,” 25 March 2010, <http://www.economist.com/node/15772127>, retrieved on February 10, 2015.

22 BBC News, “David Cameron: Rebalancing U.K. economy ‘slow and difficult,’” BBC News, 9 October 2012, <http://www.bbc.co.uk/news/uk-politics-19881293>, retrieved on February 10, 2015.

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Christopher J. Nock et Catherine Coron, « Post-Crisis Anglo-Saxon Capitalism », Revue LISA/LISA e-journal [En ligne], vol. XIII-n°2 | 2015, mis en ligne le 20 mars 2015, consulté le 28 avril 2017. URL : http://lisa.revues.org/8202 ; DOI : 10.4000/lisa.8202

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Auteurs

Christopher J. Nock

Christopher J. Nock a enseigné dans plusieurs universités au Canada et au Royaume-Uni. Il a dirigé des programmes pour le département de formation continue de l’Université d’Oxford et a également occupé, au titre de consultant, le poste de Directeur des Études de RIPA, un organisme qui élabore des programmes de formation de fonctionnaires dans le monde entier. Ses travaux de recherche ont été publiés au Canada, en France et aux États-Unis.

Catherine Coron

Catherine Coron est maître de conférences à l’Université Panthéon-Assas Paris 2, où elle enseigne l’anglais appliqué à l’économie et à la finance. Ses recherches portent sur l’impact économique de la formation et de l’éducation au Royaume-Uni, ainsi que sur le capital humain, la formation des entrepreneurs, le modèle britannique de capitalisme et la notion de bien-être économique. Elle est l’auteur de nombreux articles sur ces sujets. Elle est membre du CERVEPAS.

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