How a Great Power Falls Apart
Decline Is Invisible From the Inside
British Prime Minister Gordon Brown could delay the inevitable for only so long. Convention requires the government to hold general elections every five years, and with the last election held in 2005, that deadline was drawing inexorably closer. Although Brown and his Labour Party were slipping in popularity, Brown called elections for May 6.
This election will be far from ordinary. It is not only a referendum on Brown, who became party leader and prime minister in 2007, after waiting ten years for the more charismatic Tony Blair to resign; it is also a referendum on Labour's 13 years in power and, on an even more basic level, on the economic principles that have guided the party's rule. It is in such moments that, as Karl Marx once mused, "all that is solid melts into air." Britain has had a few such upheavals before. The 2010 election will likely be one, and its consequences for foreign and domestic policy will be profound.
In 1997, a public hungry for change after almost 20 years of Conservative Party rule handed Labour a landslide victory in the House of Commons. Labour -- which had rebranded itself New Labour during the campaign -- initially adopted a degree of economic conservativism that even actual Conservatives had shied away from when in power. It granted operational independence to the Bank of England, honored campaign pledges not to raise taxes, and favored fiscal prudence over more traditional left-wing redistributive policies. It also abided by the economic principles that the Conservative government of Prime Minister Margaret Thatcher introduced in the 1980s, avoiding inflation above all.
This political course was made possible by the economic conditions of the late 1990s. The global boom of those years, and the consequent jump in property prices in the United Kingdom (and elsewhere), improved the living standards for most voters. A booming City of London generated abundant tax revenue, and Labour was able to boost public spending on education and healthcare, increase state pensions and salaries for doctors and public-sector managers, and expand public services -- all without increasing taxes on individuals or growing the public deficit. Brown, who was then chancellor of the exchequer, had apparently succeeded in reconciling free-market capitalism with traditional Labour values. Voters, linking their good fortune to New Labour's economic policies, rewarded the party by renewing its mandate twice at the ballot box.
But the boom masked two problems. The first was the division of responsibilities -- and intense rivalry -- between Brown and Blair. Blair's interest in economics was minimal. Brown managed the economy while Blair took credit for its success. In the meantime, Blair indulged in foreign policy adventures in Sierra Leone and Kosovo and decided, against party and public opinion, to back U.S. President George W. Bush's invasion of Iraq. British politicians can be forgiven for many things, but kowtowing to the emperor in such an obvious way is not one of them. By 2007, Blair had to go, and Brown seized the moment, just as the global economy turned against the great British bubble machine he had helped to build.
This brings us to the second problem: all that had seemed solid (that is, the British economic wonder) melted into air. By the end of Blair's tenure, the financial sector constituted nearly 10 percent of British GDP (almost double what it had been in the previous decade), around 40 percent of corporate profits, and was the source of over 20 percent of taxes. Economic growth was increasingly concentrated in the financial sector, and real wages began to stagnate. When the global financial crisis hit in 2008, Brown's government had to commit over 25 percent of a substantially smaller GDP to rescuing the banks -- and it did so on a much reduced tax base. In the meantime, poverty rose and welfare programs, such as unemployment compensation, kicked in. By 2010, the government's deficit had ballooned to a size exceeded in Europe only by the so-called PIGS: Portugal, Ireland, Greece, and Spain.
If Blair's folly was to get too close to Bush, Brown's was that he never met a banker he did not like. This was forgivable until it became apparent to the voters that the miracle of Brown's Third Way -- low taxes with high spending, low inflation with high employment -- was a mirage, and Britons were left with a future of higher taxes, lower spending, and higher unemployment. The public understandably felt cheated.
In theory, the opposition Conservative Party only needed to stand aside and watch New Labour disintegrate in order to emerge victorious in the next election. And in 2005, it elected a likeable and young politician, David Cameron, as Conservative Party leader. Positioning himself to the left of traditional Conservatism on issues such as the environment, crime, and diversity, Cameron conceivably could have ridden the wave of popular disgust all the way to the prime ministership.
But if New Labour had to answer for both stoking and then bursting Britain's economic bubble, the Conservatives had to answer for making it possible in the first place. Once a legacy to be proud of, Thatcherism, with its free finance and markets, was now seen as the root of the whole problem. The unemployment and polarization of the Thatcher period had likewise not slipped from the British collective memory. As the historian Tony Judt remarked in an article in The Independent, Cameron's virtue is that he acknowledges that British society is broken. His vice is that he refuses to acknowledge that it was his party that broke it. When the general election was called and the campaigning began, Cameron found himself at sea. He offered little but platitudes on the economy and his party's Thatcherite legacy. In the meantime, his would-be chancellor, George Osborne, publicly asserted that no sacrifice would be too great to balance the budget and save the pound -- even if it had to be done on the backs of those taxpayers who had just been required to save the banks.
Cameron's performance still looked like it would be enough, and until a week into the campaign, most presumed that he would win the election. But then the unthinkable occurred -- a third candidate emerged. Nick Clegg, the young, appealing leader of the Liberal Democrats, the party that, due to Britain's first-past-the-post electoral system, is always the bridesmaid and never the bride, shot to the front of the race after a good performance in the first two of Britain's three televised election debates. The Liberal Democrats, viewed as neither the descendents of Thatcher nor the boosters of bankers, now threaten the country's longstanding duopoly of Labour and Conservative.
Clegg's triumph is far from certain. It is likely that no party will emerge from the elections with a clear majority, since the Conservatives are polling short of the percentage required to win outright. This would be an enormous change from the strong, single-party governments and authoritative prime ministers that have previously dominated British politics. Would this system be missed? Perhaps not -- the electorate seems ready to abandon the old system. As the financial crisis destroyed the balance sheets of swathes of middle England, it was revealed that parliamentarians from both of the major parties had been looting their expense accounts to pay for second home mortgages, porn channels, tree surgery, and floating duck houses. This fueled popular outrage against the political class to match that already in play against the financial class, and the Liberal Democrats seem set to benefit most from this moment of turbulence. With a new electoral balance, the United Kingdom could become more like its European neighbors, with proportional representation, coalition governments, and an increasingly decentralized political system.
For these reasons, the election on May 6 is not business as usual. It is more than just a reconfiguration of British domestic politics; foreign policy changes are likely as well. There, three issues press the next government's agenda -- force projection and great-power status, Britain's "special relationship" with the United States, and its relationship with the European Union.
Britain ceased to be a credible world power during the Suez Canal crisis of 1956, yet it still seeks to punch above its weight. With a weak economy for the foreseeable future, however, the new fiscal reality may curtail such ambitions, no matter who wins the election. The IMF has estimated that to bring the U.K. debt level back to around 60 percent of GDP, Britain will need to cut the equivalent of 12 percent of GDP from its budget over ten years. Big-ticket force-projection items, such as the Joint Strike Fighter and the modernization of Trident, the United Kingdom's missile-based nuclear weapons program, will necessarily come under intense scrutiny. International commitments, such as Britain's continuing presence in Afghanistan -- which is already deeply unpopular with the British public -- may also be called into question.
The future of Britain's so-called special relationship with the United States is also unclear. Blair used it as a rationale for joining the Iraq war, but what the British got out of the bargain is far from clear. Blair appeared unable to influence U.S. policy, and the United States could have prosecuted the Iraq war in much the same way without even one British soldier being present on the ground. Indeed, as the former U.S. State Department analyst (and apparent Cuban spy), Walter Kendall Myers, was fired for saying in 2006: "It has been, from the very beginning, very one-sided. There never really has been a special relationship, or at least not one we've noticed." It is perhaps fair to say that the British public has now noticed this, too. Politicians of all parties, therefore, must play this card very differently in the future, if at all.
Finally, all of the contending parties have charted different courses for the future of the British-EU relationship. In the past, Brown's New Labour flaunted the superiority of Britain's free-market, finance-based capitalism in comparison to continental Europe's supposedly sclerotic economy. But with the demise of this model, more than a little schadenfreude is blowing back over the English Channel. Britain's "mono-crop dependency" on finance, as the economist Martin Wolf has called it, now looks less compelling as a template for reviving the European economy. Clegg's Liberal Democrats are the most avowedly pro-Europe, but with the EU and the euro in crisis as well, they have sought to downplay their pro-Europe stance in the election campaign. For Conservatives, the Europe question is the zombie issue that they cannot kill. Cameron has made no attempt to move the party beyond its knee-jerk Thatcherite Euroscepticism, and much of his party remains deeply hostile to the EU. A Conservative government would most likely mean a return to the tense U.K.-EU relations of the early 1990s.
"Splendid isolation" was the guiding principle of British foreign policy in the nineteenth century. British leaders minimized foreign entanglements and maximized freedom to act independently. In the twenty-first century, Britain may have "less-than-splendid isolation" thrust upon it and may have less freedom to act than ever before. Languishing in recession, unable to project force, and unwilling to engage with others, Britain may turn inward and rethink its legacies -- institutional and economic, domestic and foreign. The upcoming election is nothing less than a referendum on leaders and policies past. The outcome of that referendum will become the frame for where the United Kingdom will go next.