How did New Labor start?

Great Britain: So far, New Labor has been lucky

So far, New Labor has been lucky - page 1

The first trip of the newly elected Chancellor Gerhard Schröder was to London in 1998. It was the time when British Prime Minister Tony Blair forged a real political friendship with Schröder, from the bond of visionary social democracy. It could be called the New Center or the Third Way - market-oriented social justice. PICTURE

And today? After almost equally long terms in office, the Blair and Schröder governments could hardly be more different.

One, Blair, has delivered full employment, low public debt and reforms. The other, Schröder, leaves behind high unemployment figures, national debt and a half-tied bundle of reforms.

Tony Blair and his Chancellor of the Exchequer, Gordon Brown, could only achieve so much because they inherited an essentially healthy economy from their conservative predecessors. With a lot of money in the coffers, the welfare state can be easily reformed. But now dark clouds are also gathering over the economic wonderland of Great Britain. The question is what is left of New Labor then.

When Blair and Brown competed in 1997, it was comparatively easy for them. The hardest work was done. In the 1980s, the Conservatives under Margaret Thatcher carried out extensive reforms of social welfare and unemployment benefits and partially privatized pension insurance. The success was impressive. In 1979 the British gross domestic product per capita was still 2915 dollars below that in Germany. By the end of the 1980s, the backlog had shrunk to just $ 1,800.

Chancellor of the Exchequer Gordon Brown did everything possible to maintain economic stability. He granted independence to the central bank, and when the telephone license auction raised £ 23 billion into the treasury, he used it to repay debt. In the following years, the unbroken domestic demand brought steady economic growth to the British government - despite the Asian and stock market crisis. The main cause was the booming real estate market. With the rise in the value of their homes, even average-income Britons suddenly felt rich.

The best conditions for implementing further reforms. The Welfare to Work For example, a program that forces young people out of work and the long-term unemployed to take on cheap jobs and at the same time offers them further training. More than a million people could be referred in this way.

So far, New Labor has been lucky - page 2

In retrospect, it is noticeable that the Labor government preferred to reform where it was able to spend money with full hands: in the public sector. On the other hand, she shied away from a pension reform. Instead, political promises were kept. Over 70 billion pounds flow into the national health system every year, almost two percent more of the national income than eight years ago.

Unemployment is not an issue in the UK? No wonder if the state creates jobs everywhere! Since 1997, not only have more than 150,000 nurses, doctors, teachers and police officers been hired, but around 750,000 new officers who only work at their desks. In some areas, 60 percent of the economy is provided by the public service, about as much as in Hungary when it was still socialist.

The test of the supposedly market-based Labor government is yet to come - and probably soon. Last week, Gordon Brown had to revise its growth forecast for the current year downwards, from 3.5 to below 2.5 percent. The cause is the high oil price and weak demand in Europe and the rest of the world. Immediately afterwards, the Office for National Statistics reported that the economy had grown more slowly in the past quarter than it had in twelve years. The retail sector is hardest hit and has to cope with a decline in sales of up to ten percent.

Bad news for still-Chancellor of the Exchequer Brown. If, as agreed, he takes over from Tony Blair in the near future, he will have to make do with much lower tax revenues.

Then it should become clear that New Labor, with its reform program, was more interested in short-term political effectiveness than economic sustainability. The hiring state will no longer be able to keep unemployment figures low for a long time. Especially not when the country is losing strength as an industrial location at the same time. The Amicus union estimates that up to 12,000 jobs were lost in the industry every month. One reform that Labor began much too late and half-heartedly is the increased training of skilled workers according to the German system. In Great Britain the workers are as poorly qualified as in hardly any other industrial nation. They may be more flexible and have adapted to the competition from China more quickly than other Europeans. But this lead is unlikely to be sustainable in the long term.

So what remains of the supposed economic miracle under New Labor?

So far, New Labor has been lucky - page 3

This government has been careful with the economy for more than a decade - only to end up spending too much money in the wrong place. Soon the old dilemma threatens to return to Great Britain. Should the government raise taxes? Especially for a Labor government that successfully uses the prefix New has fought, i.e. wants to get along without the classic left politics, it is not advisable. Or go into debt? The national debt in Great Britain is currently only 40.8 percent of the gross domestic product, in Germany it is more than 60 percent. So there is still room.

The bottom line could still be a government that, despite full coffers and a good mood, has by no means brought the reforms that the country needed in motion.