Introduction: The Political Challenges of Hard Times

They called it the ‘Great Moderation’. While this specifically referred to a trend of reduced macro-economic volatility among the major advanced economies since the late 1980s, it encapsulated a wider political and economic meaning. It marked the extended period of economic growth from the early 1990s into the 2000s, growth that was attributed to an encouraging combination of free market economic policies at home and globalization abroad. In this view, post-war economic history began with the ‘Long Boom’, 30 years of full employment and unparalleled economic growth. The period also coincided with the widespread adoption of Keynesian macro-economic policies, intended to smooth the business cycle, and the social welfare state, serving to protect vulnerable workers and allowing them to become stable mass consumers. Yet by the late 1960s the model was already showing its contradictions, particularly a ‘spending ratchet’ (Crouch, 2009). Keynes called for the state to spend when the economy was in recession, but democratically elected governments found it difficult to take away the goodies when the boom years returned, as Keynes also advised. This fed into rising spending and higher prices, hindering productivity and profitability. Add in the cost-push of oil prices and the result was the rampant inflation and stagnant growth (‘stagflation’) of the 1970s. Attempts to restore the balance through even more spending only fed the inflationary spiral. Keynesianism was tested and found wanting, offering a political opening for leaders advocating a return to liberal economics; hence the label ‘neoliberalism’.