James Callaghan apparently said: "There are times, perhaps once every thirty years, when there is a sea-change in politics". He was referring to the coming Thatcher revolution that transformed the nature of the relationship between capitalism and the state. New Labour added a human face to the Thatcherite economic concensus.
Now, 30 years later, the events of the past few months are very clearly showing that (at least) aspects of this are not sustainable. What is not so clear is what comes next - and the current debate is not showing much in the way of breakthrough thinking.
The state running the commanding heights of the economy is not going to happen - especially as this currently simply seems to mean spending as-yet uncounted sums of taxpayer money. Under a communist system the central planning team may have been suboptimal - but at least they did not consume the 10% of GDP that UK financial services has done. The role of the two is arguably similar - deciding where to deploy resources in the economy to maximise investment returns (albeit with slightly different end ambitions).
But the UK has to answer some critical questions:
- Should the UK attempt to reduce its dependence on financial services? Inevitably this will happen (already the City is well on the way to 30% + reduction in staffing) but what alternative economic sector does the UK really have to replace it? And does the coming wave of US regulation offer a real opportunity to strengthen London's position in the global financial system - if that system survives...
- What alternative economic sectors can we build out? How do we grow a significant green industry (at the same time as everyone else decides to go down the same road)?
- How we do face the coming pension and demographic crisis?
- How will the UK's business and social fabric survive what are going to be many long years of working through paying back our debt (rather than spending on anything else).
The answers to these questions (and there are others) will define the political meme of the next thirty years. That no one yet has the answers is one of the reasons why no one yet has the next election in the bag.