The Evolution of Labour Party’s Economic Policy

The last time a freshly minted Labour government unabashedly campaigned on an ambitious national industrial policy to revive the British economy was 50 years ago, and the results were generally viewed as disastrous.

The 1974 program of subsidies, state ownership, and power-sharing among business, unions, and government resulted in strikes that paralyzed the nation. The government’s goal of picking industrial winners turned into a policy of backing losers like the automaker British Leyland and British Steel Corporation.

The current Labour Party has clearly jettisoned that ’70s era legacy. Keir Starmer’s new government, which is scheduled to formally lay out its economic agenda when Parliament opens on Wednesday, is nonetheless embracing the idea that the government must play a key role in driving Britain’s stagnant economy.

Policies that put political leaders more firmly in charge of the economy have taken hold all over the world. India, Brazil, Malaysia, and many European capitals have all signed on. Leading the way is the United States, which for decades had spearheaded the campaign for open markets and hands-off government. The movement is largely aimed at challenging China, which has used top-down planning to move firmly into the No. 2 spot among global economies, as well as financing programs to stem the ravages of climate change.

The growing lineup of government interventions inevitably means they will end up competing to some extent with one another. With one of the world’s largest advanced economies, though, Britain’s latest experiment is being watched particularly closely.