A Labour Prime Minister Inaugurated Britain’s Neoliberal Era
Fifty years ago, British Labour leader James Callaghan used his party conference speech to promote some of the key ideas associated with neoliberalism. A close look at the speech can help explain why neoliberalism keeps defying predictions of its demise.
Margaret Thatcher usually gets the credit (or the blame) for Britain’s neoliberal turn from the late 1970s. But it was her Labour predecessor James Callaghan who took the first key steps away from the social democratic reforms his party had carried out. (Evening Standard / Getty Images)
When Britain’s Labour Party met for its annual conference in September 1976, the government headed by its leader, James Callaghan, was confronting a severe economic crisis. This included the combination of high inflation and unemployment (“stagflation”) and a currency crisis that would, by the end of the year, lead the government to arrange a loan from the International Monetary Fund (IMF). IMF assistance came with the requirement of steep budget cuts.
In this context, conference delegates passed ambitious resolutions that condemned cuts and called for nationalization of much of the financial sector as well as extensive controls over the movement of capital, imports, and company investment decisions.
James Callaghan refused to consider such measures. In a speech that historians have often seen as a harbinger of neoliberalism, he told the conference that “the cosy world we were told would go on for ever, where full employment would be guaranteed by a stroke of the Chancellor’s pen” was now gone for good:
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