5 - The Labour party and Keynes  pp. 153-185

The Labour party and Keynes

By Richard Toye

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In September 1994, during the early months of the phenomenon known as ‘New Labour’, The Independent carried the headline ‘Blair ditches Keynes’. It was reported that Labour leaders would tell a conference of businessmen and academics ‘that the party has turned its back on Keynesian economics and “the old ways of corporatism”’. In fact, Blair used his speech to insist that Keynes's legacy of demand management had never implied increasing demand ‘irrespective of economic circumstances and even at a time of inflation and high borrowing’. Real Keynesianism, in his view, represented a wider critique of the functioning of capitalism – not a call for permanent government pump-priming. Likewise, Gordon Brown stated on the same occasion that ‘I am not here to bury the real Keynes but to praise him’. This is an approach that New Labour followed in government. Blair continued to cite Keynes as an example of the beneficial influence of Liberalism on the Labour party. Brown, as Chancellor, asserted that although New Labour rejected ‘crude “Keynesianism”’, the government sought ‘to draw on the best of Keynes’ insights about political economy and put a modern Keynesian approach into practice'.

Blair and Brown's approach represents an attempt, whether conscious or otherwise, to employ Peter Clarke's useful distinction between ‘Keynesianism’ and ‘the historical Keynes’. In their opinion, the views of the ‘real’ (or ‘historical’) Keynes were misinterpreted by the economists and politicians who came after him.