Image Credit: Andrew Parsons/Parsons Media
COVID-19 has sprung an extraordinarily difficult task on the government. The Brexit logjam that paralysed parliament and hijacked the political news agenda before the 2019 general election was predominantly a political crisis and of a different nature. With Johnson’s Brexit deal finally passing in January, Johnson has proposed a different and ‘New Deal’ for solving the new economic challenge that both his government and our four nations face.
Franklin Roosevelt’s New Deal was too turned to at a time of a great economic downturn at the start of the early 1930s and created a larger role for the federal government in ensuring job security for the American people. Alphabet agencies were created, work relief programs set up and banking reform laws passed. Roosevelt’s spending splurge amounted to approximately 40% of the US national income in 1929 and yet the spending was only a small part of what gave his New Deal its character.
Roosevelt’s New Deal was revolutionary in creating the expectation that the government should take greater responsibility for the employment prospects of the masses. Roosevelt highlighted in his State of the Union address of 1934 that there was a necessity for recovery to take the form of “reform of many old methods” and Johnson’s Cabinet will need to ensure that their economic recovery programme isn’t simply about putting the economy ‘back on track’ but radical and far reaching if it is to be truly Rooseveltian.
With Johnson’s announcement of a ‘New Deal’, came the promise of a £5 billion investment plan to be brought forward. Though it is important to highlight that this investment only amounts to 0.2% of GDP. The plan isn’t unsubstantial but neither is it transformative in comparison with Roosevelt’s spending commitments. Fortunately for Johnson, Sunak is a Chancellor of Exchequer that has shown great imagination in drawing up the ‘Eat Out to Help Out’ plan. The plan specifically targets the hospitality sector, which faced a downturn of 90% in economic activity in April as a result of the nationwide lockdown. Those wanting to eat out in August from Monday to Wednesday can receive up to £10 off their meal out. This new initiative doesn’t respond to James Forsyth’ call to “rewire the whole system”; although it does demonstrate a Rooseveltian spirit in turning to new methods in order to solve an economic crisis of new proportions.
Johnson’s ‘New Deal’ philosophy is distinctly different to the Thatcherite approach, as he has declared it the “job of the government to create the conditions for free-market enterprise” and it is likely that many Conservative MPs on the backbenches will feel a new unease with the government’s new willingness to play a greater role in supporting businesses. Writing in The Spectator, Martin Weyer has described this new willingness as a “180 degree change of mind from the modern conservative belief in squashing state spending” and the ‘New Deal’ can be accredited with attempting to improve recovery across a wide range of the economy’s sectors.
Approximately £900 million in grants has been made available to businesses and cultural institutions such as theatres and art exhibitions will benefit from the much needed £1.57 billion bailout package. George Eaton has pointed out in the New Statesman that we shouldn’t be fooled in thinking that Johnson’s ‘New Deal’ spending isn’t being replicated elsewhere. In Germany the stimulus package consists of £130 billion of spending and this amounts to a tremendous 49% of the country’s GDP.
However, the true test of whether Johnson’s plan for economic recovery really is Rooseveltian in nature will be decided by how radical and imaginative the government is in preventing mass unemployment come October when the furlough scheme grinds to a halt. The government can’t be said to be setting up anything comparable to Roosevelt’s Alphabet agencies; although Johnson’s plan to create 3,000 new jobs through the creation of local conservation projects shows a unique way of tackling both the climate and health crises in tandem. Yes, these 3,000 jobs is meagre in comparison to the 300,000 jobs that Roosevelt created with his launch of the Civilian Conservation Corps in 1933; however it does emphasise that whether Rooseveltian or not the government doesn’t intend to resort back to the Cameron-Osborne era of austerity.
The Prime Minister declared the old “machine dead” and called for Britain to “build a new machine and advance”. It is still not clear what this “new machine” that Johnson speaks of will bring; although what can be said is that Roosevelt’s New Deal is definitely not a bad place to start for inspiration