Thursday, May 07, 2009

Labour governments lose fewer jobs in recessions

Don Paskini has blogged (also here) about Tory economic competence, taking a longer view:

Over the past half century, every time a Conservative government has come to power, it has introduced disastrous economic policies which have plunged the economy into far greater crisis…
The last time that a newly elected Conservative government managed even minimal competence was when they were led by Winston Churchill in 1951.

Hmm. I’m all for a jolly bit of Tory-bashing but I was a little sceptical here. The “58 year run of messing things up” that Don condemns basically amounts to ‘twice’: after 1951, they’ve only come to power in 1970 and 1979.

But here’s another historical way of looking at it: compare changes in UK unemployment under Labour and Tory governments, using US unemployment as a comparator.

Ta-da (1971-2009):

So: the Heath government started badly, with unemployment rising as it fell in the US. The Barber boom managed to create jobs in the UK, but at no faster a rate than in the US. Then the bust came, and under Wilson and Callaghan we lost far fewer jobs than across the pond, although there was no subsequent recovery in employment to speak of. Even so, throughout the 1970s we had lower unemployment than America.

It couldn’t last. Labour, apparently, wasn’t working. The early 1980s recession, in which Thatcher used the fiscal tightening that David Cameron so admires, caused far greater destruction of British jobs than American ones. Unemployment doubled, and stayed agonisingly high for far longer than it did in the US. The only thing that eventually turned it around was the Lawson boom, which (shockingly) ended in bust.

Once again, the early 1990s recession hit the British labour market far harder than the American one, as our interest and exchange rates were held punitively high; once again, our recovery was slower.

Then, one sunny day in 1997, Labour came to power. UK unemployment continued to fall, getting closer and closer to US levels. The early 2000s recession cost millions of American jobs – but in Britain, we held steady and, for the first time in over 20 years, outperformed the US. After a couple of years, the US recovered, while UK joblessness shifted up and down a bit. Then, of course, we got the credit crunch, which – so far at least – has cost many more US job than UK ones.

The moral of the story is: under Labour, economic slowdowns cost fewer jobs than under the Tories.

(Also: Andreas has a good post about the national debt under both parties.)


Liam Murray said...

The sound of scraping barrels Tom...?

Suppose you have a group of friends among whom only two ever drive when they go anywhere together. Let's call them Tom & Liam. Tom is particularly adept and pulling out of a wheel spin or controlling the car when he loses it on a corner. When things go wrong Liam tends to panic and mess things up.

We know this because we've seen both in action. In fact, Tom's skill at recovery is superior to Liam's because, well, things go wrong more often than when Liam is driving. Accidents are very rare with him, more common with Tom even if he's then better at addressing them....

I know who I'd prefer behind the wheel.....

Tom Freeman said...

I think the bottom of the barrel is yours, actually.

Obviously the bulk of the UK-US difference in this chart is accounted for by the early 80s slump, which was deepened and extended by UK government policies, and the early 90s recession, which was largely precipitated by the government-caused boom and then worsened by government policies.

And the early 2000s slowdown really doesn't show up for the UK in job losses partly because of government policies. In terms of accident avoidance rather than just accident handling, I think Labour still compares well.