British politics froze for about 12 years after 16 September 1992, otherwise known as Black Wednesday. Real movement between the two main parties was imperceptible. The Conservative party, dominant for most of the 20th century, embarked on a long period of semi-collapse, commanding the support of no more than one third of voters, perhaps rather less. New Labour, in sharp contrast, could rely on the goodwill of over 40 per cent of the electorate. The Liberal Democrats were the only real movers. They re-emerged as a healthy third party, steadily gaining ground at the expense of the Conservatives and, towards the 2005 general election, of New Labour.
There were a number of reasons for this unusual political stasis. The first was an economic boom of unprecedented durability. This in turn was the product of two factors, both insufficiently understood. Domestically, the courageous supply side reforms inaugurated by Margaret Thatcher’s remarkable government in the 1980s, in defiance of mainstream opinion, had turned the United Kingdom into the most dynamic economy in Western Europe. Internationally, the lax monetary policies of the Federal Reserve chairman Alan Greenspan (awarded an honorary knighthood at the insistence of a grateful Gordon Brown in 2004), combined with the irresponsible fiscal policies of the US government, stimulated an astonishing era of international economic expansion which shows little signs of abating even today.
Gordon Brown turned up as chancellor at exactly the right moment to claim credit for the British economic boom. As all serious students of economics understand, these claims are infantile. There is, of course, a link between political actions and economic success or failure. But to make the direct connection between Gordon Brown’s eight years’ incumbency at the Treasury and the ambient economic boom demonstrates a complete and wilful failure to understand the dynamics of business and markets.