The politics of recession

Britain has experienced a recession to some degree in every decade since the 1950s. But the extent the economy has shrunk in 2020 puts the country in politically uncharted waters.

Date: 12 August 2020

By Dr Peter Laugharne, Senior Lecturer in Politics and International Relations

“It’s the economy, stupid” the effective slogan of Bill Clinton’s 1992 US presidential election campaign crystallises the importance of the economic to the political. The UK economy has just recorded a recession, but doesn’t it always? Well, the evidence suggests the answer is yes. In each decade since the 1950s, Britain has experienced two consecutive quarters – six months - of shrinkage in its economy, negative GDP, that defines a recession. In the 1970s we had two recessions. From the 1980s the recessions have got longer: five quarters (1.25 years) in the monetarist experiment of 1980-81; the recession in 1990-91 following the Lawson boom; and that of the global financial crisis of 2008-9.

Amazingly, all these recessions now seem relatively shallow compared to 2020, e.g. the 1973-74 recession that saw a contraction of 4.1% with a miners’ strike, power cuts at 9 p.m. and a three-day working week. The current Covid-19 recession is of a different magnitude altogether. In the second quarter of 2020, the economy shrank by an unprecedented 20.4%, and 22.4% over the six months from January. If that wasn’t bad enough the biggest sector impacted was services which is now the dominant part of the hugely imbalanced UK economy.

Beyond the direct effect on people who very sadly have died, become ill, furloughed or unemployed, we can pose the question: Will there be political fallout? Is there any relationship between recessions and political failure? The answer inevitably is complex and recessions are far from the only factor that electors consider when voting. Where recessions have occurred in the early part of the electoral cycle – in the first year or two of a government – there has often been time for the governing party to recover. This was the case in 1956 and 1980-81. The 1990-91 recession came in the latter part of the government, but there had been a change in prime minister in 1990, so this could reasonably be included. The 1973-4 and 2008-9 recessions came towards the end of the cycle and governments fell.  The 1961 and 1975 recessions show that the pattern is not so straightforward, as these governments - despite having early recessions - went on to lose subsequent elections, though under different prime ministers.

Then what of the current Government’s prospects? Well, we are little over a year into the Johnson administration so potentially there is plenty of time for an economic bounce-back. Mr Sunak has merrily dispensed economic goodies, though perhaps we should beware Chancellors bearing gifts, as there will inevitably be a future demand for them to be paid for. Set against all this is the depth of the recession; the prospect of it being followed by another linked to the pandemic; and the complicating factor of Britain leaving the EU’s customs union and the single market at the end of the year. We’ve had political Brexit, the full economic consequences – for good or bad - are still to come. The British economy is in politically uncharted waters.

All data are from the Office for National Statistics 2020