Boris Johnson invoked the 1930s New Deal of the former US president Franklin D Roosevelt (FDR) as he promised infrastructure spending to rebuild Britain’s economy from the coronavirus pandemic.
The New Deal was a package of government spending used to drag America out of the Great Depression, but there are significant differences between Roosevelt’s plan and Johnson’s.
Johnson’s commitment to bring forward infrastructure spending of £5bn amounts to just 0.2% of current UK GDP. By comparison, overall the New Deal was estimated to be worth about 40% of the US national income of 1929.
The Johnson funds have previously been announced, as part of £640bn in gross capital investment first publicised by the government in March.
Like Roosevelt, the prime minister put investment in infrastructure at the heart of his recovery plan, echoing New Deal public works to build dams, housing, roads, bridges and housing across America.
From 1933, the US public works administration oversaw major projects including the Lincoln Tunnel in New York, work on the 113-mile Overseas Highway in Florida, the Grand Coulee Dam and the completion of the Hoover Dam.
Johnson’s plans are far less extensive, including funding for the refurbishment of schools and bridge repairs in Sandwell.
Roosevelt’s administration brought in the Wagner Act and created the National Labor Relations Board, which increased the power of trades unions.
Maintaining a free-market Conservative approach, Johnson’s new deal prioritises deregulation.
Johnson echoed the vaulting rhetoric of FDR. The US president used his inaugural address to tell Americans “the only thing we have to fear is fear itself”, in an effort to reinvigorate the nation to escape the Great Depression.
In a speech full of ambitious language, Johnson said he wanted to “fuel the animal spirits” to boost business investment. The term invokes the influential British economist John Maynard Keynes, who argued in the 1930s for government to raise spending to stimulate the economy.
Johnson promised he would not reinstate a period of austerity as Britain recovered from the coronavirus crisis. That was a parallel with Roosevelt, whose New Deal came after the belt-tightening presidency of Herbert Hoover.
However, Johnson has been criticised for not going far enough to rebuild Britain’s public sector from a decade of cuts. The Institute for Fiscal Studies has estimated that out-of-work households will get £1,600 less than in 2011, even after accounting for emergency steps to raise unemployment benefits this year.
Source: Read Full Article