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The split personality of prudence in the unfolding political economy of New Labour

By Matthew Watson

Abstract

This article focuses on the economic ideas which underpin New Labour's two very different appeals to the notion of prudence. The first treats prudence as a macroeconomic phenomenon, drawing upon the work of the 'time consistency' theorists of the 1970s. It dominated the Party's economic policy-making until the end of the first term in Government, emphasising the need for extreme vigilance on matters of public spending. The second treats prudence as a microeconomic phenomenon, drawing upon the eighteenth-century work of Adam Smith. It has become dominant since the start of the second term, emphasising the need to encourage the savings habit more widely within society. The shift in priority from the macroeconomic to the microeconomic understanding comes on the back of New Labour's own growing imprudence in time consistency terms. The Government has incentivised private savings at the same time as it has become increasingly reluctant to be a saver itself

Topics: HC, DA
Publisher: Wiley-Blackwell Publishing Ltd.
Year: 2008
OAI identifier: oai:wrap.warwick.ac.uk:1930

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