This chapter explores the relationship between globalisation and national economic policy through a case study of the political economy of the third way implemented by the New Labour administrations between May 1997 and May 2010. The third way was based upon the central conceit that domestic modernisation could be reconciled with the constraints imposed upon it by globalisation, and indeed that globalisation could be harnessed for domestic political and economic purposes. The chapter concludes that the third way failed in its project of reconciliation, and the onset of the 2007–08 financial crisis demonstrated the limitations of a ‘risk-based’ approach to the governance of financial markets.
This chapter provides an analysis of the changing nature of intergovernmental relations in the UK in light of its unique historical and constitutional context as a ‘state-nation’, of which England is overwhelmingly the largest component. England may have become more economically dominant within the union owing to London’s important role as a global financial centre, yet politically the City of London was also a cause of the financial crisis of 2008–9. While fiscal policy is determined centrally, ongoing devolutionary reforms have conferred some budgetary independence on Scotland, Wales and Northern Ireland, and fiscal equalization under the ‘Barnett formula’ is now generating political controversy amid long-lasting economic austerity policies in the aftermath of the financial crisis. The greater level of fiscal federalism being created in the longer term will pose increasing political challenges for the devolved administrations, and the prospects of the constituent nations of the UK holding together.