The Return of Liberal Populism in America and Britain

Obama and Miliband signal a shift to class-conscious politics for the left.

LONDON, ENGLAND - MAY 24: US President Barack Obama holds a meeting with Labour leader Ed Miliband at Buckingham Palace, as Shadow Foreign Secretary Douglas Alexander (second left), Shadow Secretary of State for International Development, Harriet Harman (left) and US Secretary of State Hillary Clinton (right) look on, May 24, 2011 in London, England. The 44th President of the United States, Barack Obama, and his wife Michelle are in the UK for a two day State Visit at the invitation of HM Queen Elizabeth II. During the trip they will attend a state banquet at Buckingham Palace and the President will address both houses of parliament at Westminster Hall. (National Journal)

LONDON "“ During the 1990s, Democrats in the United States and the Labor Party in the United Kingdom pursued parallel transformations. Behind the leadership of President Clinton and Prime Minister Tony Blair, each party recast its traditional liberalism into a "Third Way" centrism that balanced government activism with reform and tilted its emphasis from economic "fairness" toward growth. Now the two parties are moving along matching tracks again, but toward a more confrontational approach that reflects each country's shifting economic and political landscape.

President Obama and Ed Miliband, the leader of the British Labor Party, signaled the change this fall with milestone speeches in which each pledged to focus on the interlocked issues of widening income inequality, declining upward mobility, and stagnant living standards for average families.

Addressing the Labor Party conference last September, Miliband made clear he wants to force those issues to the center of the May 2015 election when the party hopes to unseat Prime Minister David Cameron's ruling coalition of Conservatives and Liberal Democrats (a centrist third party). The link between overall economic growth and gains for average families, Miliband insisted, has "broken." Economic recovery, he charged, now "just seems to lift the yachts" while leaving most families confronting a "cost-of-living crisis" in which prices are rising faster than wages.

Obama, in his speech to the liberal Center for American Progress this month, struck the same notes. "[A] dangerous and growing inequality and lack of upward mobility "¦ has jeopardized middle-class America's basic bargain that if you work hard, you have a chance to get ahead," he insisted. "I believe this is the defining challenge of our time."

These sharp words mark an unmistakable shift in tone and emphasis for Democrats and Labor since the Clinton and Blair era. Neither man ignored inequality or completely muted economic populism. Clinton raised taxes on the rich, at great political cost, in his 1993 budget and significantly expanded tax credits for low-wage workers; Blair passed Britain's first national minimum wage.

But the "New Democrats" around Clinton and Blair's "New Labor" mostly stressed ideas (such as free trade, targeted deregulation, and public investment moderated by fiscal restraint) meant to accelerate overall economic growth. Each was less interested in lashing the rich as a political foil than in winning more upper-middle-class and even affluent voters (which each, for a time, did with considerable success). Blair even pledged not to raise income-tax rates during his first term.

Obama and Miliband haven't abandoned those themes (or upper-income voters, who often identify with their parties on social issues). But they are turning the dial back toward a more class-conscious message and agenda. "Politics became less ideological in the Blair years," said Stewart Wood, a top Labor political strategist who also serves in Parliament's House of Lords. "Ed Miliband has to be on the side of people who are going through tough times."

On each side of the Atlantic, the shift toward inequality serves some short-term political needs. It offers Obama an opportunity to redirect what polls show is widespread frustration over the sluggish pace of recovery five years into his presidency. Focusing on inequality offers Miliband the opposite opportunity: shifting the debate away from indications that the British economy, after years of pain, is beginning to gather momentum. "For the next election, there's a contest between two economic narratives," says Peter Kellner, president of YouGov, a leading British polling firm. "The Conservative narrative is, 'We've turned the corner, it's working, don't give the keys back to the people who crashed the car.' The Labor narrative is that the benefits of recovery are going [only] to the rich."

But, in each country, the shift is mostly rooted in the reality of deep economic change. Like almost all major industrialized countries, the U.S. and the U.K. have experienced a steady polarization of income: The top 1 percent of earners roughly doubled its share of national income in the U.S. from 1980 through 2008 and in the U.K. from 1970 through 2005. That concentration didn't generate as many alarms while the income for average families was rising through the late 1990s (especially in the U.S., where Clinton's second term produced the broadest income gains since the 1960s.) But with the median income in both countries stagnant over the past decade — and the prospect for future gains dim — rising inequality and diminishing mobility have become an unavoidable concern for many on the left (and even some conservatives.) Focusing on inequality "feels right to people since the 2008 crash," said Wood. "If you go back to 1997, Labor talking about the problem of inequality would have been inconceivable."

Both Obama and Miliband have faced some backlash from Clinton- and Blair-era reformers uneasy with their sharper populism. But the bulk of opinion in both the Democratic and Labor parties clearly supports their shift. Having largely won the internal debates, they now face a vastly more difficult competition with their conservative rivals. In each country, squeezed living standards have helped tilt many middle-income voters toward conservative arguments against spending, welfare, taxes, and immigration. Cameron, who began his term by trying to center his party, is now moving right on all those fronts (even while maintaining contrasting notes on expanding access to higher education and improving infrastructure).

Miliband has countered by proposing a freeze on energy prices and, like Obama, is touting a higher minimum wage and expanded educational opportunities. Polls have shown support for all of those ideas — and many of the conservative responses, too. But at a time when globalization, technological change, and the shifting balance of power between workers and capital are squeezing living standards and heightening inequality across the industrialized West, it's an open question whether any party — from left, right or center — has found answers that can truly restore broadly shared prosperity.