IN 1981, Francois Mitterrand was elected as the first Socialist President of the French Fifth Republic, on a platform of nationalisation, wealth taxes and a higher minimum wage. Two years later, after the franc was repeatedly devalued within the exchange rate mechanism, he changed course and adopted austerity. It was the first sign that left-wing parties were adopting some of the market-friendly policies of Margaret Thatcher and Ronald Reagan. Arguably it was also a sign that left-wing governments could be overpowered by international capital flows; flows that had been released with the end of the old Bretton Woods system. This was the era of the bond market vigilante.
The British election on May 7 looks likely to end up with a Labour minority government; a model for the FT by Populus gives Ed Miliband an 80% chance of being the next prime minister. May 2015's seat calculator has Labour 10 seats ahead; none of the other models give the current Conservative/LibDem coalition a majority (even if such a deal could be resurrected). In contrast, three out of the five models suggest Labour can govern with the support of...Continue reading
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