PA

Balls and Brown, Harvard men

LAST weekend (November 1st-2nd) key members of Tony Blair's government gathered at Chequers, the prime minister's country residence, for a brainstorming session with leading figures in the Clinton administration. The seminar was private—so private that Downing Street would not confirm who was there or what they talked about. But the fact that Hillary Clinton, Larry Summers (America's deputy treasury secretary) and other eminent Clintonites gathered together with Tony Blair, Gordon Brown and their advisers to discuss “The Progressive Agenda” shows just how close the transatlantic policy conversation has become since Mr Blair's election. While relations with many European socialists remain frosty, the Blairites have developed an intellectual cosiness with American Democrats that rivals the intimacy of the Reagan-Thatcher era.

Nowhere is this more obvious than in economic policy. New Labour's approach to economic management bears more than a passing resemblance to Clintonomics. Both stress the importance of macroeconomic stability, of low inflation and fiscal prudence. Both are committed to a substantial overhaul of their welfare systems, based on the idea of providing the poor with “a leg-up rather than a hand-out”. New Labour has promised to introduce a minimum wage and is thinking about introducing an earned-income tax credit (EITC) to help the working poor. The Clinton administration has already expanded America's EITC and raised the minimum wage.

New Labour is not simply copying the Democrats. The transatlantic ties are both deeper and more complicated than that, and the American intellectual influence comes as much from academia as from the political world. It is based largely on personal relationships. Jonathan Powell, Mr Blair's chief of staff, spent several years as a diplomat in the British Embassy in Washington, where he specialised in schmoozing with Clintonites. David Miliband, who now runs the Downing Street policy unit, studied at MIT, as did Geoff Mulgan, another influential adviser at Number Ten. And Ed Balls, the chancellor's closest aide, spent two years at Harvard in the late 1980s. Although then in his 20s, Mr Balls informed one of his professors that he was already “preparing to govern”.

The American influence on New Labour's economic policy can be traced largely through Mr Balls and the Harvard connection. Mr Balls's professors claim that he learned there a commitment to “rational activism”, with equal emphasis on both words. (This certainly sounds preferable to irrational activism.) At a time when many British academics were still focused on short-term macroeconomic issues, the study of long-term economic growth was dominated by Americans. When Mr Brown made a speech containing a now-infamous reference to “post-neoclassical endogenous growth theory”, he was drawing directly, albeit incomprehensibly, on an American academic debate about the role of government in fostering growth.

The transatlantic ties were strengthened further when several of Mr Balls's Harvard gurus joined the Clinton administration. Larry Summers went to the Treasury; Lawrence Katz, a prominent Harvard labour economist was, for a while, chief economist at the Labour Department under Robert Reich, another Harvard man. The academics-turned-policymakers were now able to test their ideas in government. Messrs Brown and Balls, who visited Washington regularly, listened closely.

The results are evident in several areas. Mr Brown's decision to grant independence to the Bank of England was heavily influenced by a series of conversations with Mr Summers and Alan Greenspan, chairman of America's central bank. In the late 1980s Mr Summers had co-written an influential academic paper that showed that independent central banks in rich countries worked better than politicised ones. In government in the 1990s he saw how the credibility of America's independent Federal Reserve helped, rather than hindered, a centre-left Democrat administration—a point not lost on Mr Brown.

The intellectual origins of New Labour's “New Deal” for young people also lie in large part with the Balls-Katz-Summers connection. While Mr Balls was at Harvard the three men co-wrote an academic paper analysing British unemployment by region and by skill. Their conclusion—that long-term unemployment was caused both by skill mismatches and by a loss of the culture of work—underpins New Labour's emphasis on instilling a work ethic in the young, while providing them with skills. Although America's focus on single mothers is different from Britain's emphasis on the young, a constant stream of Blairites has trooped across the Atlantic to observe American welfare reform.

The Harvard connection can also be seen in New Labour's emphasis on the working poor. The dual strategy of raising the minimum wage and extending the earned-income tax credit was central to America's anti-poverty fight when Mr Reich was labour secretary. New Labour likes the approach and has borrowed the experts. Recommended by Mr Katz, Jeffrey Liebman, another Harvard economist, recently wrote a paper for the Blair government on America's experience with the EITC.

In some areas, American academic thinking has proved more influential with New Labour than it has in Washington itself. Mr Brown's pledge that, in the interests of transparency, the Bank of England will publish details of its forward operations, goes well beyond what America now does. In other areas, particularly welfare reform, the American approach has been softened and “Europeanised”. But intellectually, the British government is still a lot closer to America than to Europe.