Rachel Reeves stands as the solitary centre-left finance minister within the G7 this year, particularly highlighted after Canadian Prime Minister Justin Trudeau’s resignation ahead of upcoming national elections.

In Germany, the Social Democrat-led government is reportedly the least popular since World War II, bracing for significant losses in next month’s federal elections. Meanwhile, France’s finance minister is a technocrat from a caretaker government, and Janet Yellen, an ally of Reeves, is set to be succeeded by Wall Street fund manager Scott Bessent. Japan and Italy continue to be governed by right-wing administrations.

Labour’s recent electoral success is considered an anomaly amidst a global trend towards conservative and hard-right politics observed over the past year. Some exceptions include an alliance of France’s left that gained the most seats in the parliament last summer, although they struggled to exert substantial political influence.

In Spain, the centre-left maintained power through a slim minority government with leftist partners. The most notable leftist victory occurred in Mexico, where leftist president Andrés Manuel López Obrador was succeeded by Claudia Sheinbaum, his chosen successor.

Such progressive victories are rare globally. Major left or centre-left parties are not anticipated to achieve significant electoral gains in key economies this year. In fact, Austria’s hard-right party has recently been given an unprecedented opportunity to lead the government, marking a significant shift in the political landscape. This rightward trend has led some commentators, including The Wall Street Journal, to proclaim that the “progressive moment in global politics is over,” referencing insights from political scientist Ruy Teixeira regarding the potential for a lasting Democratic majority in the U.S.

Teixeira suggested that the prior missteps of progressives contributed to the Democrats’ setbacks, particularly following the party’s loss to Donald Trump in November. Issues such as cultural identity, lax law enforcement, and liberal immigration policies were cited as major contributing factors to this decline. Vice President Kamala Harris has been seen as ‘back-pedaling’ on these stances, yet her credibility as a messenger for change remains questionable.

The realization of working-class disillusionment with the Democrats has prompted introspection within U.S. progressive circles as they assess their miscalculations. These considerations hold significant implications for centre-left parties worldwide, particularly for Labour, which has looked to the Biden administration as a guiding influence on economic policy.

In her lecture last year, Reeves praised the ‘Bidenomics’ approach, promoting the idea of “modern supply-side economics” to reconnect with disenchanted blue-collar voters. She emphasized a ‘strategic state’ designed to facilitate job creation, focusing mainly on manufacturing and clean energy, and advocated for a modern industrial strategy.

The electoral struggles of the Democrats are particularly sobering for Reeves, who has since moved away from the rhetoric of Bidenomics. Although Biden’s economic policies aimed to rectify past neoliberal failures—such as imposing trade barriers, opposing corporate malfeasance, empowering regulators, and supporting striking workers—the Democrats’ efforts to appeal to the working class have been undermined by criticisms of their inherent elitism. Critics suggest that the party’s next steps may require a shift towards economic populism including increased corporate taxes and a stronger focus on union support.

In contrast, the Labour Party has not indicated a desire for a similar pivot, as Reeves’s economic strategy does not advocate for a ‘hot economy’ approach. Her forthcoming budget is expected to promote mild expansion over the next year but will maintain fiscal restrictions throughout the parliamentary term. While Labour has borrowed the language of Biden’s economic vision, it has yet to adopt any corresponding fiscal, trade, or regulatory initiatives.

Labour’s competition policy stands in stark contrast to the rigorous consumer protection measures championed by Biden, while their investment strategies involve partnerships with private equity and large asset management firms, which are viewed unfavorably by the working class.

Reeves appears to be increasingly isolated ideologically, with a growing divide between this iteration of the Labour Party and the evolving direction of the Democrats under a potential Trump 2.0 administration. Despite ambitious claims made during their time in opposition, Reeves and Sir Keir Starmer’s strategies often reflect a more centrist approach reminiscent of Bill Clinton rather than aligning with Biden.

Rather than embracing economic populism while in governance, it seems more probable that Labour may relinquish that ground to the right. If the UK’s centre-left doesn’t learn from the struggles faced by its American counterpart, opposition parties like the Tories and Reform could likely capitalize on Trump’s economic strategies.

As noted by my colleague Patrick Maguire, Richard Tice of Reform has been vocal about initiatives to preserve British Steel and sympathize with nationalizing Thames Water—standpoints traditionally held by the left, which could challenge Labour’s stance. Expect to see more instances of ‘horseshoe politics’ in 2025.

Mehreen Khan serves as the Economics Editor.

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