THE TRANSITION TO THE NEOLIBERAL POLICY REGIME
The starting-point for understanding the new policy regime is the ascendancy of capital that followed – and was meant to follow – from Thatcher’s and Reagan’s elimination of controls on cross-border capital movements from the early 1980s onwards. This allowed the financial markets and transnational corporations to set increasingly tight limits on the policies national governments could adopt. (12) These limits were registered in the political ‘risk premium’ that the markets placed on any government seen as liable to adopt policies – on taxation, on government spending, on labour regulation or environmental protection, etc. – that would reduce the profitability of capital, compared with governments elsewhere. In Britain before the 1992 election the risk premium for a possible Labour government was 2 per cent. To reduce this to 0.5 per cent (which they managed to do before the 1997 election), the new Labour leadership scrapped virtually all Labour’s ‘market unfriendly’ policy commitments, deleted Clause Four (which still talked of public ownership) from the party’s constitution, and adopted a new range of policies called for by the City of London (the heart of the country’s financial sector), including handing over the setting of interest rates to the independent Bank of England and adopting the Conservatives’ policy of having virtually all new public building financed and owned by the private sector.
(12) This section draws on chapter 3 of my Market Driven Politics: Neoliberal Democracy and the Public Interest, London: Verso, 2000.
Capital’s political and social power had also been enormously increased by the Conservatives between 1979 and 1997, and Blair showed no inclination to challenge it. The chief executives of big companies continued to enjoy easy access to ministers and even the prime minister, and got respectful attention. This enabled them to overcome barriers intended to protect the public interest in one field after another – town planning legislation, GM food, the ownership of genes, the science research agenda of universities, etc. The trade unions, on the other hand, had been forced to accept an industrial relations regime that Tony Blair – who retained almost all of it – was pleased to call ‘the most lightly regulated labour market of any leading economy in the world’.
The constantly-increasing power of capital also made private enterprise seem the natural order of things. Not only had Labour’s post-war nationalizations been undone, from electricity and gas to public transport, but many services that had always been public, such as prisons and airports, were now privately owned and run, while cultural and sporting events (and even police forces) increasingly relied on corporate sponsors until every dimension of daily life was tagged with their logos.
‘New’ Labour’s strategists, the so-called ‘modernizers’, saw all this as ‘the new reality’. Their idea was to win and hold power by not just fully accepting the new reality but accepting it so whole-heartedly that there would be no room left on that terrain for the Conservative Party, which would become as ‘unelectable’ as Labour had been from 1979 to 1994. This strategy meant insulating the Labour leader from pressure from the trade unions and party members. So the party’s constitution was rewritten and the annual conference emasculated as a policy-making (or even a policy-debating) forum. Of course the modernizers envisaged a ‘third way’, along which they would pursue whatever policies they considered progressive, in terms of what the new reality allowed; but they had no confidence that these would meet with the approval of the party rank and file and they were not disposed to have any public arguments about it. (13) Logically enough, too, the party’s policy research capacity was also run down and eventually abolished. Blair declared that the party was now ‘a party of business’, and on that basis business could be asked to pay for whatever policy research the leadership wanted done.
(13) See Leo Panitch and Colin Leys, The End of Parliamentary Socialism, Second Edition, London: Verso, 2001, chapters 10 and 13.
Yet there was, obviously, still a need for policies – just within much narrower limits. With capital’s freedom restored, the rules of policy-making changed. Major economic policies are still made, but in conformity with an overall agenda set by transnational corporations and the international and regional agencies they dominate. These global market policies involve adapting the British economy and Britain’s socio-economic institutions (fiscal policy, aid to industry, education, training, the health and safety and labour market regulation, etc.) to compete successfully in the global marketplace. Since these policies are often electorally unpalatable they are made as far as possible out of the public eye – inside Whitehall or the European Commission, at the WTO – from where, once made, they appear as the impersonal and unavoidable effects of the market. ‘Treasury control’ – the time-honoured principle that all departmental policies involving spending must be pre-approved by the Treasury – has acquired a new significance. Now all major expenditures also have to serve the government’s overall competition strategy.
All this meant that by the turn of the century it was only in domain of socio-cultural adjustment policies that governments presented themselves in terms of having significant choices. Personal taxation, the scope and quality of public services, crime and ‘security’, immigration and ‘identity politics’ are the main terrains on which these policies are made. Here a wider range of options exists, but within limits that are broadly the same for all parties; and for much of this kind of policy-making it is pollsters, marketing experts and spin-doctors, as much as civil servants (let alone researchers), who are seen as having the required expertise to manage public opinion and adjust the electorate to the necessary consequences of global market policy-making.. The two sorts of policy are of course interdependent, and give rise to politically awkward dilemmas. To keep wages down immigrants are required, but immigrants are the right wing press’ favourite scapegoats for every social ill; social services are popular, but the regressive tax system insisted on by the markets means that paying for them is politically unpopular; and so on. So what is the nature of the new neoliberal policy-making regime that these conditions entail?