Friday, 27 September 2013

The Revolution Devours its Children

The reinvention of neoliberalism continues. After the "one nation" and "responsible capitalism" soundbites of last year, Labour has this year started to put flesh on the bones with emblematic promises on housebuilding and energy prices, but within the context of fiscal prudence (austerity-lite). As anyone who can count will appreciate, the "Stalinist" plan to build a million new homes over a 5-year parliament is pathetically inadequate, though as any homeowner who can count will also appreciate, it means that house values won't be undermined, and nor will the balance sheets of banks be impaired.

Despite shouts of "Clause IV", the energy price freeze is pretty meaningless (the suppliers already offer fixed price deals), and certainly not the harbinger of a 70s-style three-day week (which happened under a Tory government, not a Labour one, as historian-cum-propagandist Dominic Sandbrook artlessly implied in The Daily Mail). A cut in energy prices, which would have boosted disposable incomes and thus helped stimulate the economy, would have been the real deal. The true significance of these policies is the reaffirmation of the role of government in addressing market failures at a national level, which is a key characteristic of neoliberal practice (the covert objective being to rig the market for privileged corporations). It does not herald the return of nationalisation.

Another sign of this rebranding was uber-centrist Martin Kettle praising David Sainsbury's Progressive Capitalism, which is being promoted as a new "third way" brand for Labour. Kettle retrospectively redefines neoliberalism as a "fundamental belief in unfettered markets and minimal government ". That would work as a definition of classical liberalism, but omits everything that constituted the "neo". In contrast, all-new progressive capitalism "means embracing capitalism in two particular ways – the recognition that most assets are privately owned and the understanding that goods and income are best distributed through markets. But it also means embracing progressivism in three distinct ways: the role of institutions, the role of the state, and the use of social justice as a measure of performance". In other words: the primacy of property, the efficiency of markets, the institutional defence against "populism" (i.e. irresponsible democracy), the managerial state, and the fetish of metrics. Altogether, a pretty decent thumbnail sketch of neoliberalism.

The symbiotic relationship of big business and the state (supported by the key ideologies of managerialism and public-private partnership) has always been the central feature of neoliberalism in practice. Henry Farrell provides a spotter's guide: "As one looks from business to state and from state to business again, it is increasingly difficult to say which is which. The result is a complex web of relationships that are subject neither to market discipline nor democratic control." A current example of this is HS2, which is now being advanced by the government (on behalf of rail and engineering companies) on the grounds that it will tackle a capacity problem, after the hyperbolic claims about regional regeneration, jobs and passenger productivity were shown to be dubious.

As any fule kno, there is an inverse relationship between speed and capacity due to increased stopping distances (they increase by the square of the increase in speed - i.e. if you double the speed, you must quadruple the stopping distance). The highest capacity lines are the slowest, e.g. metropolitan railways like the Tube, because they have the shortest gaps between trains, so while there may be an argument for an extra line, there is no argument for a high-speed one, unless HS2 is intended to be an exclusive facility for well-heeled commuters, and thus only a marginal increment on total capacity (not an easy sell). The lack of conclusive evidence that HS2 is the optimum use of £50bn, i.e. the absence of a clear price signal in an artificial market, and the failure to respond to popular opinion, shows how neoliberal programmes (and not just les grand projets) habitually bypass both markets and democracy.

Andrew Adonis, who remains a cheerleader for HS2, reviewed Sainsbury's book in The New Statesman when it was released back in May. The author's hilarious rejection of the Dark Side is quoted by the adoring Adonis: "It was only after I left government ... that I began to question fundamentally the neoliberal political economy which had dominated governments in the western world for the last 35 years". It's worth remembering that Sainsbury was never elected: he got into government as a Blair-appointed lord after making large donations to the Labour party (a classic neoliberal vector), having previously been the main money-man behind the SDP in the 1980s.

The lack of self-awareness over this route to power, not to mention his failure to spot the flaws in the neoliberal agenda while in government, is a breathtaking example of naivety born of entitlement (he joined the family firm in 1963, "working in the personnel department", and was appointed a director 3 years later at the age of 26). In his review, Adonis admiringly lists Sainsbury's many proposals on how to improve equity markets - this is typical: "Sainsbury is especially bold on takeovers. He proposes higher 'hurdles' in shareholder support required from within the target company, and restrictions on those who can vote to those who have held shares in the target company for 'a certain number of years'". In other words, Sainsbury wants to privilege incumbent capitalists. This is not progressive in any sense of the word.

The relaunching of "the project" in more populist clothing is bad news for the LibDems, who have already been spooked by the collapse of their ideological confreres, the FDP, in Germany (their insistence that there is no parallel is telling). This is because their economic platform (now dominated by the neoliberal Orange Bookers) is all they have left after compromising their social liberal policies in office (barely a squeak about the NSA/GCHQ revelations) and pissing away their traditional fund of goodwill over student fees. Part of the mythos of Thatcher and Reagan was that they sold raw free-market economics successfully to the electorate. In reality, it has taken 30 years to normalise the idea that the Royal Mail might be privatised. The LibDems' enthusiasm for overt economic liberalism, without the saving grace of civil rights or empathy for the poor, is not a vote-winner.

The market for a laissez-faire party has been fragmented by UKIP and the LibDems' overlap (confusing to many voters) with the Tories, so this leaves Clegg and co fighting on an increasingly narrow front. Their achievements in office have been underwhelming, even if you include the list of mad Tory policies that they supposedly kyboshed. The only achievement most people will remember is the increased tax-free allowance, which benefited the better-off more than the poor. Against this, everyone remembers the student fees fiasco and the electoral reform bungle. Their electoral challenge in 2015 will be a lack of novelty and distinctiveness, as much as the background noise about broken promises and opportunism (amusingly, Tim Montgomerie in 2011 imagined Clegg emulating the FDP's Guido Westervelle and resigning as party leader in order to concentrate on his government job - don't rule it out, or a sorrowful video about making sacrifices for the national good).

The decline of Germany's FDP is being partly explained by the rise of the eurosceptic AfD (a less eccentric UKIP). Assuming there was direct movement between the two, this (allowing for national differences) supports my suspicion that a strong showing for the Kippers in 2015 may be as damaging for the LibDems as for the Tories. Labour's decision to rule out a EU referendum commitment looks like an astute tactic to detach the pro-EU LibDem "left", who were already halfway out the door. Labour can afford to be a pro-EU party (or at least neutral) as the anti vote will be split between the Tories and UKIP.

Germany also parallels the UK in the relative decline of the Greens. This is partly due to the centrist parties adopting greenish policies (Merkel's decision to abandon nuclear power post-Fukushima appears to have been pivotal in Germany), partly due to the Greens acting like killjoys when they get near power, and partly because they look increasingly like a middle-class indulgence (the NIMBYism of the anti-fracking protests at Balcombe didn't help). If Labour augments their intervention in the energy and housing markets with green-tinged policies around renewables and sustainability, they could well hoover up ex-Green votes.

Meanwhile, neoliberalism has never gone out of fashion with the Tories, even if the name is carefully avoided. Stitch-ups between business and the state are integral to their natural mode of operation. By 2015 the penetration of the NHS by private interests will have reached critical mass. Labour may well slow this, and may even reverse some of the more offensive features, but we won't be going back to the status quo ante of 2010, let alone dismantling the internal market (the volte face of Blair after 1997 is the obvious template). You can also expect Royal Mail to stay in private hands and HS2 to reappear in some form.

While many are determined to put a positive interpretation on Labour's evolving policy (Duncan Weldon's "moving from living with capitalism to reshaping it" is a touching triumph of hope over experience), it should be obvious that there has been no philosophical watershed. Despite the intellectual bankruptcy revealed in 2008, the nexus of the defence of privilege (austerity) and the privileging of corporations ("good businesses") remains at the heart of politics. The false choice is still between laissez-faire and the neoliberal state, or as Michael Meacher puts it: "It opens up the critical divide between those who believe 'Let the markets get on with it, and government get out of the way' (such as the Tories, Orange Book Lib Dems, Blairites like Mandelson, and pretend-Labour ex-ministers like Digby Jones), and those who believe that when a private market is utterly dysfunctional and broken, the state has to step in and re-set the rules".

All that has happened here is that the previous generation of neoliberals have been recast as pantomime villains (a role Mandelson appears to be enjoying more than Blair), thus allowing the ideology to survive with a suitable makeover. 2008 is painted as a failure of individual competence and morality, from greedy bankers to hubristic politicians. We will now be saved by progressive capitalism.

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