What is the Purpose of Labour?

Let us accept that the purpose of a political party is not simply to represent a class interest, but to manage an element of the political economy in furtherance of that interest. Thus the purpose of the Conservative Party is to manage parliamentary democracy in such a way as to preserve and reinforce existing privileges. The purpose of the Labour party is to manage labour in the interests of capital and the liberal professions. This isn't a cynical view, merely a reflection of its actual achievements, notably the development of a welfare state focused on improving the quality of labour, and the creation of a hierarchical public sector that privileged the professions. Beyond that, Labour's record in office has merely been the continuation of cautious liberalism by other means.

The current angst over the Labour party's purpose is the product of an era in which workers are increasingly surplus to requirements. This is the result of two, inter-related developments: the rapid advance of information technology, which is simultaneously reducing the demand for domestic labour and increasing the supply of global labour; and the shift of focus for capital expansion and accumulation from the developed to the developing world. In a word, globalisation. While it's moot whether we'll achieve a post-scarcity economy, we are clearly moving to a stage in capitalism's long history where jobs are no longer effective as a universal mechanism of value exchange: balancing the distribution of social wealth (wages) against exploitation (profit). Since the 80s, we have mitigated this through various formal and informal job-creation schemes, from workfare and public sector investment through "bullshit jobs", precarity and the spread of self-employment. These are clearly fragile and inefficient responses.

According to the Invisible Committee, "Today work is tied less to the economic necessity of producing goods than to the political necessity of producing producers and consumers, and of preserving by any means necessary the order of work. Producing oneself is becoming the dominant occupation of a society where production no longer has an object: like a carpenter who’s been evicted from his shop and in desperation sets about hammering and sawing himself". This performative workerism becomes ever more anxious, hence the increasingly paranoid language about "strivers" and "shirkers". This presents a problem to Labour as a party centred on the social value of work, i.e. the belief that we become individually and collectively better-off through work and that the welfare state is a necessary adjunct of the world of work. In contrast, the Tories can thrive politically in an economy where a job moves from being a right to a privilege, and the welfare state is recast as the burden of the workless on the workers.

The Labour leadership contest has been bereft of any real situational analysis, beyond rightist scares about an "existential crisis" (the wall-to-wall coverage the Observer gave to the latest Blairite "directed focus group findings" was hilarious: to determine the way ahead, speak to a tiny sample of Tory voters who obliging parroted Tory propaganda). The contest has been equally bereft of substantive policy debate (ironically, it took Harriet Harman's misjudgement over benefit cuts to spark the contenders into life). As a result, it is essentially a competition of moods: accommodation versus resistance. While the latter has the better tunes, Jeremy Corbyn is likely to lose simply because Labour's raison d'etre is ultimately accommodation. That said, it is worth noting that his fleeting popularity (like that other maverick, Donald Trump) owes much to a visceral distaste for managerialism and the denial of autonomy, and that both the electoral success and the institutional failure of Syriza in Greece is feeding the anti-establishment mood.

Guy Standing of precariat fame notes that "the progressive march of history ... is always about the struggle over the key assets of the time. And in this regard we are living in a tertiary society, not an industrial society. The key assets now are security, time, information (or knowledge) and financial capital, not machines, buildings or other physical assets". Labour, as a democratic socialist party, was initially concerned with the parliamentary struggle over the control of capital (nationalisation). From the 1930s onwards, it transitioned towards a social democratic party, struggling over the control of labour (via the medium of the welfare state), which marked its evolution from an ostensible working class vanguard to a middle class managerial elite. Since the 70s, it has failed to come to terms with the shift that Standing outlines, too often focusing on the low-hanging fruit of the trivial democratisation of knowledge (e.g. academies) and financial capital (e.g. ISAs), while happily ceding control of physical assets to the market. Pro-capital in-work benefits have been its chief policy for addressing security. Notable by its absence has been any attempt to address the issue of work time.

For accommodationist parties like Labour, whether social democratic or neoliberal, there are three options in respect of work time. First, the party can advance a citizens basic income as an continuation of its historic pro-social and redistributive mission, accepting both that the solution must be universal and that it needs to address societal wealth as well as work. Second, it can advance a job guarantee as a continuation of its commitment to full-employment, committing the state to being the employer of last resort and insisting (despite the evidence) that unemployment will remain cyclical. Third, it can advance a managed transition to a parsimonious dole, policing the "left-behinds" and valorising workers/tax-payers. The problem Labour is faced with is not which strategy makes sense in economic terms - the basic income wins hands down - but how this can be effected politically. As the old joke has it: it works in practice, but does it work in theory?

One of the reasons for the reluctance to address a basic income is the recognition that popular macroeconomic understanding has been set back relentlessly over the last 30 years with simple notions such as aggregate demand and multipliers dismissed as abstruse and technical. The parables of microeconomics are now so widespread, from national credit cards to leaky roofs, that any plan that relies on social trust, rather than individual responsibility, is considered crazy talk. Explaining the positive benefits of a basic income on entrepreneurship, innovation and wellbeing is an uphill struggle. It obviously doesn't help when some advocates of a basic income are hamstrung by their ideology (e.g. the anti-growth Greens), but the bigger problem is shifting discussion on a basic income away from a benefits substitute to a more rational way of managing an economy characterised by a declining demand for labour and an abundance of capital.

The job guarantee is a perfectly good response to cyclical unemployment, but it is wasteful and ultimately unsustainable in the face of structural unemployment. The public sector cannot be allowed to compete with the private sector, so both wages and the social value of the work must be inferior. If a profit can be made in any activity, the public sector will have to cede it to the private sector. Consequently, a large-scale job guarantee scheme might well accelerate privatisation and drive down wages for the public sector as a whole. As the number of guaranteed jobs grows over time, so society is coarsened and impoverished. The job guarantee is often advocated because of the presumed externalities of work: on-the-job training and informal skill development, community cohesion and social stability, improved mental health and self-esteem. However, it is doubtful that these benefits would accrue over a long-term dominated by structural, as opposed to cyclical, unemployment. Instead, the job guarantee might produce a new helot class, unable to break into an ever-shrinking pool of private sector jobs and condemned to low-value, pointless toil that undermined self-respect.

The instinctive response of the Tories is to create a parsimonious dole. In practice this will be a basic income, but one that has been birthed out of the existing infrastructure and ideology of benefits, primarily through the creation of limits: the overall benefit cap, the cap on housing benefits, the cap on child benefit etc. This "capping" has become the dominant motif of debate around the funding of the unemployed and the underpaid. It is important because it removes the key distributive mechanism of a basic income: the ability to distribute the fruits of growth by gearing the income level to GDP as opposed to prices or private sector wages. A related tactic has been to question the definition of poverty: what constitutes an acceptable standard of living. The "national living wage" is clearly intended to depress that level, but also to act as a de facto cap - i.e. the implied limit of ambition for equivalent benefits.

Though the state will reserve the right to mandate the wage level (Osborne's marginalisation of the Low Pay Commission is only superficially centralising), in practice the level will be determined by capitalist sentiment. This will inevitably bias downwards in real terms, with business leaders claiming that a generous increase will damage confidence. Though the Tories are effecting a small step up in the short-term (more than offset by benefit cuts), the longer-term trend will be as mean as before. In theory, a Blairite Labour Party might match the rhetoric while being more generous in practice; but, as they found with working tax credits, any mechanism that can be gamed by the private sector will be so gamed, leading to the unintended consequences of under-investment and declining productivity. Even accommodation presents choices: do you accommodate automation and liberate labour, or do you accommodate the implicit blackmail of business's monopoly on the declining pool of jobs?

Labour's strategy since the 80s has been a combination of corporate indulgence (to encourage and subsidise job creation), and public sector investment, to both improve the quality of labour (supply-side) and create jobs (demand-side), particularly in regions unable to independently attract private capital. The limits of this strategy have become obvious, with low levels of corporate investment and high levels of corporate tax avoidance, endemic low-pay and increasing job insecurity, and a beleaguered public sector. The Tories long term strategy towards the welfare state has always centred on division, from the defence of private beds in the NHS, through a preference for means-testing over universalism, to the current speculations of Iain Duncan Smith on Schillerian insurance markets (as with pensions, it can't be long before NICs are "liberated" for employees and abolished for employers). Labour's desire to "revive the contributory principle" risks reinforcing this turn.

The Tories attempt to rebrand themselves as the "workers" party is not merely chutzpah or an attempt to deny the word to Labour ("recasting it as the badge you wear when you earn a living, and you resent subsidising anyone who doesn't", in the words of John Harris). It is a recognition that the core employed (i.e. those with well-paid jobs, rather than the precariat) are a shrinking segment of society that is increasingly open to a pitch based on fear, the preservation of gains, and the acceptance of privilege. This is an old strategy with its roots in the working class Toryism of  Disraeli, which sought to combine deference (the organic "one-nation") with sectional appeals during periods of social and economic turmoil (e.g. anti-Catholic sectarianism in the face of Irish immigration). Despite the Bullingdon Boys, modern working-class Toryism has decisively shifted away from deference since the 1960s towards aspiration (i.e. self-interest), which was nicely illustrated this week by The Sun's publication of a photo showing the royals giving Nazi salutes (this was also an early shot across Cameron's bows to keep the royals away from an EU referendum that will inevitably feature anti-German sentiment).

In response, some on the centre-left have sought to recast Labour as a party of nation and community, detaching it from the workplace (as Harris puts it, "As the great grey millstone that is Labour’s name still attests, paid employment is too often assumed to completely define people’s sense of who they are"). This has produced multiple morbid symptoms, from the sentimental authoritarianism of Blue Labour, through the civic nationalism that casts envious eyes at the SNP, to the Village Green Preservation Society of the likes of Harris ("Labour should finally think seriously about what needs to be conserved and protected: the town centre, the green-belt fields, the bus route, the pub" - Blake and Orwell are never far away). What they all share is a belief that the party should desert the field of the economy (or at least choose to fight more of its battles elsewhere) because labour is increasingly excluded from it. This is the resigned acceptance of enclosure.

Labour was (and was proud to be) the party of welfare when that was seen to be joined at the hip to work: temporary unemployment assistance in an era of full employment; health care and education for workers and their families; and council housebuilding (good accommodation at affordable prices) intended to make up for inadequate private sector provision. Over time, neoliberalism has normalised the traditional Tory critique that welfare is an opponent of work, rather than its necessary support. As welfare has come to be the defining characteristic of the jobless and precariously employed, Labour has sought to cling ever more tenaciously to the life-raft of work: rebranding as business-friendly New Labour, insisting that rights are contingent on responsibilities (they must be "earned"), and treating benefits as evidence of poor personal choices.

The choice embodied in the Labour leadership contest should be about more than just the mood music of accommodation and resistance. It should be about the need to change Labour's purpose to meet the changes in the economy. The New Labour project has failed: we are not a "young country" with high skills and world-beating businesses, generating well-paid jobs and affordable housing. We are a country marked by growing inequality, rentiers, low investment, poor productivity and a worsening balance of payments. Labour will remain accommodationist, but it needs to get back on the front foot as the party best able to manage the transition to a post-work society. Its new purpose should be to "reform welfare", but not in the sense of treating it as an opponent that must be tamed. Instead it should acknowledge that welfare is a universal right and the goal is to manage it in the interests of all, rather than a few. It is welfare that needs a rebrand.

Managerialism and Innovation

Chris Dillow asked an interesting question recently: "Could it be that the spread of managerialism and the pursuit of 'efficiency' in the static sense of trying to maximize output for given inputs has squeezed out innovation?" I'm not convinced that innovation is generally in decline (the Robert Gordon thesis), but I do think there have been significant changes in its institutional form, and this - combined with a generational misunderstanding of the significance of software - may lead some to pessimism. Where I think Chris errs is in building the following claim: "If this is the case, then perhaps secular stagnation is not so much an aberrant feature of hierarchical capitalism as its logical consequence ... managerialism squeezing out the slack space in which innovation can occur." This implies that managerialism, and its deleterious effect on innovation, is the main cause of secular stagnation, and it further implies that managerialism is a recent development. In contrast, I'm of the view that stagnation is largely the fruit of innovation, and specifically the revolutionary dynamics of software, and that managerialism was born with capitalism and reached maturity over a century ago.

In theory, manageralism is the belief that professional managers are best equipped to administer and plan activity. This isn't the simple advocacy of management (planning, checking and so forth), but the insistence that there is a orthodox body of knowledge and techniques, supported by qualified professionals, that should be applied universally to optimise human activity. Because this orthodoxy is exogenous, it necessitates hierarchy (the dominance of the expert over the non-expert), accountability (feedback between the two) and measurement (the close inspection of the non-expert by the expert). These characteristics are often taken to be managerialism, but it is important not to lose sight of the significance of the word "professional". If its mode is control, its motivation is power. At root, managerialism is elitist and therefore anti-democratic. Like much of business practice, its roots lie in religion (consider the etymology of "professional" and "clerical") and the wider social transition of the Early Modern era.

The notion of a meritocratic elite independent of the social order was crucial to the development of both Protestantism (e.g. the Calvinist elect) and Counter-Reformation Catholicism (e.g. the Jesuits). Emerging from scholasticism, professionalism would first absorb post-Renaissance empiricism and then the "bourgeois revolutionary" mode of the Enlightenment during its secular diffusion. The growth of industry in the eighteenth and early nineteenth centuries saw it increasingly adopt the practices and language of engineering. Though the occult habits of old lived on in Freemasonry, there was a clear shift in the first half of the nineteenth century from the adept who masters arcane knowledge to the "practical man" (or woman, if you consider Florence Nightingale's exemplary managerialism at Scutari) who masters public knowledge, both in the sense of the corpus of scientific evidence and quotidian data within his sphere.

This is the point when we can start to talk of "managerialism" as a generic approach. By the late nineteenth century, it had expanded beyond engineering to business more generally, notably in the form of the "scientific management" of F W Taylor in the USA, which was influential on both the Fabians and the Bolsheviks (it's wrong to assume the managerialist infection of government started with neoliberalism). It was also influenced in Europe by the contemporaneous growth of corporatism. This was a response to industrialisation that combined both Catholic notions of organic community and reactionary political notions of nationhood, seeking to reconcile different interest groups in the service of social "harmony". It was a major ideological current that fed into Fascism and Nazism, and the remnants of it could be seen in the postwar era in Christian Democracy and the co-determination of the social market economy.

In practice, managerialism is fundamentally teleological, in its insistence on purpose (mission statements, targets) and its emphasis on perfectibility, seen in such practices as CQI, TQM and Six Sigma. It is also evangelical and imperial, in its insistence on a single truth that can be applied universally. MBA courses are sold as "object lessons", and thus commodities, a form that they have inherited from mass-produced religious tracts (the same influence can be seen in the "parables" of neoclassical rational agents and behavioural economics). Managerialism is also prescriptive, in its reliance on magisterial texts supported by "case histories" (which often turn out to be convenient fictions). Popular business books exist to emphasise the transformative power of simple rules, the need for intervention and close inspection (unfettered by society), and the inevitability of ongoing corporate reinvention.

Ideologically, shifts in management theory reflect the changing needs of capital. For example, the diffusion and disempowering of labour was enabled by process reengineering and human capital theory; the first abstracting work design from consideration of actual workers, and the second emphasising the need to cultivate (and thus divide) workers as individuals rather than as members of a group. It also gave rise to organisational learning, as institutional and tacit knowledge were eroded through outsourcing, offshoring and casualisation. Similarly, the reverse takeover of the state has witnessed not only the adoption of market-based mechanisms by the public sector, but also the assumption by the private sector that it has equivalent rights to the state but without similar responsibilities, for example in the area of data privacy and surveillance.

Managerialism is now so pervasive that it is more helpful to define it in terms of the things that it prohibits. Chief among these is autonomy (the claims for the value of autonomy within businesses, like the notion of "managed democracy", are specious). Managerialism assumes that intervention by outside experts is always beneficial and routinely denigrates tacit knowledge ("not invented here syndrome"). Behind this is the premise that organisations are inherently inward-looking and traditional ("always done that way"). But rather than a critique of capitalist hierarchy, this is framed as an individual failing, with the objective being to "save" or "turn around" the specific organisation. In the same way that modern notions of addiction and rehabilitation employ the traditional tropes of demonic possession, weakness of the flesh and personal religious salvation, so the practice of managerialist intervention is big on missions and revivals.

Managerialism also deprecates unpredictability (famously satirised in the "mystery" scene in Shakespeare in Love). This is more than risk-aversion. Capitalism appreciates the value of speculative ventures and creative destruction, but this is because it is optimistic about its own ability to overcome obstacles and setbacks. What it cannot abide is the presumed unpredictability (i.e. unreliability) of labour, which is why it is fundamentally pessimistic about human motivations (people are naturally lazy, greedy etc). Where it has occurred, the corporate indulgence of "obliquity" (the investment in curiosity and thus the possibility of serendipity) has tended to be either the result of independent funding guarantees (e.g. the importance of US Department of Defense money for the original "skunkworks") or a combination of low R&D costs and a desire to motivate staff (e.g. Google Time depends on the material cost of self-directed projects being trivial, while labour time is recouped through a willingness to overwork on other days).

Outside such formal arrangements, and particularly those tech companies that make a fetish of research as part of their brand, informal slack space has clearly declined as many businesses have become leaner. R&D has been increasingly outsourced, however this may ultimately be a good thing if it bridges the traditional pure/applied divide between business and academia. Globally, both pure and applied research resources are growing due to rapid expansion in the developing world, and there seems little let up in its cultural celebration, from The Theory of Everything to the current Pluto mission (essentially academia's inheritance of the medieval "duty of prayer"). Innovation has increasingly left the building (of the large company) and become dispersed among many more nodes, of which startups are just one class. This reflects the way that ICT is reducing the cost of research in many areas, both as as a general purpose technology and through the leverage of new information networks (let's not forget the origins of the Internet).

It's plausible to imagine that the flexibility and virtuality of the modern economy (from the "precariat" to Uber) is facilitating "decorporatization", whereby lower transaction costs allow businesses to move towards the Coasian ideal of a small group of contract managers. With labour dispersed and atomised, and the "slack space" of the old corporate world no more, it would be easy to conclude that innovation was in decline and that this was sapping capitalist vitality. But it's worth noting here that one of the criticisms of Taylorism a century ago was that it stifled innovation. Clearly that was unfounded. Managerialism is inimical to innovation (or at least undirected innovation) because it is a technology of power and innovation potentially challenges the established order (see The Man in the White Suit for an emblematic mid-century critique), but the evidence is that managerialism is no more successful in taming or inhibiting innovation than predestination and the Jesuits were in preventing the advance of atheism.

Innovation is the product of human curiosity rather than the availability of corporate space. What has happened is that the technological changes that have been exploited by managerialism to create leaner organisations and disperse labour have also served to disperse and democratise innovation. Whether this will lead to the final crisis of capitalism, as Paul Mason thinks, I will leave till another day.

New Order

The party of order has won. A split in Syriza is now likely and a new Greek government of national unity the most probable outcome. I suspect Tsipras will remain at the helm, partly because the eurogroup want to tie him to a personal guarantee of implementation, and partly because the leaders of the mainstream Greek parties lack credibility and don't want to accept a poisoned chalice. The specificity of the terms of the agreement, and the insistence on reimposed inspection and homework-marking, are humiliating for the Greeks. If this isn't quite a Carthaginian Peace, it certainly echoes the punitive and counter-productive attitude of Versailles in 1919. It is even faintly redolent of the arrogance of the Allied takeover of Iraq in 2003, with its talk of "de-politicising" the Civil Service. What is perhaps most disturbing is the evidence that the eurogroup were never sincere during the negotiations, and that all key decisions were dictated by Germany.

However, it is misleading to call this as a "coup", as power has not be seized. The power was already in the hands of the Troika and had been since 2009. Syriza have always had a poor hand, but they thought (not unreasonably) that the rest of the eurozone would reckon an easing of austerity to be a fair price for a genuinely reformist government. In the event, Syriza's "impudence" has only produced a more vindictive imposition, both to preserve the fiction of beneficial austerity and isolate any political initiative outside the orthodoxy. That orthodoxy is now as much ordoliberal (the adherence to established rules) as neoliberal (deregulation, marketisation etc). As a consequence, talk of a fissure in Europe has shifted from German-Greek relations to German-French relations, though the evidence from Varoufakis (who is, admittedly, not a disinterested observer) is that the French failed to stand up to the Germans when it mattered.

This is hardly surprising. The French crisis of confidence over recent decades has a number of causes, from stylised declinisme (equal parts nostalgia for De Gaulle and the soixante-huitards), through anxieties about modernity (the role of women, laicité, Islam and the rise of the FN), through fears of creeping Americanisation and cultural homogenisation (notably the advance of English). But at root, there lies a fear that in a German-dominated EU France will be marginalised, with its natural supporters (Italy, Spain, Portugal and Greece) exiled to the periphery and Germany buttressed by a hardcore (Kerneuropa) of Austria, The Netherlands, Finland and the Baltic states. This begins to stir uncomfortable memories of both the foreign policy failures of the later years of the Third Republic and the pathological denial of Vichy: a failure in its historic objective of constraining Germany followed by an abject humiliation.

There is a suspicion that the relentless face-punching of the Greeks is meant to be an exemplary lesson for the French. If the attitude of France in the aftermath of 1989 was essentially one of skittish worry - that Germany would be distracted by reunification and so neglect the joint project of the EU - the attitude now is one of sphincter-squeaking anxiety at Germany's evident willingness to lead. The claim last week that Angela Merkel was in a cleft stick - terrified of being the leader who oversaw the first substantive reverse for Europe, in the form of a Grexit, while simultaneously terrified of alienating popular opinion at home - looks absurd in retrospect. She was always going to get a deal, and always on whatever terms Germany chose. The pro-Greek rhetoric from Hollande and Renzi on Sunday, like the subsequent claim that France was the active midwife of the agreement, was just face-saving.

Three years ago, Perry Anderson put the emerging German role into historic perspective: "To work, the Union requires the state that is a different order of magnitude in population and wealth to give it coherence and direction. Europe needs the hegemony of Germany, and Germans must cease to be shy in exercising it. France, its nuclear arsenal and seat in the Security Council now of little relevance, must adjust its pretensions accordingly. Germany should handle France as Bismarck dealt with Bavaria in that other federal system, the Kaiserreich, soothing the lesser member with symbolic awards and bureaucratic balances under Prussian primacy". This view is coloured by Anderson's increasingly unsympathetic view of the French, but he is also aware of the inherent weakness of Germany and how its obduracy reflects immobility: "The new hegemon may be flexing its muscles. But it remains a lame one, unable either to dismantle the monetary union generating disorder, or to move beyond it towards a political union in which it would have to accept fiscal transfers its electors refuse".

Absent any vision for the EU beyond the preservation of order and a respect for rules, the Germanification of Europe proceeds incrementally: a slow march through the institutions. As Eric Bonse puts it, "The old complaint of a 'pro-French bias' in Brussels has fallen by the wayside; German personnel policy has won the day. Almost all the strategically important positions are now held by Germans, and understandably this is not received with universal enthusiasm. ...  A special characteristic of this casting is that some lead roles are reserved not for Germans but for politicians like Tusk or Juncker, who have close ties to the German government. ... all EU actors – and not just the Germans – are integrated into a regulatory framework that turns them into German Europe's pawns." Historically, France and Britain were the leading providers of the senior civil servants of the EU Commission, which reflected the larger governmental expertise of those two states in the second half of the twentieth century. No more.

Though Germany had long enjoyed indirect influence via the Bundesbank, the launch of the euro and the establishment of the Frankfurt-based ECB brought more of the German style of administration into the workings of the EU. In particular it shifted the normative framework away from the counter-cyclical policies of Keynsianism, while placing a greater emphasis on regulating monopolies and cartels (e.g. its attitude towards US tech companies). That combination of belt-tightening and market intervention is central to the Greek agreement. As Bonse notes, "German Europe is not chiefly held together by individuals, but by rules – just as the 'ordoliberal' school of thought demands. Yet these rules have brought Europe neither growth nor stability. They are fragile, in need of enhancement or even failing. They are also no longer recognized by all EU countries – in fact, quite the opposite: Greece, alongside the UK and Hungary, is more or less openly laying down a challenge to the rules. In short: German Europe is stronger, but at the same time more vulnerable, than ever before".

While some have opportunistically tried to corral Greece with the UK as a dispute over sovereignty and subsidiarity, the Procrustean fate of the country is actually symptomatic of Germany's failure in its leadership role, not a difference of views over "ever closer union". The corrosion of democracy does not arise solely from the flaws of the euro itself, but from the limiting beliefs of Ordoliberalism. Europe is moving from the republic of ideas, which was founded in Paris in 1789, to a republic of rules, which was constituted in Frankfurt in 1998. The French feel powerless to resist this, while the British are concerned solely with self-interested exemptions. Everybody else is making their peace with the new German order; some more messily and painfully than others.

Osbornomics

Many people appear have been nonplussed by the apparent contradictions of "Osbornomics" revealed in this week's budget statement: welfare slashed, but the minimum wage up; the bank levy relaxed (for bigger banks), but a new apprenticeship levy imposed on big businesses; corporation tax down, but tax on dividends up; inheritance favoured, but buy-to-let disfavoured. For some, this is just evidence of Osborne's obsession with political positioning; for others, evidence of opportunism and incoherence. These are not mutually-exclusive. Those expecting a landmark budget - one that would reset the assumptions of economic policy, like Geoffrey Howe in 1981 or Nigel Lawson in 1988 - were disappointed, with the suspicion mounting that this iteration was uncomfortably close to the "omnishambles" of 2012, despite the avoidance of self-inflicted wounds like the pasty tax.

Given the lack of any clear economic focus (the subsequent productivity plan was largely tinkering), most of the commentary has veered towards a political interpretation. For example, Simon Wren-Lewis noted that "Most of the Conservative base is not devoted to the cause of free markets, but is passionate about their own families' income and wealth"; while Tim Harford was equally scathing: "Mr Osborne promised a Budget for working people but reality does not match that sound bite. The biggest tax break was for people inheriting expensive homes from their parents". As reliable as clockwork, Martin Kettle piped up that "George Osborne's budget was more New Labour than Thatcherite". His evidence? "It was a budget that reduces the size of the state while using the state's power to intervene in labour markets and raise pay". This ignores the fact that state intervention is not, contrary to myth, anathema to Tories, as even the IEA recently pointed out, but to accept that would be to admit the narrow ideological space between New Labour and the Conservative Party.

According to Kettle, "Many on the left, and some on the right, believe all modern UK politics exists in the shadow of Thatcherism. In this view, as Britain was de-industrialised after 1979, there was an epochal battle between neoliberal, small-state and socially authoritarian ideas against social democratic, mixed-economy ideas". This is not just the usual triangulation that insults the intelligence of anyone who is not a centrist. It continues the fallacy that neoliberalism desires a small state and is socially authoritarian, when the evidence (from the size of the state to gay marriage) is to the contrary. Thatcher was certainly a social reactionary, which might be taken to contradict her laissez-faire attitude towards economics, but that fails to situate her historically: she owed more to the pessimism of Hayek than the optimism of Friedman.

The Conservative party of 1979 was not neoliberal; and it came to power because Labour was exhausted, not because it promised a radical programme. It's cabinet members included a majority of Heathites (aka "wets") and traditional de haut en bas Tories, like Hailsham and Carrington, many of whom derided Keith Joseph, the nearest thing to a neoliberal, as a "mad monk", as much for his un-Tory-like fervour as his barking policy ideas. Kettle creates the strawman of an abrupt political shift, which obscures the slow march of neoliberalism to hegemony between the early-70s and the mid-90s. He insists that "This is not 'the same old Tories' – and it is important to understand why". In fact, this is very much the same old Tories, if by that is meant the historic party of property that long-predated Thatcher and the right-to-buy. Ironically, Kettle echoes Paul Goodman in seeing Osborne as an opportunist in the tradition of Disraeli, but views this tactically (the "political obsessive" meme that has attached itself to the Chancellor) rather than strategically.

"New Labour was a sustained first attempt to rebuild a post-industrial, more market-orientated form of social solidarity, which rejected the injustices and anarchies of the post-1979 neoliberal order as well as the economic unsustainability of the regime it replaced". While New Labour was certainly ameliorative and progressive, its commitment to a "more market-orientated form of social solidarity" was textbook neoliberal. Kettle is trying once more to detach New Labour from association with the now-toxic neoliberal brand, which leads him to reverse-engineer Blair & co as the progenitors of contemporary Conservatism: "So it might be more useful to think of the Cameron governments – as to some extent some of their members have thought of themselves – more as alternative successors to new Labour rather than to Thatcher". The suggestion that New Labour was a "second watershed", rather than the culmination of a process lasting a quarter of a century, is one more attempt to deny the real implication of Thacher's delusional boast that her greatest achievement was Tony Blair, namely that they were both phases of a common endeavour to entrench a state intervening decisively on the side of capital.

On the conservative right, Tim Stanley is happy to applaud the historical continuity of Osborne's stance: "It revisits that moment in the 19th century when capitalists first realised that a little regulation could both improve society, give workers a stake in the system and make everyone more profitable in the long-run". The libertarian right, represented by Allister Heath, acknowledges this genealogy but regrets that intellectual purity is being sacrificed for political expediency: "We now know that Mr Osborne’s brand of conservatism attempts to marry, not entirely coherently, a smaller state with extensive government intervention ... [His] beliefs are consistent with a philosophical tradition that has held sway in the Tory party for most of the past 65 years, with the crucial exception of the Eighties and early Nineties". In their different ways, both Stanley and Heath acknowledge that Osborne is no committed free-marketeer or instinctive state-shrinker. Their employment of the diminutive - "smaller", "little" - is just whistling to keep their spirits up.

We've seen two crucial interventions recently that reveal the nature of neoliberalism in what we may come to see as its dotage. The key event in Greece was not the decision of the eurozone group of 18 to ignore the referendum result, but the decision of the ECB to limit liquidity support last week, thereby pulling the trigger on Greece in slow motion. We were presented with the spectacle of a central bank deliberately undermining a national banking system for which it has ultimate responsibility as the lender of last resort. By extension, this meant undermining a popular government, confirming Varoufakis's subsequent characterisation of the euro's management as "disciplinarian". The power-play within the Troika (which has left the IMF looking a broken reed), and specifically the decision to bail out Greece's creditors and refuse any debt restructuring, saw the shift of neoliberal focus from capital access (deregulation, liberalisation, privatisation) to capital consolidation (the protection of accumulations and inheritance). Post-2008, neoliberalism has evolved from a historically progressive (if destructive and class-biased) force to a conservative and reactionary one. Consider the continued determination to black-ball Syriza from EU political society for not being sufficiently penitent.

The second intervention was Osborne's decision to restrict child benefit to two kids (I wonder if the Civil List will be similarly curtailed for any additional royal sprogs). Behind this is the idea of children as property. Historically, conservatism has been divided between a reactionary distaste for the breeding habits of the poor ("more mouths to feed"), which lives on among neo-Malthusians and some Greens, and natalism, which encourages large families as a matter of national policy (initially for bigger conscript armies and then for a growing labour supply). The former saw children as an asset that belonged to the family, hence the reluctance to allow its "cost" to be externalised onto society (but also the toleration of child labour, which externalisded its benefits). The latter saw children as an asset of the nation, hence the willingness to socialise investment, which started with medals for fecund mothers and culminated in the welfare state (its growth in the interwar and postwar years owing much to concerns over population replenishment). This policy change, as much as the further privileging of inheritance, confirms the lesson of Greece: that we are in an era focused on the preservation of capital, not its expansion.

Returning to Martin Kettle: "British voters remain highly receptive to a modernising Labour approach that shows it is in touch with the way the country and the world have changed and are changing. Whether Labour offers them that is what the party must now decide in its leadership contest. In the absence of such an offer from Labour, however, Osborne's budget will seem to many voters like a logical and not wholly unreasonable alternative". Kettle's insistence on historical inevitability, and the plea that Labour - as a modernising vanguard - should offer the electorate what is best for them, rather than what they might want, emphasises the degree to which neoliberal practice since the 1970s consciously borrowed from both Marx and Lenin. What Kettle has failed to accept is that neoliberalism dispensed with the revolutionary form in 2009. We are in an age of reaction, in which the preservation of gains is now paramount.

Timoney of Athens

My apologies for the title of this post, but I may never get a better opportunity to deploy this particular pun. The tale of a man who foolishly squanders his wealth on false friends that subsequently desert him in his hour of need, causing him to become a wretched misanthrope, might appear to be promising raw material, but I'd be doing serious damage to try and eke out any real parallels with the Greek debt crisis. However, I cannot pass on without noting that Shakespeare's play was a favourite of Marx, partly for its cynical view of the corrupting power of money. As the German summarised it, "Money, then, appears as this distorting power both against the individual and against the bonds of society, etc., which claim to be entities in themselves. It transforms fidelity into infidelity, love into hate, hate into love, virtue into vice, vice into virtue, servant into master, master into servant, idiocy into intelligence, and intelligence into idiocy".

The impression I gained last week from the UK press and TV was that opinion in Greece was evenly-divided. It was clear on the ground when we arrived on Friday that the "No" (Oxi) camp was well ahead, and I really don't think this was due to a mysterious midweek swing. I think the British media slant was the product of a schismatic reading of Greek politics and the habitual pro/anti-EU frame, rather than conscious bias, though the regular interviews with small business owners bemoaning uncertainty and neoliberals bemoaning democracy on Newsnight is becoming almost parodic. Though there were a few riot police lurking off-stage during the "No" rally in Syndagma Square on Friday night, there was no sense of antagonism or threat, despite the simultaneous (and much smaller) "Yes" (Nai) rally at the nearby Panathenaic Stadium. "Oxi" dominated the posters and flyers around Central Athens, with the periptera (newspaper kiosks) providing little islands of "Nai" and anti-Syriza sentiment (one tabloid carried a magnified photo of Tsipras's face to suggest that stress was giving him cold sores).

Athens is always relatively depopulated in summer, as many locals head off for ancestral islands or rural villages, but this was even more pronounced due to the recent drop in tourist numbers caused by the scare stories of financial chaos. The longest queue we saw at an ATM was 5 people in the centre of town on the Monday morning. 0 to 2 was typical. It's worth remembering that living costs in Greece are relatively cheap, so a €60 a day limit is not quite the problem that London-based media types imagine. The cafés were probably about half as full as they would normally be, though those in both Exarchia (anticapitalist) and Kolonaki (rich) remained busy. The Greeks are having a hard time, but they are not on their knees (yet), hence the defiant "Oxi!". The historic significance of Sunday was the precedent of a national referendum being used to reject an EU-level agreement. Though this has happened before, notably during the Maastricht Treaty ratification process, it has usually been glossed-over as a "pause" or evidence of the need for "variable speed". There is no credible way to spin the Greek vote as anything other than a slap in the face.

The good humour of the Greeks (particularly evident as crowds gathered in Syntagma Square on Sunday night as the vote came in) should remind us that this "crisis" does not originate in Greek politics, despite the many historic failings of the Greek system, but reflects a wider struggle over the costs of neoliberalism, which is now corroding the EU. Greece is only atypical in quantitative terms, not qualitative. Steve Randy Waldman gets to the nub of the matter: "The choice Europe's leaders faced was to preserve the union or preserve the wealth, prestige, and status of the community of people who were their acquaintances and friends and selves but who are entirely unrepresentative of the European public. They chose themselves. The formal institutions of the EU endure, but European community is now failing fast ... They turned a systemic problem of financial architecture into a dispute between European nations. They brought back the very ghosts their predecessors spent half a century trying to dispel".

The architectural problems of the euro hardly need reiterating, but it is worth emphasising one key point: the implication of "convergence" was that the transition to a common currency could be achieved without the need to write-off historic debts. In other words, there would be no "reset", either in 1999 or thereafter. Despite last week's report by the IMF confirming that Greece's debt is unsustainable, this means that the group of 18 remain determined not to concede the Greek demand for a deal that includes a debt haircut. Despite the clearly exceptional situation of Greece, this would establish a precedent that the eurozone hardcore fear would quickly lead to either the disbanding of the common currency (to prevent the more incontinent members from "looting the treasury") or the acceleration of fiscal union (which might jeopardise the EU itself, even if some are attracted to the idea of shrinking back to "fortress hardcore").

In other words, the real cause of the EU's irritation with Greece is not Tsipras's "unreliability" or Varoufakis's "impudence" but the obligation to make a hard choice. Waldman is right to see the EU elite's response as a straightforward reflection of class interests, but I also think the current dilemma is coloured by the evolution of those interests since the fall of the Berlin Wall. Germany's tragedy was that social democracy quit the stage just before the moment it was most needed, namely at reunification. What Waldman calls the "loan shark theater" of the Greek crisis is in part the projection of a particular German angst over regional transfers, with the North-South EU divide inverted within the Federal Republic. To the Bavarian middle-class, the youth of Exarchia are indistinguishable from the "recipients" of Kreuzberg in Berlin.

This is the bitter legacy of the "Europe of the regions" meme that enjoyed such a vogue in the 90s and 00s, often as a rather hopeful counterweight to the "democratic deficit" of the EU. Though this was usually presented in progressive terms as a matter of devolution and autonomy, the reality was mainly wealthier regions, such as Catalonia and Lombardy, being reluctant to subsidise poorer ones. In those poorer regions (and outside those with a history of separatism, such as the Basque Country) devolution only gained traction once central government indicated a willingness to curtail transfers as part of a wider anti-redistribution policy, hence the birth of the meme in the 80s. For example, the advance of the SNP in Scotland can be sourced to the Poll Tax and regressive reform of local government financing under Thatcher (the current Tory offer of fiscal autonomy is a strategic continuation of that anti-distribution policy).

But the idea of regional identity is misleading. The strongest advocates weren't traditional "ethnonationalists" or reactionary antimodernists but business owners with minimal financial interests in the central state and growing interests (and peers) outside the country. John Hall, the erstwhile owner of Newcastle United, banging on about "the Geordie nation" and how the club could be the equivalent of Barcelona, was an emblematic if ridiculous UK example. Regional pride, like civic nationalism, simply reflected the evolution of capitalist interests. In particular, it highlighted the growing alliance of multinationals, who found Brussels and regional governments easier to negotiate with than national governments, and SMEs, who resented national taxes as their profit margins were eroded by increased global competition. In contrast, national businesses lost influence through market deregulation, foreign takeovers and privatisation, and were gradually replaced as a political lobby by companies dependent on public subsidies via tax-breaks and outsourcing. We swapped ICI and British Rail for Amazon and G4S.

2008 restored the clout of the national state through its bailout of banks and regional governments, but the consequent increase in central government debt has merely exacerbated the resentments of the richer regions, i.e. the resentment of businesses and asset-owners towards the nation state as an agent of redistribution, hence the new political orthodoxy of austerity, corporate indulgence, and the valorisation of inheritance. The hype of the "Northern Powerhouse" is typical of a vocabulary of devolution and autonomy that masks a reality of public service cuts and corporate handouts. The real division remains one of class, even if this is increasingly characterised spatially - i.e. by where you live - due to the dominance of property wealth: "the rich quarters of Europe are all more similar to each other than to the poorer areas that are nearer to them". And vice versa. Just as Kolonaki Square looks like Sloane Square, so Exarchia looks like Kreuzberg.

The Greek crisis has provided an outlet for this new class solidarity, which is why liberals and social democrats have been just as contemptuous of Syriza as conservatives have. A cynic might assume that Sigmar Gabriel, the German SPD leader and vice-chancellor in the current coalition, was merely reinforcing his own position in case Merkel compromises, but his angry dismissal of Alexis Tsipras is of a piece with his neoliberal track record. More ridiculously, Guy Verhofstadt challenged Tsipras in the European Parliament today to live up to the example of two earlier liberal Greek PMs, Charilaos Trikoupis and Eleftherios Venizelos. The former is famous for declaring Greece bankrupt in 1893, as a result of the clientelism that Verhofstadt claims Tsipras is reluctant to eradicate, while the latter ordered the seizure of Smyrna in 1919, triggering the Greco-Turkish War that would result in the destruction of the Greek communities in Anatolia.

The invocation of Trikoupis returns us neatly to Steve Randy Waldman's excoriation of the EU elite's foolish and historically ignorant attitude, and in particular their invocation of moral hazard as a reason not to write-off Greek debt. As he notes, "the term moral hazard traditionally applies to creditors. It describes the hazard to the real economy that might result if investors fail to discriminate between valuable and not-so-valuable projects when they allocate society's scarce resources as proxied by money claims. Lending to a corrupt, clientelist Greek state that squanders resources on activities unlikely to yield growth from which the debt could be serviced? That is precisely, exactly, what the term 'moral hazard' exists to discourage". Of course, the systemic risks built up by the global banking system (aka "too big to fail"), and the compromised interests of the neoliberal elite, trumped all consideration of moral hazard in 2008, which in turn required the rapid identification of an alternative scapegoat to carry this moral burden.

Showing that there is nothing new under the sun, Patrick Eichenberger (in 2010) described the international response to Trikoupis's announcement of bankruptcy in 1893: "German and other creditors tried to put pressure on their respective foreign offices, which argued that the investors knew about the risks involved. Therefore, the German state or other states could not act as a de facto saviour since creditors then probably would act even more foolishly in the future". Following a debilitating war with the Ottoman Empire in 1897, "Athens grudgingly accepted that a European commission would restructure the national finance status under account of the remaining interests of the creditors. As a result, many Greeks saw no future in their country and migrated to Europe, the United States, and also to Australia". What neoliberals like Gabriel and Verhofstadt cannot allow, dedicated as they are to their own perverse reading, is that Tsipras is trying to set Greece on a new path and that the EU is now playing a reactionary role, not a progressive one, by inhibiting him.