Ross McKibbin | ukwatch.net

What can Cameron do?

JamieSW — Tue, 21 Oct 2008 18:57:34 +0000

In 1931, as the European banking system seemed to be collapsing, the Austrian economist Joseph Schumpeter observed that people felt the ground giving way beneath them, and not merely those with bank accounts. Many in Britain and America must be experiencing similar tremors now. Yet, in Britain at least, there are huge differences between 1931 and today. The 1931 crisis had profound political consequences – it almost wrecked the Labour Party and established the extraordinary hegemony of Stanley Baldwin, Neville Chamberlain and the Conservative Party – but it was a balance-of-payments crisis that was resolved the moment Britain went off the gold standard and devalued the pound. Almost uniquely among major economies, Britain didn’t experience a run on the banks or a threat to people’s savings. No high street bank collapsed or was likely to. In so far as there was a nervous shifting of money it was from the banks to the building societies, whose golden age it introduced.

The stability of 1931 was based on large, conservative institutions – the Midland Bank (now HSBC) was the biggest bank in the world. Unlike so many of the American banks which collapsed, British banks were not dependent on the savings of rural and small-town communities (whose incomes had begun to fall even before Wall Street ‘crashed’). Nor, unlike the great German banks, were they large investors in perilously unprofitable industries. They were cautious organisations run by cautious men. The building societies were exactly that, societies for building: building houses in local communities to which many were tied. Nearly all were ‘mutual’: ‘owned’ by their depositors, they were products, like the co-operative societies, of the 19th-century tradition of financial mutuality. They were not investment or commercial banks; and did not want to be.

Again, the London Stock Exchange, unlike Wall Street, wasn’t a site of crazy speculation. There was less loose money sloshing around with no other profitable outlet; a stiff tax was levied on all Stock Exchange transactions; and the culture was different. The members of the predominantly Conservative governments of the 1930s were not wholehearted admirers of the City. They imposed exchange controls on capital exports and they believed in a ‘managed’ currency. This reduced the authority of the City banks that had been so influential in the 1920s and before the First World War. Free trade was abandoned: Britain became a protected and cartelised economy. These governments were often suspicious of the state and believed in balanced budgets, but even so they nationalised mining royalties, brought the national grid under public control and established Imperial Airways (the distant precursor of BA) as a state monopoly. They believed in capitalism as a system of private ownership, a system of social and economic virtue, but not in the piratical capitalism of the United States. The Conservative Party of the 1940s was not seriously hostile to the nationalisation of the mines and railways, or of the Bank of England.

How things have changed. That kind of Conservatism is (or was) one with Nineveh and Tyre. We are faced with the possibility of a Conservative government in less than two years’ time led by men who have hitherto represented the purest form of freebooter capitalism. Despite a couple of brazen attempts by George Osborne to pretend that the banking crisis has nothing to do with them, all its ingredients, to the extent that they are home-grown, were cooked up by the Tory Party – mostly under Thatcher. The first was the abolition of exchange controls, which had the effect of strengthening the City and its institutions at the expense of other sections of the economy, as well as permitting the uninhibited export of capital regardless of what it did to British economic and financial systems. The second was to allow the value of the pound to rise considerably, rendering much of British manufacturing uncompetitive. This led not only to the elimination of hundreds of thousands of jobs but to a ‘rebalancing’ of the economy in favour of the financial and service sectors – which the country’s elites convinced themselves was the way of the future. It also had long-term consequences for the current account that were hardly less damaging. The third was the ‘Big Bang’ and the process by which the City and the banking system were effectively deregulated.

If you wanted a ‘competitive’ and risk-happy City, as the Conservative government did, then getting rid of all the understandings and conventions that regulated the old City was entirely proper. The Big Bang undoubtedly reinforced the City’s international standing; but it encouraged ecstatic risk-taking everywhere – often via financial devices themselves intended to spread risk. It also encouraged, as in 1920s America, huge inflows of loose money that were hard to control and were usually seeking speculative returns. The Big Bang initiated the process by which the old merchant banks, still largely home-owned, passed into foreign ownership or simply disappeared. The result, whatever the intention, has been to make the British largely (and almost uniquely) indifferent both to who owns the country’s assets and to the purpose for which they are owned. (Since these assets had to be sold to cover ever widening current account deficits this is probably a mere quibble.) The inevitable accompaniment to the Big Bang was the deregulatory legislation of the 1990s which, among other things, allowed the mutual building societies to ‘demutualise’ and become banks.

Finally, and most important, the Conservative governments began the politicisation of British housing and its manipulation for electoral reasons. The desirability of owning one’s house has a long history in all English-speaking countries and there are good social arguments for private ownership. But there is a thin line between social desirability and political calculation, and Thatcher crossed it with complete insouciance. The mandatory sale of council housing was pushed through not for social reasons (though many defended it on those grounds) but as a way of re-engineering the electorate. When Conservatives spoke, as they often did, of a ‘property-owning democracy’, what they had in mind was an owner-occupying, Tory-voting democracy. Thus the councils whose houses were compulsorily sold were not allowed to spend the proceeds on new social housing, since that would create more Labour voters. New housing was almost always privately built – i.e. rationed. Since demand could never be met, owner-occupiers achieved an effortless rise in asset-wealth and privately built housing was increasingly used as security for consumption on credit. Again, that was its purpose. Although the rhetoric of Thatcherism was ‘productionist’ – thrift, hard work and so on – what it actually stood for was private consumption.

The housing boom of the late 1980s, ending, as it was bound to do, in the recession of 1990-91, eventually did for the Conservative government. In their criticisms of Labour’s ‘credit bubble’, Cameron and Osborne are right only to the extent that Labour further refined the politicisation of housing and carried it to its logical electoral conclusion. But there is no evidence that the Tories would have acted differently. Labour didn’t invent the credit bubble.

The banking crisis has understandably caught the Conservatives on the hop, and Cameron’s responses have been pretty incoherent. Much of what he recommended with confidence even a few weeks ago now sounds dated – as he knows. Fundamentally, he is trying to adjust Thatcherism to inappropriate political and economic circumstances. Thus he wants light regulation; he is opposed to forced nationalisation of financial institutions; he wishes somehow or other to cut taxes; he still believes in the overriding efficacy of the market as against the state; he is a man whose sympathies lie wholly with finance and financial institutions – probably inevitable in someone whose experience of life outside Parliament was a brief stint in a PR firm. He has, however, committed the Conservative Party to Labour’s current spending plans; he has reluctantly admitted that nationalisation of banks could be defensible (the sight of savers struggling to open accounts in Northern Rock must have shaken the faith of every committed free-marketeer); he has conceded that taxes might have to rise given the ‘mess’ his party will certainly inherit. In other words, he is all at sea. The banking crisis has undermined the whole edifice of Tory policy, which was founded on high levels of public expenditure plus a deregulated economy – i.e. exactly the same assumptions as New Labour’s, but tweaked in an even more free-marketish way.

The events of the last few days, however, have driven him far from free-market triumphalism. In fact, he has had little option but to support the public recapitalisation of the banks. The banks themselves want it and nothing else seems likely to restore the money markets or the mental balance of increasingly irrational stock traders. He has done this with reasonable aplomb; even trying to snatch some moral credit by appearing as the scourge of the money-lenders; something the City probably won’t forget. But we don’t know whether this is merely a tactical switch – to be abandoned when the good times return – or an expression of genuine doubt about his political inheritance.

In either case Cameron needs to accept that Thatcherite Conservatism is not the only form of Conservatism, and doesn’t have a unique political legitimacy. What is the function of the Conservative Party? It is to defend inequality: to make acceptable the social and economic unfairness inherent in a predominantly capitalist economy; to preserve the interests and privileges of social elites. But historically it has not been committed to a particular strategy to fulfil these aims. Thatcher appears to have thought that she was the first ‘proper’ Tory prime minister since Chamberlain. But Chamberlain was not a proto-Thatcherite, and the predominant Conservatism of the last thirty years has been unlike any other in the history of the party. As its behaviour in the 1930s suggests, the party has always been prepared to allow an active role to the state if circumstances required. It has not always given primacy to the unfettered market: indeed, it has hardly ever done so. And it hasn’t always been the party of banking and finance – and to the extent that it has been, it was in its role as the party of property rather than of finance. In the past, powerful forces within the party have aimed to divorce it from finance. Joseph Chamberlain’s campaign for protection before the First World War had precisely this intention; by 1914 the protectionists had won control of the party – and they kept it in the interwar years. Baldwin and Neville Chamberlain were products of that campaign. In Chamberlain’s case it simply ran in the family.

The Tories have had recourse to many specious slogans in the defence of inequality. One was ‘fairness’. Believing that Conservatism actually stood for fairness was doubtless naive on the electorate’s part, but it wasn’t wholly absurd. Until recently the party was reluctant to be seen sanctioning displays of conspicuous unearned wealth, but the difficulty with the economics it has espoused in the last thirty years is that unfairness and the display of conspicuous unearned wealth are intrinsic to it. That is its point. And this is what landed the party in so much trouble in the 1990s. There are no doubt many explanations for the debacle of 1997, but the deliberate abandonment of ‘fairness’ and the open cultivation of unearned wealth was one. For a time Cameron could get away with being in a muddle. That he is not Labour is his strong suit, just as not being Conservative was Blair’s in 1997. But as he gets closer to the election and, even more, if he wins it, muddle will become increasingly disabling. The policies to which he is naturally drawn will almost certainly be discredited and in any case won’t work. If, on the other hand, he comes to see that the party has other traditions, less heretical than neo-Thatcherism, he is unlikely to lose support among the electorate or his own party membership. If he doesn’t, he risks either losing the next election or leading a government even more unsuccessful than the present one.

Events of the last year or so – certainly since the run on Northern Rock – have imposed several almost inescapable obligations on any responsible government. The first is the restoration of the regulatory systems that were set up in most Western countries just before or just after the Second World War. Everything suggests that light regulation or self-regulation of financial institutions never works. In the General Theory, Keynes said he expected the state increasingly to determine the patterns of investment because the state, unlike everyone else, can take the long view. Keynes went further than we would want to go, but it is surely correct that among economic actors the state is best placed to arbitrate between differing and often antithetical economic interests and best able to regulate financial systems dominated by short-term decisions. What has happened in Britain and America is that the state has abdicated its responsibilities to such agents as the Financial Services Authority, whose regulatory touch has indeed been light. The question is how much of the regulatory regime can be re-established. Demutualised mortgage lenders can be remutualised only with difficulty, but they should at least be subject to adequate regulation, whether by the Bank of England or the FSA. Even if it is unlikely that the present political class will entirely restore the credit discipline of the 1950s, when governments controlled access to credit by fiat, something like it seems unavoidable.

The second inescapable obligation is the return of housing to its proper function: as providing places to live in rather than to speculate on. The relationship of housing to politics in both Britain and the United States is not fully understood even by those who transformed it. They don’t understand it because that would require confronting awkward facts about Anglo-American democracy. Fundamentally, private housing has become a compensation for the increasingly gross maldistribution of income. Inadequate incomes mean that large numbers of people don’t have access to the style of life that has always been the ultimate justification of neoliberalism and to which, reasonably enough, they now believe they have a right. What does give them access to it (in the short term) is credit. But credit has to be secured, and that’s what housing does. However, it works only if house prices keep rising and people have enough income to repay debt. When prices stop going up and people can no longer repay what they owe, the financial system begins to disintegrate. This is what has happened; and it has happened because we have replaced something like social democracy with credit democracy, or universal access to credit, and credit is a thoroughly inadequate substitute because sooner or later it has to be repaid. Which means that people’s incomes have to be sufficient to repay it, and in many cases they aren’t. What we have put in place is a dynamically destructive cycle. The number of houses is rationed in order to force up prices; people buy houses in order to secure credit on the strength of those prices; this encourages a heady belief in perpetual profit and thus both risky lending and risky borrowing; this renders the banking system unstable; and lending both to individuals and among banks then collapses. Such a cycle involves a paradox. Since these credit democracies still hold elections, governments are forced to underwrite savers at the expense of creditors and stockholders. And if savers are also small shareholders, as many are, the price they pay for protecting their deposits is the devaluation of their shares. This is absolutely not what was originally intended. The rationing of house building has one other consequence: it means that many cannot acquire somewhere adequate to live.

As a way out of this, stricter regulation, though necessary, is not enough. Governments must restore house building to something like postwar levels. When Richard Crossman was housing minister in the 1960s, some 400,000 houses were built every year, most of them council houses. In the last few years the number has scarcely exceeded 150,000. This year it is unlikely to reach half that level, and little of it will be social housing. Increased house-building programmes would both stop the development of credit bubbles based on artificially inflated house values and would have a ‘public works’ effect as an expansionary mechanism should the economy go into serious recession. The housing market obviously has to be restored – some want to sell and others want to buy – but not on the pattern of the last thiry years.

Governments must also reduce the demand for private credit. Since it is unlikely that people will lower their lifestyle expectations very much, and since falling house prices diminish their value as security, the only way demand for credit can be reduced is by increasing the income of those who want it. That is something any British government would hate to do because it involves redistribution, which in turn involves the taxation of high incomes. But if there isn’t to be some form of income redistribution, we will be back on the same old treadmill.

British governments, of whatever party, should also think carefully about our relationship with the United States. It is largely one-sided, has been very damaging and has left the political class in a world of illusions, a world where above-weight-punching is thought indispensable. Gordon Brown has been careful to emphasise that the banking crisis had its origins in the US. In one sense that is self-evident: almost any crisis in American banking is going to be a crisis in Europe. But it is an error to assume that the lending and borrowing practices of the demutualised societies in Britain, or Brown’s role in encouraging those practices, were immaterial. The run on Northern Rock was, after all, the first and so far the only serious run on any bank anywhere. Equally immaterial, Brown would like us to think, is his own profound admiration for the economic and financial system of the United States. Although our own bankers hardly needed it as a model, it has been New Labour’s model, whether Brown admits it or not, as it has been the Conservatives’. If the crisis induces the government to increase its distance from the United States and display greater scepticism as to its financial and economic virtues, that is only to the good. But it will be difficult for New Labour, since the ideological superiority of the US over ‘Europe’ has been central to its formation. And it will be even more difficult for the Conservatives. If anything, their illusions are stronger, heightened by the party’s infantile and dangerous Europhobia. It has been under Cameron (who must surely know better) that the Conservatives have threatened to withdraw from the Christian Democratic grouping in the European Parliament and join the ratbags of the extreme right. Cameron might still be the favourite to win the next election, but the last few weeks, to the extent that they have forced disagreeable choices and unpalatable facts on him, have tested him more than anyone else.

Ross McKibbin is a fellow of St John’s College, Oxford, and the author of Classes and Cultures: England 1918-51. His edition of Marie Stopes’s Married Love is published by Oxford.

Pure New Labour

JamieSW — Sun, 30 Sep 2007 09:57:14 +0000

Gordon Brown has become prime minister with less seeming to be known about him, and what he thinks and believes, than almost any other holder of the office. As chancellor, he showed an exceptionally narrow concern with his brief and usually disclosed an opinion on anything outside it only if absolutely forced to. As a result many unanswered questions circulate around him. What is he for? Why was he elected? Is he expected to be different from his predecessor? More ‘left-wing’? More Old Labour? The fact that he kept his cards so close to his chest encouraged many to hope that once his own man, he would somehow liberate himself from the more dogmatic excesses of New Labour. (I had hoped – forlornly – that he might try to save comprehensive schools.) Even as prime minister, he keeps his cards chestwards. His reaction to the prison officers’ and the London Underground strikes was characteristic. He saw in them only inflationary wage claims, and didn’t appear to give a thought to the wider context – to the horror of working in British prisons, on the one hand, and to the failure of the private management of London Underground maintenance, on the other – for which in both cases he shares (or bears) the responsibility. Yet there is already enough on record – and more than enough from his chancellorship – to suggest what kind of politician he is.

For whatever reason – a wish not to appear disloyal (and so muck up his chances of becoming prime minister) or genuine belief – as chancellor he supported all Blair’s major and worst policies: above all, of course, Iraq, but also the increasingly nasty and incoherent political asylum and immigration policies, the capitulation to the tabloids on crime and imprisonment, the alarmist anti-terror legislation, the wretched and immensely expensive ID cards (no Mr Prudence here, although he allegedly once opposed them on financial grounds), continuing privatisation, the attacks on a democratic system of secondary education, the increasingly casual attitude to civil liberties and the emergence of Britain as the EU’s security state par excellence. It’s true he did not go out of his way to say he supported all these things; but when pushed he said he did, even though, had he wished, he could have stopped any of them by a well-timed threat of resignation. He is no less responsible than Blair for our corrosive relationship with the United States. His view of America is different from Blair’s but equally damaging. Blair’s admiration for the United States is power-political; it is the exercise of physical power that seduced him. Brown’s admiration is for America’s ‘soft’ power; its economic dynamism and entrepreneurial vivacity making it the model for a modernised Britain. The effect in each case has been the same: to marginalise Europe in the government’s thinking and to make it much more difficult to disentangle our foreign policy from America’s. That Britain is primarily a European society – if we must have a special relationship, it should be with Germany – is something we are even less likely to hear from Brown than from Blair. Indeed, Blair as prime minister was publicly more of a European than Brown, clearly had more sympathy for the aims of the EU, and was culturally less parochial.

Furthermore, to the extent that the New Labour ‘project’ has an intellectual shape, it has been provided by Brown rather than Blair. Both can claim credit for the big increases in public expenditure that took place after 2000; and both were aware (rightly) that such increases were ‘objectively’ necessary – the country’s infrastructure was falling apart – as well as politically necessary to keep the Labour Party together and the New Labour show on the road. But it was Brown and the Treasury who insisted, against all good sense, on attaching the PFI to public expenditure, which has seriously distorted the government’s spending programmes, limited their effectiveness, and landed many public authorities – not least the NHS – with huge burdens of debt. It was Brown as much as Blair who drove the government into target-setting, often of a ridiculously refined kind. Targets are to New Labour as nationalisation was to Old Labour and have even less justification. Like the PFI, they have distorted ‘outcomes’ (a New Labour word) and forced those bodies on whom they have been imposed into all sorts of demeaning and misleading dodges to meet their requirements. A kind of competitive target-setting developed between the Treasury and No. 10, and the NHS and schools had not only targets but endless ‘reforms’ foisted on them – nearly all of them harmful. Both the PFI and targets originated as short-term strategies to get New Labour out of various immediate difficulties, but then became central to New Labour politics. What began as calculation became conviction, as much for Brown as for Blair: a nutty intellectuality obstinately adhered to and a product of that fiddling legislative pedantry that even Brown’s admirers admit is one of his failings.

Everything Brown has said and done since he became prime minister simply confirms everything he did – if not said – as chancellor. The immigration laws are to be toughened and all sorts of conditions placed on ‘skilled’ (non-EU) migrants – including a command of English that might test much of the indigenous population. (But since most migration now comes from the EU it isn’t clear that this has significance beyond the merely rhetorical.) The anti-terror legislation is to be extended and the government apparently intends to try once more to lengthen the period during which suspects can be held without charge. The country’s prisons will probably become even more crowded. There has been no attempt to limit (let alone reverse) the growth of academies, trust schools, faith schools and the rest. Indeed, the Department for Children, Schools and Families has expressed the hope that the number of faith schools will increase. How far such schools will be required to teach ‘Britishness’ it doesn’t say, but it appears to see no contradiction between encouraging this and having an increasingly compartmentalised educational system. There is no sign that the government will permit local authorities to resume large-scale house building – about the only conceivable solution to Britain’s increasingly acute housing problem. And, like Blair, Brown has gone out of his way to praise Mrs Thatcher. He is, he said, a conviction politician like her; and like her, a conviction politician who wants change, although he concedes that Mrs Thatcher’s policies led to a ‘large amount’ of unemployment which ‘perhaps could have been dealt with’. So much for the 1980s. Many must have hoped that Brown would rise above the futile New Labour approbation of Mrs Thatcher. It cuts no ice with the electorate and simply annoys those members of the Labour Party whose memories of Mrs Thatcher are not so benign. But then annoying them is probably the point.

Above all, there is no sign that his political-economic priorities as chancellor are going to change. In one way, that is understandable. For whatever reasons – only partly to do with him – the economy has worked very favourably for Labour in the last ten years and he is clearly reluctant to abandon a winning formula. But it is now a risky formula. The decision to use public-sector wage settlements to control inflation throughout the economy is especially risky (he might have a word with Denis Healey about this) at a time when rates of inflation have been at a historic low, and made even more so by taxation policies for which he is definitely responsible. Tax under Brown has hitherto been very mildly redistributionary; but if we are to judge by rising income and wealth inequalities, that effect is disappearing, in part because income changes at the very top have become so shameless that the tax system is unable to cope. Brown will do nothing about this. He is convinced, with little evidence, that increasing income tax for the rich would be electorally fatal and that, in any case, ‘globalisation’, an all-purpose excuse to which the whole political class now resorts, has imposed limits on personal taxation that no government can exceed. He has even created a category of ‘non-domiciliary’ super-rich whose only contribution to British life is to raise the price of mansions in the South-East and the cost of living in London.

There are several problems with all this. ‘Globalisation’ is one. The notion that the world is so desperate for British businessmen that any increase in taxation here will drive them to take even more fabulously paid jobs elsewhere is simply absurd. Another is the consequence for wage settlements. It is very hard to expect public-sector workers to accept below inflation increases when those at the top are almost encouraged to grab everything they can get – and do. Indeed, one might have thought that from the government’s point of view it would be bad politics to give the unions a legitimate excuse (what about the rich?) to refuse the settlements on offer. There is also a moral issue. Notions of fairness are strongly grounded in British political life, and not least in the Labour Party: to ignore fairness in such a conspicuous way is to undermine the social solidarity that even New Labour is supposed to favour. It also suggests that ‘controlling’ inflation must take precedence over everything else. Controlling inflation, however, is not a neutral activity: it is one, but only one, of those things a government should do, since as a policy it is better for some people than for others.

How problematic Brown’s policies were and are has been demonstrated by the Northern Rock affair. In the short term, of course, its difficulties were not the doing of the government. Northern Rock was the victim of a crisis in the international banking system caused by unwise mortgage lending in the United States. In the longer term, however, Brown, New Labour and much of the country’s political and financial elite have acquiesced, with more or less enthusiasm, in a financial regime which began in this country with the abolition of credit restrictions by the Thatcher government. Although there were arguments in favour of abolition it was always very risky – just as the present colossal levels of personal indebtedness (essential to Labour’s electoral success) are very risky. That it came to a run on a bank – something that has not happened in Britain for 150 years, not even in the international financial crisis of 1931 when the stability of the British banking system was the wonder of the world – shows how instinctively (and understandably) nervous people are of this regime. Furthermore, Brown’s system of regulation worked badly. It was he who divided regulatory responsibility between the Financial Services Authority and the Bank of England – which was asking for trouble – and it was he who extended the autonomy of the Bank, with predictable results. The Bank behaved as it did in the 1920s – it lectured people about their bad behaviour. Fussing about ‘moral hazard’ in these circumstances has a certain heroism but is politically and socially foolish. In effect, the new chancellor, Alistair Darling, made a wholly correct political decision to override the Bank, but it was one with dire possibilities. What if it had been necessary to support the Alliance and Leicester and the Bradford and Bingley too? The fact is that the assumptions on which New Labour, and Brown especially, built their policies are badly flawed. The setting of interest rates, the degree to which credit is controlled, like the ‘fight’ against inflation, are political acts, and that is true whether they are done by the Bank or the government. There is no ‘non-political’ way of doing this: as the government has just discovered.

Probably more than Blair, Brown represents the pure form of New Labour, which is why, despite predictions, there has been no Blairite ‘backlash’. He is no different from their man; perhaps even better. If one of the main aims of New Labour is to eliminate conventional party politics altogether, Brown is more likely to do this than Blair. Blair’s instincts as prime minister were more combative and more partisan: he did not actively co-opt the opposition as Brown seems to do. Brown now hardly recognises political differences or clashes of interest – if they do exist they are somehow illegitimate. What he wants is the Labour Party with the politics left out and a parliamentary system with the parties left out. The Labour Party has already moved far in this direction. The crucial fact about Brown was the manner of his election: unopposed, with nearly all MPs signing his nomination papers. The immense pressure on MPs to do nothing that would suggest political disagreement and the inability of the doubters to find a plausible candidate or the nerve to oppose Brown openly, demonstrate the extent to which the parliamentary party has been rendered apolitical. And Brown intends to keep it that way.

Yet this is an impossible ambition. ‘Apolitics’ is very political, and usually conservative. It also displaces politics; partisanship simply goes elsewhere. And since politics is intrinsic to any social system, those who deny its legitimacy or try to wish it away adopt alternative forms of political mobilisation. If you seek change (as Brown says he does) you can’t avoid disturbing vested interests, whose response tends to be very political. As a number of people have pointed out, you cannot be both a conviction and a consensus politician: Mrs Thatcher undoubtedly had convictions, but she did not want consensus. Non-politics also undermines the participatory politics Brown says he wants. Active politics revolves around interests and demands partisan participation. Non-political participation is an oxymoron, and no amount of playing about with electoral systems will change that. In these circumstances the alternative forms of partisan politics that inevitably emerge can be very nasty: see the tabloid press which now sets the tone. They usually involve the isolation of and discrimination against comparatively weak minorities – asylum seekers, illegal immigrants, even public-sector employees – and once started are very hard to stop. Brown has already dirtied his fingers in this mire: ‘A British job for every British worker’, the phrase he used to defend otherwise more or less defensible labour market policies at the TUC, is full of implications, and was meant to be. Unfortunately, under both Blair and Brown the Labour Party has been drifting towards these alternative forms of partisan politics with its eyes closed and its mind shut.

Destruction of the Public Sphere

Alex Doherty — Sat, 31 Dec 2005 13:51:17 +0000

That the next general election will be fought by Prime Minister Gordon Brown and Leader of the Opposition David Cameron we do know; but how it will be fought we dont, in part because the present prime minister will not disclose when he intends to go. Furthermore, both Cameron and Brown are in some senses, but for different reasons, unknown quantities. Cameron simply because he is unknown; Brown because hes known only as a bruiser who tenaciously defends his own patch, not as a man who has to lead a government and a political party. Any prediction as to the character of a Cameron or Brown government must, therefore, be tentative. Such a prediction might be that Cameron would lead a moderately unenlightened businessmans government; Brown a moderately enlightened businessmans government. The difference between the two, while a bit more than wafer thin, will hardly register on any political scale.

In his campaign for the leadership Cameron was more anxious to give impressions than facts, and one impression he was anxious to give is that he is a man of the centre. Yet apart from his keeping clear of the law-and-order rhetoric which burdened his predecessors and his rival, David Davis, there is not much evidence of a new beginning. He has dropped virtually none of Michael Howards baggage: he simply proved more adept at reordering it than Davis. He has persisted in arguing that we can have both lower taxes and better public services: an argument the electorate regards sceptically and something that has eluded all British governments. He has repeated, and appears to believe, the self-serving conviction of British businessmen that they would be world-beaters were it not for over-regulation, red tape, high taxes and Brussels. Although he concedes there is society, a we as well as a me, his is to be a highly privatised society increasingly shaped by social entrepreneurs, charities, do-gooders, people with axes to grind, and our old friend faith groups: in other words, a society based on the model of a market and restored social hierarchies. Cameron is as Eurosceptic as any of his predecessors; he even wishes that touchstone of scepticism to withdraw the Conservative MEPs from the Christian Democratic grouping in the European Parliament. And despite his keeping clear of law-and-order rhetoric, those who seek rational immigration policies or prisons that do more good than harm will almost certainly look to him in vain.

Gordon Brown, though alleged by the Conservatives to personify Old Labour, differs little in substance from Cameron. His, too, will be a businessmans government even if businessmen refuse to acknowledge it. His surprising decision to abandon the new corporate financial reporting rules shows how far he will go to assure businessmen that he is business friendly. And his fundamental order of priorities differs little from Camerons. He has always wanted to create an economic environment conducive to an American idea of business success: the aim of both major political parties in the last ten years. The way he has financed much of the countrys social infrastructure, via the PFI, could not be more business friendly. Bad for the country, but unquestionably good for business (and lawyers, and consultants). In two ways, however, he has acted differently from recent Tory chancellors. He has, first, expected something in return from businessmen measurably increased productivity which they have been unable to achieve: hence his constant fiddling with largely futile fiscal incentives. He has, second, permitted significant and long-overdue increases in public expenditure now, alas, ending whose effect has been wholly benign; and that has made it hard for the Conservatives to revert to the damaging policies of the 1980s and 1990s, as Cameron has tacitly accepted.

For the rest, Browns record is more difficult to read. For whatever reason a desire not to forfeit his chance of the leadership or genuine belief he has acquiesced in all Blairs follies, not least Iraq. Whatever his private doubts, he has been in practice as servile as Blairs other ministers and shares as much responsibility. We do not, however, know whether he would have initiated the folly. Like Blair, he is obsessed with America, but his obsession is different: it is America as an economic system that obsesses him. It is hard to see him crusading in Iraq, other than inadvertently. Although, like Blair, he believes the private sector is invariably more efficient than the public, his enthusiasm for the marketising of everything seems less complete. As a Scot he might simply be indifferent to the English educational system, but it is unlikely that a Brown government would have produced the recent white paper on education though officially he supports it.

As to who will win the next election, the balance must favour Brown, but it is three years away and the longer Blair stays the more difficult it becomes for Brown. Furthermore, he has had a lucky ride as chancellor and that wont last. For all his prudence and obstinate Treasury-mindedness, he has not always been a particularly prudent minister. The prosperity over which he has presided, as has so often been the case since 1979, has been based largely on inflated house prices and mountains of private and national debt. What distinguishes him from the pre-1979 chancellors is that the balance of payments (hugely in deficit) has recently not acted as a serious constraint on consumption. But our rate of growth is now significantly below Treasury predictions; and given Germanys extraordinary export performance achieved despite having to prop up its old East Zone compared with Britains, Brown might well come to regret the foolish triumphalism of the last few years, as will all those other purveyors of embarrassing wisdom (virtually every economic commentator) about how much the Germans have to learn from us. Moreover, Brown, though clearly respected by the electorate, is no charmer. On the contrary, his public manner is designed to intimidate, the opposite of Camerons.

Nonetheless, even if electoral circumstances are more favourable to him than they were to his predecessors, the next election will not be easy for Cameron. He is inexperienced though he has done a surprisingly good job at not looking inexperienced and its certain that Labour will give him a rough ride. He has had to overcome the fact that he is an Old Etonian, which is sort of a problem now though he has also done that rather well. Above all, he is shackled to the Conservative Party. Unless there is a remarkable change in the pattern of voting the complete collapse of tactical voting, for example it will be exceptionally hard for the Conservatives to win under the present electoral system. At the last election, for instance, they polled only 3 per cent less of the vote than Labour but won 158 fewer seats. Sociological and demographic changes have also worked against them; though not irreversible they will be hard to reverse. And there is still a sense in which the Conservative Party is not of the real world. Its infantile reaction (fully shared by Cameron) to possible reductions in the British EU rebate like its attitude to Europe generally is not the behaviour of a party which wants to be taken seriously.

Is any of this important? Does it matter whether Brown is prime minister rather than Blair, or Cameron rather than Brown? Does it matter, indeed, whether there is a Conservative or a Labour government? At the moment, not much. There are several reasons for this. The first is that the countrys political elite is now largely divorced from the country; probably to a greater degree than at any time since the 19th century. This elite is drawn from an increasingly narrow social range: primarily from the law, the media, political and economic consultancy and research. In the present cabinet, for example, there is only one former trade unionist. Whatever their formal political allegiances, they are all the same kind of people who think the same way and know the same things. Their authority has been increased by the way the prime minister runs his government in an informal, ad hoc and disorganised manner that marginalises the administrative Civil Service.

The members of his cabinet believe, and are constantly told, that political victory lies in the centre, which is where they must be. To argue this, however, is fundamentally to redefine the word centre: fifty years ago those in the centre were likely to be Keynesians. The extent of this redefinition is made clear by Blairs belief that unless the recent white paper on education becomes law Labour will cede the centre to the Tories. This is an absurd belief but is presumably gospel in the prime ministers camarilla. In a less mealy-mouthed age both the Labour and Conservative Parties would be thought on balance right wing, with the Labour Party more ambiguously right wing than the opposition. We have now a right-wing government and a right-wing opposition, while a centre-minded electorate has to choose which of the two is more palatable that is, least right wing. Much of the electorate is now so divorced from the political elite that it does not even bother to make that choice: thus the exceptionally low turnouts of the last two elections. What we do not know is whether under Brown the Labour Party will be more like a party of what was once understood to be the centre, instead of being, as it is under Blair, centreish in little bits. To judge by his record so far, however, this seems improbable.

The second reason it will not make much difference is that the two major parties fundamentally share the same ideology. Despite assurances that the political elite is interested only in what works, this is the most intensely ideological period of government we have known in more than a hundred years. The model of market-managerialism has largely destroyed all alternatives, traditional and untraditional. Its most powerful weapon has been its vocabulary. We are familiar with the way this language has carried all before it. We must sit on the cusp, hope to be in a centre of excellence, dislike producer-dominated industries, wish for a multiplicity of providers, grovel to our line managers, even more to the senior management team, deliver outcomes downstream, provide choice. Our students are now clients, our patients and passengers customers. It is a language which was first devised in business schools, then broke into government and now infests all institutions. It has no real historical predecessor there was no equivalent Keynesian vocabulary in the 1940s and 1950s and is peculiarly seductive. It purports to be neutral: thus all procedures must be transparent and robust, everyone accountable. It is hard-nosed but successful because the private sector on which it is based is hard-nosed and successful. It is efficient; it abhors waste; it provides all the answers. It drove Thatchers enterprise culture. It lies behind Camerons social entrepreneurs.

It is more powerful than the kind of language Flaubert satirised in the Dictionnaire des idées reçues since, however ridiculous it might be, it determines the way our political (and economic) elites think of the world. A remarkable example of this comes in the governments recent proposal to privatise or partly privatise the probation service. This is probably the most preposterous legislative proposal in living memory but is justified on the grounds that we need a vibrant mixed economy of probation. As for the probation officers themselves, they are to be swept away and replaced by offender managers. The language might be laughable, but it is now the language shared by all those who command, Labour or Conservative, and is one way they wield power.

This ideology has also been destructive of the public sphere. It began under the Conservatives and, far from being reversed under Labour, has been advanced by them into territory the Conservatives did not enter. The contents of the latest white paper on education, the legislation that will save the centre for Labour, are the most overt manifestation of how far Labour has gone. Virtually every premise on which this paper is based is false. You cannot combine a socially structured educational system with social justice, and that is so even if discrimination at admission is technically prohibited. Not everyone can get their first choice under such a system. It is not arithmetically possible. And schools cant expand and contract as though they were supermarkets, unless they are what used to be called in Australia portables. Parents are not the best judges of their childrens education any more than they are the best judges of their childrens health something most parents know perfectly well. The pressure for parent power doesnt come from them.

The expansion of faith schools is indefensible. The secular tradition is central to the Labour Party, not because Labour was anti-religion far from it but because it recognised that specifically religious schools (even the old aided elementary schools) were socially divisive. That a government which has faced the consequences of a sectarian educational system in Northern Ireland and is obsessed with Islamic extremism should be simultaneously promoting religious secondary schools in England is astonishing. Furthermore, it is clear that when they think of faith schools the writers of the white paper dont have in mind the Anglican aided schools. These are to be private venture schools where faith is strongly held. And since they are to have considerable powers to alter the curriculum, be ready for rows over creationism. It is not true that schools are the main variables in the education of children. Children are influenced by their schools; but they are as strongly influenced by their families, their peer groups, their physical environment, their wealth or their poverty. Failed schools are usually the result of failed cultures: failed cultures are not the result of failed schools. A government which was really interested in educational reform would tackle seriously the relative poverty which underlies most forms of cultural failure. But the degree of comparative poverty has scarcely changed since Labour came to power in 1997.

Behind the white paper is a ferocious ideological utopianism impervious to social reality. The countrys health and educational systems have been subject to countless pieces of legislation since 1979. All of it, whether from the Conservatives or Labour, has tended in the same direction: the re-establishment of the NHS and schools on the basis of a competitive market. None of this legislation has ever satisfied its authors for long. Few ask why the educational and health systems seem now so subject to (failed) permanent revolution, given how stable their regimes were before the late 1970s. One answer is that ideological utopias can never be achieved precisely because they are utopian. The other is that the competitive market simply does not work in such systems. It usually works well where it works at all, but there are important areas of our lives where it does not work at all, and collective activities such as education and health are two of them. Much of the legislation in these areas has left its authors dissatisfied and thirsting for more not just because it has not worked but because it cannot work.

Above all, the white paper is an attack on the public sphere and on the idea of democratic citizenship. The proposal effectively to neuter the LEAs and to encourage the supposed independence of secondary schools, whatever form their independence takes, turns citizens into supplicants. Our relationship to the state, to the public sphere, is analogous to our relationship to such property as we have. In a sense we own it. We might feel that the state has not given us what we are entitled to, but that is because we have a sense of entitlement. As citizens, we approach the state not as supplicants but as people who claim a right because we are citizens. We do not, however, approach schools run by faiths, or businessmen, or universities, or crackpots, as citizens. We approach them as people seeking favours. And that gives the providers social authority incompatible with a democratic state.

This attack on the public sphere has a further consequence. It replaces strong intermediate authorities (the LEAs) with weak ones, just as the agencies and the misnamed citizens charters did under the Conservatives. It purports to give freedom to heads, parents, the community, but in fact increases the power, though not the accountability, of central government, which makes the legislation even more attractive to government. If this document in anything like its present form is passed with significant Labour support, the Labour Party absolutely loses its raison dêtre. But even if a significant number of Labour MPs revolt, in all probability it will be carried in something like its present form because the Tories will support it. Cameron is an enthusiast. He agrees with Blair (and we must assume Brown), and his decision to support the white paper is a recognition that they all inhabit the same intellectual world.

The final reason to doubt that much will change under Brown is the institutional decay of the Labour Party and the cabinet. Most of Labours institutions, like the national executive or the annual conference, are mere shells. The cabinet meets only to be told what government policy is. We are now used to the notion that Iraq has been a disaster, that it was the result of a shocking error of judgment. We are also aware of the way Iraq, and indeed all Blairs policies towards the United States since 9/11, have corrupted British politics, endangered the security of the country, been responsible for attacks on our liberties which only a few years ago would have been thought inconceivable, irreparably damaged the reputations of all those involved, and implicated Britain in American policies which in many cases appear criminal. In a few years time people will be amazed that neither the prime minister nor his cabinet has been in any way held to account for all this.

The reason for that has to do with the structure and recent history of the Labour Party. The partys institutions have always been weak, and the reforms of the last 20 years made them weaker. They dont act as a makeweight to the Parliamentary leadership. The Parliamentary Party, also always weak, but now much less diverse than it used to be, is largely made up of men and women of a Blairite caste of mind. This narrowing of its base reflects the social narrowing of the countrys political elite and is a result of the same pressures. Thus the majority of the Parliamentary Party voted in support of the Iraq war though 122 did not as they have for ID cards, 90-day detention (291 against 49), and no doubt will in support of the new education bill. Patronage and the whips have much to do with this, but it is also central to New Labours strategy. New Labour (not unreasonably) took the view that the partys old pluralism had degenerated into destructive factionalism in the 1970s and early 1980s, and concluded that in no circumstances should that be allowed to happen again. Labour MPs, therefore, have been socialised into a system which rates the possession of power, and hence loyalty to the leadership, above all else. Whatever the original intention of the strategy this means that the party leadership can do more or less what it likes; and has. And Brown almost as much as Blair is responsible for this.