Turning the neo-liberal tide

Gary Fraser discusses how the Left can counter the attack on the Welfare State

There are two themes that I want to explore in this article. The first is how did a crisis that began in the financial sector caused by two decades of deregulation end up becoming a crisis in public expenditure. The second theme concerns the challenge facing progressives to develop an alternative economic strategy.

The exact date when this great con trick started was the 8th May, the day the Daily Telegraph published details of MPs expenses. Within hours of the story breaking, it was being covered by every major news outlet. For weeks on end the media discussed nothing but the ‘MPs expenses scandal’. Thanks to the corporate media, attention was diverted from the bankers and structural problems in the economy to a bunch of greedy MPs. In the words of one commentator writing in Scottish Left Review, ‘duck ponds started to replace derivatives as the story of choice’. Just at a time when people were looking to Government to stabilise the economy, all of a sudden parliamentarians were seen as the problem. Leading the charge against public expenditure was David Cameron. Up until this moment, Cameron had struck most serious political analysts as a nebulous politician bereft of any real substance. He was nothing more than the outcome of a marketing strategy that was directed by Tory central office. Before the crisis Cameron had shown little interest in the public sector saying at one point that he would match Labour’s spending, something which infuriated traditional Tories. But with the crisis Cameron discovered ideology and has emerged as a serious political figure to be reckoned with. ‘Compassionate conservatism’, the era when ‘Dave’ cycled to work and talked about recycling is over. The Nasty Party are back.

According to the Institute of Fiscal Studies, Britain has an annual fiscal gap of £90 billion which urgently needs to be closed. Cameron says he will do this by slashing public expenditure. For Cameron, the problem is not the recession but how to tackle the national debt. In a country where prudence is regarded as a virtue, Cameron’s narrative is powerful. In contrast Labour, to use the old cliché, look like a rabbit trapped in the car headlights unsure which way to run. The left is pushing for the Government to return to a genuine social and economic Keynesian programme. Instead Labour has procrastinated and all of the contradictions inherent in ‘New Labour’ are coming to the surface. For unlike Cameron, who has found ideology, New Labour was the party that proclaimed ideology was dead. It now finds itself without a compass and bereft of a core set of values that offer guidance in these troubled times. This was bound to happen sooner or later. From the outset, ‘New Labour’ was conceived of as an electoral machine organised by a disciplined group of cadres. These men and they were mostly men, shunned ideology and preferred to see themselves as realists and pragmatists. Winning elections and maintaining power was their primary purpose. It’s ironic that New Labour’s strategists now fear that Labour is being held hostage to the very formula that made it successful, namely winning the allegiance of a demographic lazily referred to as ‘Middle England’ on the one hand, whilst securing the support of the traditional working classes on the other. If Gordon Brown talks up state intervention the strategists worry that Labour will lose ‘Middle England’ whose courtship is needed to win elections. Yet if he emphasises spending cuts they claim that Labour will lose the support of the traditional working classes who hitherto have remained loyal. This issue is at the core of Brown’s leadership crisis. Cameron senses the Labour dilemma and has capitalised accordingly. For the first time in a generation Labour are dithering whilst the Tories seem ideologically confident.

The challenge for the left is to develop an alternative economic strategy. Convincing people will not be an easy task. It needs to be said that many people are passively accepting public sector cuts and job losses. Three decades of neo-liberal social realism has taken its toll. This grim ‘realism’ espoused in the ‘death of politics’ discourse has turned Thatcher’s mantra of ‘There is no alternative’ into a dangerous political truism. It is one of the reasons, although not the main one, why left-wing hopes of a return to the politics of ‘class struggle’ has failed to materialise. Of course there have been several high profile strikes and even workplace occupations but these are the exception not the rule. Moreover, the impact of these small acts of resistance is blown out of all proportion by a far left that is prone to getting easily excited. In his aptly titled article ‘Two Swallows Do Not Make a Spring’, Gregor Gall, notes, ‘it’s not uncommon on the left for commentators to herald that a clutch of instances form an observable trend’. Sensitive to the claim that his conclusion might be interpreted as being overly pessimistic, Gregor argues:

‘This analysis is not a question of being pessimistic as some ultra-lefts will no doubt think it is. It is a materialist analysis in which it bears heavily on the mind that, with an extremely low level of class consciousness and collective confidence amongst workers, we should not expect the demonstration effect of one group of workers’ actions to pass easily and appropriately on to other groups.’

The short term prognosis for the left is not good. The dominant and insurmountable narrative amongst the majority of progressive voters is that ‘Labour is the lesser of two evils’. In Scotland, the power of this narrative should ensure that Labour recover important left of centre ground lost to the SNP in 2007. For the left outside of Labour these are troubled times and the troubles are far from over. If individual parties do contest the election it will be nothing more than a perfunctory exercise in flying the flag. Meanwhile, cobbled together coalitions that are top down in nature, consisting of disparate groups with no real impact in communities, are unlikely to even save deposits.

Progressives need to take the longer view. More important than the General Election is the need to develop an alternative narrative that not only defends public expenditure but highlight why public spending is crucial in turning the tide of this crisis. Saying that we are opposed to cuts is not enough, and hyperbolic rhetoric that ‘we’ should pay for ‘their’ crisis only gets us so far. When it comes to the actual debates about public expenditure progressives have strong arguments. Economists agree that the countries best weathering the storm are those who protect their welfare states and levels of government spending. We should not lose sight of the fact that public spending in the UK remains lower than that of France, Germany, Italy and Sweden.

Neither should we forget that whilst the national debt is high, it’s nowhere near the levels of 1945 and 1963. Yet this was the era of the welfare state was built and economic policy was based on full employment which contributed to an increase in living standards for the vast majority.

So what then would an alternative economic strategy entail? There are of course the obvious arguments about withdrawing from Afghanistan, or abolishing Trident and using the money elsewhere. But we need policies that connect to people’s everyday experiences. We should be demanding that Government take the lead and uses the public sector to shift us out of recession. At present the opposite is happening. Whilst public services are attacked, the banking sector has been bailed out without any real reform. If the Government gets it’s way and all that happens is the nationalisation of debt during the ‘bad times’ followed by the privatisation of profits during the ‘good times’, it will be an opportunity squandered. Now is the time for progressives to be discussing what an alternative banking sector should look like. For example, would it be possible to run banks as social enterprises that reinvest profits back into public projects? In terms of the here and now Government needs to instruct banks to increase investment and lending to small business, and where appropriate to individuals and their families, the latter should be seen as part of a strategy to revitalise the slump in the housing market.

At a time when profits are falling the private sector is too nervous to invest. Therefore it’s up to Government to lead the way. One example is housing. Government in partnership with local authorities, should be investing in social housing and revitalising a major part of the UK’s housing infrastructure. This development would get people in the construction sector working again, whilst helping those currently excluded from the housing market. Government-led investment keeps people in jobs enabling countries with a strong public sector to spend their way out of recession.

This is a point that progressives need to keep making. We should not forget that under both Labour and Tory Governments, the proportion of the economy going to wages has shrunk, leading to declining social mobility and individual debt that is sometimes unmanageable. However, by putting money in the pockets of people at the lower end of the income scale, the overall rate of consumer spending increases which in turn leads to economic growth. This his how arguments about reversing the culture of low-pay must framed.

Scotland’s 32 local authorities have already started the process of cuts. Undoubtedly there will be resistance but resistance needs to be informed. We are not starting from a strong position. For too long, the left has abandoned local government as a potential site for creating an alternative discourse. After 30 years of neo-liberalism it could be argued that we no longer have local ‘government’ as such. Instead there is local ‘administration’, a very different concept from ‘government’. Privatisation, deregulation and competitive tendering have systematically taken away the powers of old district and regional councils. Today the amount of taxes raised locally are far too low a portion for Council’s to spend effectively on services. Local taxation urgently needs to be rethought as does the relationship between local government and central government. Systematic political and economic control by Westminster and Edinburgh is stifling local governments function. Furthermore, power has been taken away from elected representatives at community level. The consequence is that regardless of which political party gains overall control of a Council it is central government that rules the roost. A whole raft of measures are in place, strictly adhered to by COSLA (Scottish Coalition of Local Authorities) that ensure that local government does not deviate from the neo-liberal path that is dictated by Westminster and Edinburgh.

Of all the areas that highlight the shocking state of local government finance the Private Finance Initiative (PFI) is the most scandalous. Second only to the Iraq war it is Labours biggest shame. PFI has been Labours preferred method of building hospitals and schools. As readers will be aware PFI works like a mortgage with Council’s being forced to pay back many times more the cost of what they originally borrowed. According to the Treasury, the 640 UK wide PFI projects cost £63 billion yet by the time the taxpayer has finished paying off the PFI debt the bill is likely to be around £246 billion. Money that could be spent on essential services is being handed over to private companies without a question being asked. The result of this non-negotiable Labour policy is an intolerable burden on public finances which could last 30 or more years. The private companies involved in PFI, and it should be pointed out that the vast majority of them are based outside Scotland, are guaranteed by law to receive monthly payments from the same Council’s that claim to be strapped for cash. No council is prepared to renege on its obligations to big business it’s far easier to renege on their commitments to communities who expect decent public services. Under, PFI big business can look forward to regular payments whilst communities lose swimming pools, libraries, community centres and other leisure facilities. Meanwhile, council workers and their colleagues in the voluntary sector, stare into the abyss of unemployment whilst much needed grants for community groups are scrapped or curbed.

Exactly how much of taxpayers money is being squandered by individual local authorities is difficult to find out as PFI is clouded in secrecy. When questioned about PFI payments, Councils refuse to disclose information hiding behind ‘commercial confidentiality’ agreements. They get an easy run because questions are seldom asked. A local media notorious for its docility seldom challenges Councils in a way that is constructive. Meanwhile anti-cuts campaigners are often ill informed or completely ignorant about PFI. Exposing the PFI scam needs to be raised by the left when engaging with anti-cuts campaigners and framed within a broader alternative economic strategy which must include raising the issue of local government finance and challenging the systematic neglect of Councils by governments in Westminster and Edinburgh.

At the beginning of this crisis there were some on the left who naively proclaimed the death of neo-liberalism. This was incorrect. Whilst it is true that neo-liberalism has been exposed as a bankrupt ideology, neo-liberal politicians are pragmatist’s first and ideologues second. The strategy of neo-liberals is to shift attention from structural problems in the economy caused by deregulation and an over reliance on finance, to one that links our current problems to national debt and public expenditure. The challenge for progressives is to expose this strategy as flawed and one which will deepen the recession. As this article demonstrates the path to sustainable economic growth lies in a return to the social state when the governing party ruled in the interests of the country as a whole not on behalf of a select few.

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