October 13, 2008

Social Implementer – The State, as they know it

Follow-up to 3.2? from Patrick's Political Blog

‘This is not a time for outdated thinking or conventional dogma.  Extraordinary times call for bold and far reaching solutions”


- Gordon Brown, announcing the £500 billion bail-out package on the morning of 9th October 2008

British Politics is witnessing a seismic shift in the nature of the State and the role it plays.  Having undergone an extensive reworking through the course of history, the UK might be about to experience a further mutation.

Under New Labour, the State took a decisively new role, deemed by many Modern Liberals at the time as the ultimate role that the State should take.  Modern Liberals prescribed the State as an extra-social arbiter that serves as an ‘activator’ or an ‘enabler’; to regulate, but never to define markets – including specifically, the employment markets.  The notion that the State should serve as an activator is a subtle, but nevertheless decisive, departure from both Neoliberalism’s projection of the State as a minimal market facilitator and from Old Labour’s previous inclination that the State should lead economic management.  In other words, the notion that the State should serve as an ‘activator’ should not be deemed as a compromise between socialism and capitalism, but rather as an independent idea.

To understand why, we must first appreciate the historical and political context in which the New Labour project was born.  Despite the theorised economic efficiency that the system promised, Thatcherism failed to yield the fall in unemployment that neoliberals projected by ‘freeing up the markets.’  New Labour believed that this failure was rooted in a misunderstanding of ‘meritocracy’ and the inherent barriers to social mobility that halted it.  The response therefore was to try and remove these barriers by increasing investment in ‘Education, Education, Education’ and other public services in order to emancipate the individual’s self-serving capacity.  In other words, the State was deemed, in a strictly utilitarian sense, as a way of unlocking people’s talents – a way of enabling self-realisation, but ultimately a self-realisation that the individual must recognise for him or herself and hence an allowance for job-seekers as opposed to the jobless.

This definition helps us to understand the fundamental difference between New Labour’s State and what it could soon become.  As we have already seen, one way to improve Thatcherism is to remove physical barriers – the way that New Labour adopted.  But there is also a further way of improving upon Thatcherism, a more cynical way that can arguably be drawn from recent projections of society issued by both Brown and Cameron.

This demands the State to take rational decisions for and directly shape the path of the individual: to become a ‘Social Implementer’.

If we assume Gidden’s’ analysis of society to be correct – that public institutions are only effective in so far as individuals interact with them (which it undoubtedly has under New Labour), we can begin to uncover the potential advantages, if not genuine need for the State to assume this new role in a time when collective action is more favourable than individual choices.

The Modern Liberal belief propagated by New Labour that the State should limit itself to defining the limits of and regulating the market failed to provide the fundamental structural changes to Thatcherite capitalism that were (and still are) necessary to avoid the ‘boom and bust’ cycles witnessed every decade from the end of the Second World War.  What we saw and continue to witness are contradictions between economic institutions and the State.  Where once before we saw conflict between the Unions and the State – a conflict, which dominated economic policy from the 1950s right through to the early 1990s (it was after all Kinnock’s attack on the militant urges of Liverpool Labour councils and their leader, Derek Hatton, that would signal the end of Labour’s relationship with the TUC – a task completed by Blair) – the late 1990s and the early 2000s has witnessed the creation of a new antagonism between the State and the City, under which bankers and investors have been able to negotiate for increased economic freedom – at the cost of macro-economic stability.

In other words, New Labour’s attempt to provide economic stability by substituting State-intervention with Market-regulation has simply failed to facilitate the uneasy marriage between socialism and capitalism that its post-modernist architects naively thought could be achieved.  Instead, a fundamental misunderstanding of capitalist economics has allowed New Labour to preside over increased relative poverty levels and has allowed ministers to overestimate their capacity to avoid the boom and bust cycle. An attempt to review the interaction between the economy and the State is therefore long overdue.

However, we shouldn’t be fooled into thinking that Brown has the answer, for the reactionary conception of the State that is now invariably emerging, very easily jeopardise our longer-term economic and political safety.  We’re already witnessing this in the government’s role in the holding and selling of banks. By orchestrating big bank takeovers – such as selling Bradford and Bingley to Santander, the government is allowing the monopolisation of the banking industry and thereby exacerbating its oligarchic nature.  This has two profound implications for the economy and the individual agents placed within it.

Firstly, an in a strictly practical sense, a private banking monopoly would severely undermine the effectiveness of the government’s macroeconomic strategy – especially monetary policy.  With the wealth of an entire people in its hands, the bank could avoid cash flow regulation and could potentially undermine efforts to cut inflation.  The government’s current actions could therefore entrench the power of certain bankers at the cost of the State’s

Secondly, and more threateningly, it would irrevocably confirm a capitalist hegemony.  By specifically investing for the first time in banks’ assets, tax-payers have become share-holders – and shareholders gain the ability to direct banks, which for Brown and Darling, is where the significance lies.  By become share-holders, the individual tax-payer is being given the opportunity, if not responsibility, to shape the banking sector. Or so it would seem.  For by setting up the recovery package in this way, Brown is not so much offering the tax-payer the opportunity but rather is compelling us to support the banks – he is in effect ‘agenda-setting’ – and as such actively forcing us to subscribe to his vision of economics.  In effect Brown is conducting a very cynical attempt at marrying thinly disguised social-democratic policies with rational-choice theory in a bid to make State action representative of the people.  This therefore suggests that leaving economic necessity to one side, the State is assuming a monopoly of knowledge and demands us to comply with it.

As such, a new model of understanding can now be shown to exist, in which the State assumes the authority to define relationships between private institutions and the individual.

So where will the State now try and take us? One clue is offered by the regressive way in which both Brown and Cameron mutually desire to reassert Britain’s international leadership.  In this way, our leaders betray an archaic understanding of the world – a Sovereign-State model whose origins date back as early as the late 19th century and one which has arguably become unfashionable, if not incompatible with the dominant understanding of the world as a global community.  And it is arguable that such a misunderstanding of eco-political phenomena has already led to unforced errors. 

The failure to orchestrate a rescue package in concert with the rest of Europe, almost forced the British Treasury into action against its will.  The actions of Germany and Ireland put pressure on the British government to provide a similar package – which it did: £400,000, 000, 000 - in a bid to keep the City alive in the face of being out-competed by foreign banks and without much consideration of the longer-term implications – including increased risk-taking.  This in itself serves to ironically highlight how Britain doesn’t actually fit the Sovereign State model that its leaders wish it did. 

More devastatingly still, we are also being shown how unilateral action can exacerbate international tensions – particularly between Russia and the West.  After declaring itself bankrupt, Iceland had (as in not voluntarily) to resort to a Russian (a country led by nationalists with a well documented desire for territorial expansion) loan, because its usual creditors could barely help themselves.  If action is not taken now to ensure global economic cooperation, we could observe empire-building or the accumulation of economic protectorates (as we’ve witnessed of China in Africa and South America), which could severely limit the effectiveness of international banking and as such limit the availability of much needed liquidity, from which economies over the past decade have thrived.  In this sense, the solutions that are being prescribed to the global credit crunch have far wider long-term implications that governments have yet to acknowledge.

Or is it that ‘We’ have yet to acknowledge the implications of these actions?  Draconian measures are easy to resort to, in a time in which we crave for certainty and justice.  But instead of falling prey to such snares, it is our responsibility as citizens to take our government to task and ensure that parties do not capitalise on our vulnerability.  In particular we need to safeguard competition between banks - in order to safeguard our status as customers and to avoid entrusting the banks with even further power over our economy.  But so too must we be aware of the type of State-intervention being conducted here.  In stark contrast to 1997, Labour has now made the State central to the direction of the economy again by proscribing it the role of ideologue - at the expense of freedom of expression.

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