Economics - Anti-Capitalism - Scotland

2007 - 2022

New Labour and the Devolution of the Axe

blairNeo-liberal globalisation is often understood in terms of a dichotomy between the state on one side and the market on the other – the more an economy is liberalised, the less the government is perceived to be able to implement distinctive policies. Set taxes too high, or regulate your labour market too heavily, and you will encourage capital flight and disinvestment. On these grounds, the state is – and ought to be – subject to the ‘laws’ of the market.

The problem with this account is that it rests on a false separation of the political and the economic. Neoliberalism doesn’t simply diminish the power of the state – it transforms the institutions through which state power is exercised. This transformation involves not just a ‘hollowing-out’ of state capacity, but also a delegation of power ‘up’ to transnational institutions, ‘out’ to privatised but state-regulated bodies, and ‘down’ to local institutions working within a strict, centrally-imposed budgetary framework.

So neoliberalism amounts to more than just deregulation. It generates new forms of social regulation and political control.

The New Labour project involved a reconfiguration of state power according to what has been termed “depoliticisation”: the attempt by politicians to create the impression that economic policy is not under their control but rather governed by neutral, usually technocratic, third parties.

The classic example of this is the granting of ‘operational independence’ to the Bank of England in 1997. This meant that interest rates would no longer be set by the Treasury – a political institution – but instead by a supposedly apolitical monetary policy committee. The Bank was mandated to hold inflation below a target of 2.5%. In this way, monetarist principles were encoded into the framework of British government, setting limits on policy-makers’ discretion while constructing a narrative of ‘fiscal credibility’ which Tony Blair and Gordon Brown used to present themselves as sound guardians of the economy.

This example reveals the logic behind depoliticisation. In practice, the setting of interest rates is highly political because it distributes benefits and burdens throughout society in a non-neutral way. For instance, a rise in interest rates will generally protect bond holders and financial services while raising running costs for industry and placing a downward pressure on wages. The delegation of power ‘out’ to the central bank veils the inherently political nature of monetary policy.

This offers a number of advantages to politicians. While power appears to be delegated out, the reality is that the executive retains arms-length control over key social and economic processes. For example, the governor of the Bank of England is appointed by politicians, the framework of rules within which it operates is set by government, and the Chancellor retains reserve powers over the operation of the Bank. Moreover, if a certain policy proves unpopular – such as raising interest rates in order to control inflation – politicians can deflect responsibility onto a third party.

How does this relate to the ‘state-market’ dichotomy set-out above?

Depoliticisation demonstrates that neoliberalism has in many ways enhanced rather than limited the power of the state. It allows politicians to pursue policies in line with their chosen growth strategy while dodging responsibility for unpopular decisions. There Is No Alternative, leading politicians claim, having consciously created the regime which now constrains them.

These institutional reforms reinforce, and are reinforced by, a dominant ideology which limits the realm of the possible and therefore of the political. Tony Blair repeated ad nauseam that the UK would have to adapt to the ‘realities of globalisation’, implying that the new global market was an external, independent constraint which politicians had no choice but to adhere to. At the same time, Blair enthusiastically advocated the further liberalisation of markets within numerous international forums.

There is a contradiction here: what is often treated as necessary and unchangeable – part of the ‘natural order of things’ – is in fact produced by conscious political action. Depoliticisation doesn’t just subsume the political sphere into an instrumental pro-market logic through institutional reform, it also colonises the public imagination, rendering ‘necessary’ in the minds of voters constraints which are in fact a matter of choice.

blairandbrownThe Scottish parliament was meant to be part of the depoliticisation project. Constitutionally and financially constrained by design, it was powerless to pursue an alternative to the UK’s finance-based growth model which crashed so spectacularly in 2007/8. Its ability to resist the current austerity programme is equally as weak. Indeed, in light of the expected £40 billion cut to the Scottish budget over the coming decade, the “devolved axe” will increasingly come to demarcate the limits of the politically possible (see Johann Lamont’s ‘Something for Nothing’ speech). In this way, the arms-length control of the political Centre (London) will be consolidated as Scottish civic institutions are locked into Westminster-imposed cuts.

But there is a flip-side to depoliticisation. Within the evolving social geography of the UK, new spaces of legitimacy and contestation are created. The Scottish Question arises out of this process. The inevitable transformation of Late Britain’s constitutional settlement offers the possibility of a radical re-politicisation on the UK’s periphery.

Re-claiming our capacity to democratically organise social institutions in line with a conception of the public good – reclaiming politics – is the only antidote to the depoliticising thrust of Anglo-liberal capitalism. The protection and promotion of the democratic intellect may seem like a relatively modest ambition, but it could have radical consequences. Independence campaigners take note.

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