Capitalist models and social democracy: the case of new labour

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David Coates
Department of Political Science

Wake Forest University

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Some of the more critical readings of the adequacy and effectiveness of New Labour in power have been developed by scholars willing to link arguments about the trajectory of Labour politics to wider arguments about the character of the contemporary global economy and the space within it for the construction and development of distinctive capitalist models. Mark Wickham Jones and Colin Hay in particular have made that linkage in a series of important writings on the contemporary Labour Party. Their arguments are here subjected to critical review, and set against a third position on New Labour and global capitalism: one informed by the writings of Ralph Miliband on British Labour and by the arguments of Leo Panitch and Greg Albo on the limits of the ‘progressive competitiveness’ strategies associated with ‘third way’ social democratic governments.

Though New Labour has been in office for so short a time, there already exists a huge literature on different aspects of its policy and performance, some of which is broadly supportive in nature and some of which is decidedly not. The critical literature, when written from the Left, tends to treat New Labour as insufficiently radical both in aspiration and in impact. It shares a common reading of New Labour as conservative, but disagrees among itself about the sources of that conservatism and their wider implications. This paper extracts for detailed examination two ‘voices’ drawn from the critical side of that debate, each chosen because their arguments on New Labour are informed – as much of the rest of the critical material is not – by an explicit position in the wider debate on globalization and capitalist models. It compares and contrasts the arguments of Mark Wickham Jones and Colin Hay on the trajectory of labour politics in the UK and on capitalist convergence, and uses that comparison to establish a third position in the contemporary debate about New Labour’s politics.

New Labour in the Global Economy’
Mark Wickham Jones has written extensively on the development of economic policy inside the British Labour Party since 1970 (Wickham Jones, 1995a, 1995b, 1996, 1997; King and Wickham Jones 1990, 1998,1999a, 1999b) and has recently published an important essay on New Labour’s place in the global economy which links those developments to the wider arguments on the viability of social democracy found in Geoffrey Garrett’s widely admired study of Partisan Politics in the Global Economy (Wickham Jones, 2000). The Wickham Jones’s theses on the Labour Party include the following:

  • After the 1983 election debacle Neil Kinnock did make ‘a sustained effort…to relocate Labour within the mainstream of European social democracy’ (Wickham Jones, 2000,12): persuading the party to prioritize policies that strengthened the DTI, created a state investment bank, developed industrial training and encouraged long-term investment by creating barriers to easy corporate take-overs. The clear goal of policy then was: ‘to develop in the United Kingdom the kind of organized capitalism they perceived West Germany to enjoy’ (Wickham Jones, 1995, 469).

  • Later in the Kinnock period, and more determinedly under Blair, the Party retreated from such an attempt to consolidate the party as a reformist one. In a determined effort (a ‘prawn cocktail offensive’) to establish its credibility with the holders of mobile capital, the new party leadership abandoned any pretense of ‘a more vigorous industrial strategy’ (Wickham Jones, 2000, 17), adopted a conservative reading of the policy implications of the new growth theory, dropped elements of compulsion from its training initiatives and added elements of compulsion to its welfare to work ‘new deal’.

  • Wickham Jones was initially drawn to a ‘modified structural dependence theory’ (1995a, 487) to explain the trajectory of Labour politics. This was a view of Labour politics that emphasized the force of external constraints on Labour Party policy making in power: seeing the party as necessarily obliged to subordinate its radicalism to those constraints, to ‘satisfy the fears of markets’ and ‘to ensure business confidence (1995a, 488) and to avoid a voter flight triggered by the fear of adverse business reactions to the arrival of Labour in power. More recently Wickham Jones’ position has been rather different. Since the 1997 election victory, he has placed less emphasis than before on the impact of structural constraints, insisting that ‘much recent research has thrown doubt on structural dependence theory (1997, 263). The main research cited here is that of Geoffrey Garrett, whose distinction between economies containing encompassing labor market institutions and those without them is now offered by Wickham Jones as the most suitable conceptual framework for grasping both Blairite conservatism and its necessary replacement. On such a reading of the determinants of Labour Party politics, the Blair Administration was predisposed to a conservative reading of the new growth theory (and to the aping of its predecessor’s policies more generally) by the absence of strong trade union pressure of an encompassing kind (2000, 16).

  • But Wickham Jones has also argued that New Labour’s conservatism needs to be (and even at this late date can be) replaced by a more mainstream European kind of social democratic reformism. Even though it is not the case that ‘the Blair Government is a social democratic one or that it will adopt a reformist trajectory’, Wickham Jones has recently insisted that: ‘a variant of the social democratic model outlined by Garrett is potentially a plausible one for a reformist party in the UK if it enjoys sufficient electoral strength and political power’ (2000, 22); ‘Garrett’s model may still be applicable in the British context’; ‘social democrats may be able to offer policies desirable to capital….wage moderation may be possible without the existence of an encompassing labor movement’; and ‘most ambitious, it may be possible to develop an encompassing labor movement within the UK’ (2000, 1).

It is not that Mark Wickham Jones is an uncritical reader of Garrett’s work. He is well aware that the Garrett thesis is ‘understated in theoretical terms’, that the causal linkages it posits are never systematically exposed and that its ‘descriptions of the precise nature of the arrangements under social democracy’ are ‘at times rather vague’ (2000, 4). Certainly his prescription for the British Left sits ill with an argument that appears to preclude a social democratic government lacking encompassing labor market institutions from ‘combining reformist measures with a tough anti-inflationary policy’ (2000, 19); since he is adamant, as Garrett is not, that ‘a social democratic settlement oriented around wage moderation without union involvement is theoretically possible’ (2000, 20). However Wickham Jones still draws on the Garrett argument to explore: ‘what “policy space” a social democratic party in the UK enjoys and to consider whether a stronger reformist strategy is an achievable and more beneficial one than that taken by the present Labour administration’ (2000, 3); and because he does, we must too.

The full Garrett theses for our purposes here are the following.

  • Globalization has not weakened the capacity of social democratic governments to pursue egalitarian economic and social policies. On the contrary, it has strengthened that capacity in important respects. The constituency for policies that reduce market-risk and increase stability through the maintenance of a large public sector and a substantial welfare state has actually increased in size as global market forces have touched the lives of wider and wider sections of the population, and this is true even though the traditional working class has shrunk in number (Garrett, 1998,10-11).

  • It is quite wrong to over-state the propensity of foot-loose capital to ‘exit’ in the face of social democratic egalitarianism. There is no necessary tension between redistributive policies and competitiveness-inducing ones. There are ‘collective goods’ that capital needs from the state, and which social democratic governments can best provide: not just Adam Smith’s ‘public goods’ but ‘new growth theory’s investment in human capital and R&D. Garrett even argues that: ‘income transfer programmes or in-kind benefits for the unemployed, the sick and the old are “good for growth” in economies with strong encompassing labor institutions’; and that taking ‘a broad view of the positive externalities of big government’, it is possible to locate a ‘virtuous circle in which government policies that cushion market dislocations are exchanged for the regulation of the national labor market’ to ‘restrain real wage growth in accordance with productivity and competitiveness constraints’ and generate good industrial relations (1998, 5). Garrett claims that these ‘collective goods’ offset ‘the disincentives to investment generated by big government and high labour costs highlighted by neoclassical economics’. He also claims that ‘far-sighted capital can be expected to understand the upside of social democratic corporatism, and hence to forego the temptation to use the threat or the reality of exit’; and that it ‘is often not the case’ that companies can ‘increase their long-term profit stream by moving offshore’, because ‘large public economies can provide numerous benefits for capital’ (1998, 9,44).

  • Nor, according to Garrett, has globalization reduced the capacity of social democratic governments to generate competitiveness in their own economic base by policies of market-regulation. Instead, now as in the past, under certain sorts of circumstances those macroeconomic outcomes can be better than those generated by market-freeing parties of the right. We are told by Garrett that the competitiveness of an economy can be expected to improve in one of two scenarios: where the political and industrial wings of the labor movement are both strong (a social democratic corporatist route to growth); and where they are both weak (a right-wing neo-liberal route to growth). We are also told that, on a whole string of macroeconomic indicators (from growth and employment to price stability), there is no one-to-one correlation between the politics of the party in power and the quality of performance. Indeed the Garrett data suggests that, if there is a pattern, it is one that supports the claims for the superiority of social democracy, which performs better both than ‘incoherent regimes’ (those where one half of the labour movement is weak, the other strong) and also ‘market liberalism’ regimes (where strong right-wing governments face weak trade unions) (1998, 107). This pattern exists because: ‘the leaders of encompassing labour market institutions ensure that workers do not take advantage of market-cushioning policies to act in ways that harm the macro-economy – most importantly, by gearing economy-wide wage developments to the competitiveness of the sector of the economy exposed to global markets’ (1998, 130)

  • Garrett also argues that, where a social democratic government faces a weak labour movement, or a labour movement with strong individual unions but no overarching encompassing institutional leadership, it can be expected to move its policies to the right. Left governments are supposedly ‘in a real bind’ when facing strong but uncoordinated unions, because the imposition of ‘market discipline on wage setting’ will not improve economic performance since ‘individually strong unions will react by becoming more militant’ (1998, 36). In addition, where labour unions are particularly weak, ‘the deck is clearly stacked against the Keynesian welfare state’ and ‘even governments dominated by left-wing parties can be expected over time to move toward more free market-oriented policies, in an effort to improve macroeconomic outcomes’ (1998, 36-7).

Mark Wickham Jones’ attempt to integrate his analysis with that of Geoffrey Garrett then gives us one chain of causality through which to understand the dynamics of recent British Labour Party politics, namely that:

  • Models of capitalism are to be differentiated by the degree to which the labour institutions within them are encompassing;

  • Globalization as a process does not necessarily foreclose on the capacity of encompassing labour movements to combine policies strengthening the competitiveness of local capital with policies redistributing income and wealth;

  • Labour Parties facing non-encompassing labour market institutions find it harder to establish that compatibility, and come under electoral and macroeconomic pressure to move their policies in a market-freeing direction

  • New Labour’s policy trajectory is a clear example of the working through of those electoral and macroeconomic pressures in the absence of encompassing labour market institutions

  • It is always open to the Labour Party to create those institutions, or to substitute for them, so moving its policies back into the European social democratic mainstream.

Labouring under false pretences?’
Colin Hay has also written extensively on the Labour Party and on globalization. He initially broke into the debate on the post-1983 Labour Party in a series of exchanges with Mark Wickham Jones and others on the degree to which policy de-radicalisation was/was not a predetermined response to the structural constraints imposed on UK governments by the power of British capital, and on the extent to which that de-radicalisation was aligning New Labour with Thatcherism (Hay, 1994, 1997). His argument then, and subsequently, was that the political space available to New Labour was wider than any structuralist argument implied, that Labour’s policy trajectory was one it chose for and by itself, and it was one that the Party could (and needed to) change. What was wrong with the Party in the 1990s, according to Hay, was its supineness before both the local business community and its electorate: its propensity for what he termed the politics of ‘preference accommodation (whether directed at capital or the electorate)’ (Hay 1997, 235). What the Party needed to do instead, he argued, was adopt: ‘a preference-shaping strategy based upon a recognition and “narration” of the crisis of the post-Thatcherite settlement and the formulation of a new alternative vision of a truly post-Thatcherite “developmental state” capable of addressing the persistent structural weaknesses of the British economy’(Hay 1994, 701). Colin Hay’s reading of the impact of globalization on UK political options after 1997 was fully in line with this. In his view, New Labour had chosen to accommodate its definitions of globalization to those dominant in local business circles, and has thus interpreted the imperatives imposed by globalization in a particularly narrow way. It is also Colin Hay’s reading of the impact of gobalization on UK political options that such an interpretation actually prevented the New Labour Government from adopting policies vital to long term economic health, policies which were both necessary and became possible once the mythology of globalization was recognized and transcended.
Among the Hay theses on both the Labour Party and globalization are the following.

  • Since 1983 the Labour Policy has realigned its policies in a neo-liberal direction, playing policy ‘catch up’ to Thatcherism. Though the realignment needs periodising – being driven predominantly by electoral considerations prior to 1992, and by a desire to appease local business apprehensions after that date (Hay, 1999, 158) – overall ‘the trajectory of change for Labour has been overwhelmingly in one direction - that of convergence with the Conservatives on the basis of the dilution, weakening and selective abandonment of prior commitments” (Hay, 1999, 140). The conservative nature of the realignment became particularly marked after 1994. The 1994-6 shift in policy involved a move away from the more radical policy mix emerging prior to the Blairite period (when first Bryan Gould and then Robin Cook held the industry portfolios) and was sufficiently distinctive (and conservative) as to leave the Party no longer ‘labourist’ or really even ‘social democratic’ in character (Hay, 1997, 239). It was also sufficiently substantial to constitute an acceptance (and to a degree an actual embracing) of ‘the terms of a post-Thatcher yet nonetheless Thatcherite settlement’ (Hay, 1999, 59).

  • The Party’s move in this direction was ultimately not predetermined. Rather it was the product of a failure both of intellectual power and of political courage: a failure of New Labour’s think tanks and organic intellectuals to break decisively from a subordination to the perceived and articulated interests of UK finance capital (Hay, 1997, 246-7); and a failure of the Party’s leadership to ‘rediscover the political courage of its former policy convictions’(Watson and Hay, 1998, 408). In the process of that policy move: ‘Labour sought assiduously to anticipate and appease fears on the part of industrial and financial capital alike that it might implement in government a traditionally social democratic programme’ (Hay, 1998b, 18). The policy shift left Labour as a government more prone to ‘preference accommodation’ with UK capital and less prone to the politics of ‘preference shaping’ than more radical Labour governments in the past (especially the 1945-51 Governments). It also left the bulk of New Labour’ economic and social policies indistinguishable from those of the Major governments that preceded it (Hay, 1999, 105-133).

  • The post-1983 policy realignments were not ones imposed on the party by external imperatives. They represented a choice made between equally viable alternatives. Hay is conscious that – on the surface of things – it appears as if the policy realignment was directly driven by changes in the UK electorate on the one side and by pressure from business interests on the other. He is certainly aware of the Party’s penchant for focus group-led policy redesign: for what he, following Leys, calls ‘market research socialism’ (Hay, 1999, 66; Leys, 1990, 119). He is also aware of how deliberate was the ‘prawn cocktail offensive’ around 1992, through which the Party leadership sought to allay business fears through a series of meetings over food. But for Hay it is vital that we do not confuse description and explanation here, and that we do not rush to the view that either electoral or economic imperatives dictated only one line of policy. This is his key point in his dispute with Mark Wickham Jones over ‘modified structural dependence theory’: namely his absolute rejection of the view that ‘since the state is structurally dependent upon capital it must internalize the preferences of the latter and hence engage in preference-accommodation or capital appeasement’ (Hay, 1999, 173). The argument for him is ‘not that changes in the external environment have simply necessitated an accommodation with neo-liberal orthodoxy” (Hay, 1998b, 3). It is rather that, when we move from description to explanation, we have to allow an independent causal space for the role of ideas. For Hay, the explanation of the policy realignments of the 1990s lies ultimately in the party leadership’s perceptions of dominant electoral trends and in their perceptions of what business interests would or would not tolerate. As he put it more generally: ‘perhaps it is now also time to concede that, very often, we make our history in the image of the theories we construct about it, or, indeed, in the image of the theories others construct about it’ (Hay, 1999, 36)

  • The Blairite enthusiasm for market-based policies is thus primarily to be understood as the product of their narrow interpretation of the political imperatives associated with globalization. Hay argues that, on the ‘altar of (perceived) globalization’, the Blair Government has ‘sacrificed…a positive agenda for welfare reform: an active role for the state in industrial policy; and its commitment to restore an indigenous investment ethic to British capitalism’ (Hay 1998b, 2). The Blair Government has swallowed ‘the mythology of globalization’ and has cloaked its market-strengthening policies ‘in the language of inevitability, by re-inflecting them with the rhetoric of globalization’ (Hay, 1998a, 26,12). It is the Hay view that this is a tragedy for the New Labour project and the key to its missed moment.

  • In Hay’s view, a more ‘preference shaping’ party than New Labour has become would have adopted an analysis of UK economy and society more in line with that of Will Hutton (1994) and stuck to more interventionist economic policies (of a German or Scandinavian variety). At the heart of Hay’s optimism that a different (and more social democratic) programme is both possible and needed is his conviction that the long-term competitiveness of the UK economy requires the ‘restoration of an indigenous investment ethic to British capitalism’, one that can be delivered by the creation of a ‘more dirigiste conception of a supply side developmental state’ prepared to be more proactive, by creating a national investment bank, regional development agencies and other interventionist agencies (Hay, 1997, 249-51; Watson and Hay, 1998, 42).

  • It is that policy mix that, according to Hay, British Labour still requires: one that, since it briefly surfaced under Cook and Gould, is still within Labour’s idea-bank to be reclaimed. It is not that Colin Hay wants the Labour Party to do what it has not done before, or indeed to go back to Keynesian or AES positions that he considers now outmoded. It is simply that he wants it to return to the strategy emerging embryonically under Kinnock. As Watson and Hay put it, ‘our aim…is to reclaim the potentially radical, and within the context of neo-liberal economics, heretical erstwhile industrial and regional strategy’, the better to judge ‘the political and economic alternatives available to New Labour as and when the shackles of the neo-liberal paradigm have been cast off’ (1998, 408). The way to square the circle of the tension between Labour Party radicalism and the concerns of capital for the conditions in which successfully to accumulate is, for Hay, for the Labour Party to become ‘preference accommodating’ to the long term interests of UK-based industrial capital. The Party should pick industry rather than finance as its ally, and educate that section of UK capital in the way interventionist state policies can facilitate increased levels of manufacturing investment. That move alone will, in his view, generate long-term economic revival and electoral success: because, if the Party does not make it, if ‘it continues to consign itself to the politics of [short-term] preference-accommodation (whether directed at capital or at the electorate), then it can only be to the long-term detriment of British capital, the competitiveness of the British economy, and Labour’s traditional constituencies alike’ (Hay, 1999, 151).

  • The space for such a policy realignment remains intact not simply because of the openness of sections of UK capital to this ‘politics of persuasion and preference shaping’ (ibid). The space is also intact, according to Hay, because of the limited nature of the constraints imposed by changes in the global economy on the freedom of action of the nation state. Colin Hay aligns his own understanding of globalization with those he identifies as ‘second’ or even ‘third’ wave contributors to the debate on globalization (with Berger and Dore, Garrett, Weiss and Wade among others) in opposition to those ‘first wave’ writers (such as Ohmae and Reich) who argued that globalization has completely eroded the space for national variation. The Hay position is a less dramatic one. He argues that a degree of capital flight in the face of social democratic radicalism is likely, but is not terminal to the social democratic project (Hay, 1997, 243); that institutional variations in form and performance are still to be expected in a globalized world economy; and that the very term ‘globalization’ obscures by homogeneising heterageneous processes and by implying a direction of causality that must itself be questioned. In fact, Hay is critical of the Garrett thesis for precisely this reason: that Garrett makes an inadequate break with the first wave literature on globalization (Hay, 2000a, 141). Garrett offers a two-track scenario for a globalized world, and allows social corporatism to flourish only where encompassing labor institutions already stand ready. In contrast, Hay argues that the world is not as globalized as Garrett concedes and that the political options facing less organized labor movements (like the UK’s) are actually wider than the logic of Garrett’s argument allows (Hay, 2000a, 145-6). It is Hay’s view that the convergence between capitalist models, when it occurs, is contingent rather than inevitable, and is likely to occur regionally rather than globally (Hay, 2000b).

Hay is particularly keen to reassert the role of political agency in the creation of structures which are then mistakenly taken as totally destructive of alternative policy scenarios; and is fond of quoting Fox Piven’s view that ‘the realm of politics – of agency, imagination, of demonic and heroic intent – matters in creating the structures which then limit human possibilities’ (Piven, 1995, 114, in Hay and Marsh, 2000, 1). For him it is the discourse of globalization, rather than globalization as a set of real processes, which is proving terminal to the social democratic project, because of the propensity of leading social democrats (and New Labourites) to exaggerate the degree of constraints on their freedom of action brought by increases in trade, capital mobility and transnational corporate growth.(Hay, 1999, 1). As he put it when debating the evidence with Garrett: ‘social democratic corporatism may not have been undermined by globalization per se; but it may very well have been undermined by ideas about globalization – ideas about its corrosive effects on welfare states and encompassing labor market institutions’ (Hay, 2000a, 151). Hay is well aware that ideas and material forces co-exist in shaping political spaces – that both the idea and the material reality of globalization count (Hay and Marsh, 2000, 6). He is simply adamant that the assertion that globalization now makes neo-liberal policies imperative is a misleading myth: one whose adoption by parties of the Left represents ‘a profound failure of political imagination’ (Hay, 1997, 244), and one which, if and when broken, leaves the space open for more radical politics again.

All this then gives us a second line of causality through which to understand the dynamics of recent British Labour politics, namely that:

  • Models of capitalism only contingently and regionally converge;

  • Globalization does not foreclose the space for social democratic politics, though a particular discourse on globalization might;

  • New Labour has internalized that discourse, and has narrowed its policies accordingly, with potentially disastrous electoral (and economic) consequences;

  • A more radical center-left politics is both necessary and possible: necessary to the long term competitiveness of UK-based capital and possible precisely because of/to the degree that a future Labour Party can convincingly argue the case.

Towards an Alternative View
Mark Wickham Jones and Colin Hay have powerful and important things to say about the character of New Labour, and all of us will long be indebted to them both for the quality of the scholarship lying behind their arguments and for the clarity and range of the empirical and theoretical material they deploy in their construction and defense. Of the two, Mark Wickham Jones is the more empirical. Indeed that was the force of the defense of his own position when first challenged by Colin Hay in 1997: that his was an accurate ‘account of Labour’s development of economic strategy’ and ‘characterization of the phases that policy-making underwent’, to be set against Hay’s more ‘normative counterfactual’ (Wickham Jones, 1997, 263). So it was: and that was both its strength and its weakness. As an historian of the post-1970 period, Mark Wickham Jones has made (and no doubt will continue to make) a huge contribution to the recording of Labour’s internal policy-making processes; but what he has yet to do is to link that descriptive history to an adequate explanatory framework. Unlike many historians, he at least tries, as we have seen: first using structural dependence theory, then Garrett’s arguments. But there is a definite sense in the Wickham Jones corpus to date that those theoretical frameworks are add-ons to what is essentially an empirical project, add-ons whose quality actually declines in the move from Przeworski to Garrett. Labour Party history does confirm (and not just in the Kinnock period) what Wickham Jones asserted in his defense against Hay: namely ‘both relationships at the heart of the modified structural dependence theory: markets were nervous about a Labour election victory while the party’s leaders sought to allay those nerves through the moderation of its policy platform’ (ibid:259). Similar evidence could be adduced for each of the earlier Labour Governments, and has been (Coates, 1975:150-161; 1980, 155-161). The error that Wickham Jones makes is to shift from that framework towards Garrett’s; because, whatever else Garrett’s framework does or does not do, it certainly does not fit well with the Wickham Jones claim (2000) that British Labour can easily realign itself with the European model.
The whole thrust of the Garrett argument is otherwise, as Colin Hay has himself observed when critiquing Garrett for other purposes (Hay, 2000, 146). The central thrust of the Garrett argument is that a labour movement of the UK kind will succumb to party leaderships of a right-wing disposition, precisely because, in the absence of strong encompassing labour institutions, only neo-liberal policies stand a chance of generating economic growth. The Garrett argument makes New Labour’s drift of policy intelligible; though whether it constitutes an adequate explanation of that drift depends on the whole Garrett argument being sound (and I will argue later that it is fundamentally flawed). But right or wrong, it offers no genuine basis for Wickham Jones’ advocacy of a return to Kinnock-type policies: and its deployment serves only to pull Wickham Jones away from a full confrontation with the force of the structural dependence argument that all Labour Party leaderships will be so constrained, regardless of their personnel. Wickham Jones tells us that a more radical Labour government could introduce collective goods that all employers want, and that such a government could be reformist without union support. Yet the experience of previous Labour governments challenges the first assertion, and the growing gap between the political and industrial wings of ‘third way’ social democratic parties belies the second (on this, Bodah, Ludlam and Coates, 2000). What we now need from Mark Wickham Jones is not a move from a detailed history of the Labour Party to a general theory of capitalist models, or a wish-list of the kind represented by the article he wrote on partisan politics. What we actually need is a move from that detailed history to a specification of the determinants of Labour Party policy over the long period. There may already be such a specification buried in the Wickham Jones corpus; but if it is there it now needs bringing to the surface and defending against others (including the one to be laid out here as the culmination of this article).

Instead, for the moment, we merely have the Garrett thesis; on the general limitations of which I have written elsewhere (Coates, 1999b, 133-136; or 2000a, 104-106). Though superficially attractive to center-left enthusiasts because of its optimism about social democratic possibilities, that thesis is very double-edged. It actually serves to legitimate neo-liberal policies in economies where unions are weak (or can be weakened by Thatcherite initiatives). In fact Garrett treats the UK throughout his study – as Wickham Jones does not – as inexorably neo-liberal, and as such outside the social democratic mainstream (Garrett, 1998, 68). Garrett also builds his arguments about social democratic possibilities on data that is predominantly now a decade old, and explains adverse shifts in that data after 1990 – when ‘the historical bastions of social democracy [were] shaken by rising unemployment, greater public debt and welfare cuts’ (Garrett, 1998, 130) - as shifts contingent on accidental variables rather than on globalization per se. Colin Hay has correctly pointed to weaknesses in the data so mobilized (Hay, 2000a, 148-50); but even if that data were problem-free it would not of itself enable us to judge the adequacy of the counter-claim about the temporal specificity of the political space Garrett so wants to defend. No one is seriously denying that, in post-war capitalism’s ‘golden age’ prior to 1973, the space did exist for a variety of capitalist models successfully to cohabit, including social democratic ones. The issue now is whether that space is eroding. Garrett doesn’t prove that it isn’t, not even in his reply to Hay’s criticisms (where his argument becomes particularly opaque). In fact, it is Hay himself who makes the stronger claims about the persistence of that space, by challenging the understanding of globalization to which Garrett seems to subscribe. However neither of them refute fully the counter-claim that the space is being eroded, not just by false ideas about globalization’s political imperatives, but by genuine changes in the balance of class forces on a global scale. Garrett may deny that social democratic governments are under pressure to establish their credibility with international financial markets, and are free to pursue policies of tax and spend -- that they do still enjoy a high level of autonomy in fiscal policy (Garrett, 1998, 43) --­­­ but that has not been New Labour’s experience. So either New Labour have been misled (which is, of course, the Hay argument), or Garrett simply misjudges the degree to which capital mobility now does actually constrain Labour, which is my view (on this, Coates 2000a, 255-9).

The problem with Colin Hay’s work is rather different. Exciting and informed as it is, it too has at least one major problem on which, as yet, little has been said. Hay is keen to insist that we explain, rather than merely describe, and builds his own explanation of New Labour conservatism on an argument about ideas. Essentially he suggests that New Labour picked the wrong ones. But there is a paradox and a silence here. The paradox is this: Colin Hay has New Labour adopting a ‘post Thatcher and yet Thatcherite settlement’ at the very moment when, on his own account (Hay, 1999, 59-60,69), the limited capacity of that settlement to modernize the UK economy was becoming clear. Yet, if it was becoming clear, that makes New Labour’s choice of idea package even more difficult to explain; and in fact Colin Hay does not explain it. He documents it, and uses his evidence to explain New Labour’s convergence with the policies of John Major’s Government; but he never tells us why New Labour made that choice. He never tells us why/how New Labour managed to persuade itself that a set of policy initiatives as weak as the ones it adopted could transform the economic base of a capitalism in decline. There are, it must be conceded, elements of an explanation running beneath the surface of the Hay narrative. By advocating that New Labour return to the policies of Gould and Cook, he implies that the explanation lies in the attitudes and values of the personnel holding the relevant portfolios after Blair became leader. He offers, that is, an embryonic agency explanation (fully in line with his general thesis on globalization). However he does not explain why more conservative leaders should have come to the fore. Indeed a structural dependence theory (that does offer an explanation of their emergence) is explicitly rejected: but with nothing put in its place. Moreover, as a subsidiary tension in the Hay narrative, the Kinnock team appears both as evidence of Thatcherite ‘catch up’ and as the lost radical alternative; so that it is hard to know, from Colin Hay’s work, whether Gould and Cook are part of the problem or part of the solution. The Attlee Government appears too, in Hay’s work, as a more ‘preference shaping’ one than New Labour: part perhaps of what Martin Smith early perceived to be a Hay tendency to ‘over-estimate the radicalism of Labour in the past’ (Smith, 1994, 709), and certainly a view of past Labour radicalism that stands in sharp contrast to the argument developed later in this article about the persistent conservatism of Labour governments old and new.
Perhaps all this would matter less if the Hay position on globalization was not itself so distinctive. In parts of that work, Hay concedes that globalization is both a process (or rather a set of processes) and an idea, and that both processes and ideas act as constraints on government. But there can be no mistaking the priority that Hay affords, as an explanatory variable, to the idea of globalization: which then sends his analysis inexorably in an agency direction, advocating changes in ideas as keys to changes in constraints. He insists that Labour could persuade sections of UK capital to trust it in its interventionism, that the prawn cocktail offensive failed not because UK capitalists dislike seafood but because the sauce in which it was offered was too pale. However this runs counter to a whole body of material that suggests ideational resistance to such a politics among UK business leaders (Coates, 1994, 207-8: Boswell and Peters, 1997). Of course such data is not conclusive: since it is always possible to demonstrate disagreement between business opinions, to find a progressive business voice, and to argue that Labour needs merely to try harder to make that progressive bloc grow. But it is worth remembering that it has long been a feature of the UK business community that neo-liberal policies are in general preferred to interventionist ones, that state regulation of business and exchange controls are anathema, and that large UK financial and industrial concerns have (in comparative terms) an unusually developed propensity to export capital. So if ideas are all that stand in the way of effective Labour Party radicalism, it must be said that those ideas themselves have a permanence and ubiquity which might well help to explain the Labour Party’s reluctance to challenge them; and if ideas have a material base (as Hay and Marsh concede they do) then maybe the structural underpinnings of those ideas in the UK case are an important independent variable in their own right.
Of course, structural factors of that kind will still play the Hay way if Hutton is right: if financial and industrial interests in the UK diverge, if UK manufacturing is antiquated, and if a national industrial owning class still exists in sufficient size and economic centrality to act as the social base for a center-left developmentalist politics. But they will not play the Hay way if, at this stage in the internationalization of global production systems, the big UK players are now genuinely transnational in their scale of operation, if local manufacturing industry survives competitively on the basis of low wages and low value-added production, and if the local manufacturing sector is now too small and too under-capitalized easily to catch up with even its European opposition, let alone its North American and Japanese competitors. Wickham Jones ties his flag to Garrett, but Hay ties his to Hutton, and each must fly or fall by the quality of the flag pole chosen to sustain them.
The ‘dull logic’ of Labourism
The degree of uncertainty about the adequacy of the explanation of Labour Party trajectories offered by both Mark Wickham Jones and Colin Hay, and the question marks which surround the more general arguments on capitalist models on which they draw, then leaves space for a third, more structuralist explanation of New Labour politics, of a kind now long associated with scholars influenced in both their Labour Party analysis and more general theorising by the writings of Ralph Miliband (on this group, see Coates and Panitch, 2001). The key elements of that explanation can be set alongside those of Wickham Jones and Hay:

  • In Labour Party terms New Labour is both new and not new. It is new, in that there are discontinuities between its programme and previous Labour Party programmes: particularly its antipathy to corporatism and trade unionism (as against Old Labour) and in its lack of enthusiasm for redistributive taxation and industrial democracy (as against the Bennite Labour Left). (Coates, 1999c, 350-57; 1999d). But there are also powerful strands of continuity between this Labour Government and previous governments. There are strong elements of continuity in the economic and educational policies of this Labour government and of the Major Government which preceded it (Coates, 1999d). There are also strong elements of continuity between this Labour Government and previous Labour ones, particularly in the manner and centrality of its relationship to UK capital. The rhetoric of New Labour may be different, and its willingness to use state controls may be less, but the underlying closeness of its relationship with private corporate capital is not new in Labour Party terms. On the contrary, all previous Labour governments have ‘work[ed] with the grain of market forces, in a collaborative relationship with senior managers in major companies, to trigger privately-generated economic growth’ (Coates, 1996, 67); and this is exactly what New Labour is doing. The details of its policy stance may no longer be those of the Kinnock party, and the detailed changes clearly matter and need to be documented and explained; but their existence should not blind us to the underlying continuities of aims and practices which persist beneath the surface of the rhetoric and the detail.

  • New Labour is, in this sense, merely our contemporary moment in a longer story with its own internal logic – the story of British Labourism and its limited capacity for effecting social change. This is not the first time that supporters of a Labour government have experienced a shortfall between promise and performance, nor the first time that the continuities between Labour and previous Conservative policies have drowned out the potential for a major realignment of social power tucked away in the rhetoric of Labour politicians in opposition. It happened in 1974, when Labour entered office promising to effect ‘a fundamental change in the distribution of power and wealth in favour of working people and their families’; and then did not deliver on that promise (Coates, 1980). More contentiously it also happened between 1945 and 1951 (Saville, 1967, 50; also Coates, 1975, 42-74). So far from understanding New Labour as some kind of qualitative rupture from a more glorious and radical past, it seems wisest to emphasize its involvement in an on-going cycle of radical ebb and flow in Labour politics, one that historically has shown four persistent stages. Stage 1 is always that of electoral success built on fragile ground, power gained by

‘winning floating voters…on their terms, not yours – and so the whole retreat from radicalism and class-defined politics begins. 2. The internal tension this creates within the party – between a “left” who will not play the game and a leadership who “must”, [then] provokes the bureaucratization of internal party structures and the erosion of inner-party democracy. 3. Periodic experiences in office then confirm both this retreat from radicalism and the propensity to bureaucratization….alienating voters and supporters in the process. 4. Characteristically, the response…to the resulting election defeat is a fierce internal dispute, the search for scapegoats, the re-assertion of inner-party democracy, and a promise to do better next time – all against the background of growing popular cynicism and the dwindling strength, depth and range of electoral support.’ (Coates, 1986, 421)

  • What drives Labour Party politics, and gives it its inner logic, is the dynamic between these internal struggles and a set of powerful external constraints. The Labour Party has always been internally divided between positions now characterized as ‘old’ and ‘new’. It has ‘always been a broad coalition of two main groupings, two projects, two political universes: a coalition of social reformists keen to subordinate the power of private capital to progressive social ends, and bourgeois radicals keen to modernize the local manufacturing base’ (Coates, 1996, 68); and it has always united those conflicting groups around a common faith in the capacity of the parliamentary state to be used for either set of purposes. But in power the Party’s leaders have regularly experienced the limited capacity of the parliamentary state to effect progressive social change. In particular, they have regularly found that ‘no matter how many cocktail offensives’ they launched, they could never ‘pull UK private capital round just by the force of arguments alone’ (Coates, 1996, 70). Instead, in office they have regularly faced both material and ideological forms of resistance to any radicalism in their programme, resistance to which they have regularly succumbed, not least because their politics have always lacked any mechanism for building a strong counter-hegemonic culture from which effectively to resist and overcome conservative forces (Coates, 1989, 160-183; 1996, 63-4). On this argument, the regular backsliding of previous Labour governments from their opening set of radical electoral promises is best explained by the interplay of policy constraints generated from within the state machinery itself, by the persistent pressure of business and financial interests for policy orthodoxy, and by the particularly low tolerance for social reform characteristic of privileged circles at those moments of economic difficulty which alone propel Labour into office (Coates, 1975, 148-161). If New Labour is new in this regard, it is that it did its succumbing to local business interests before taking office; eschewing any pretence of major progressive social reform by insisting on the retention of much of the Thatcherite legacy and all of the Major Government’s spending ceilings. In this way, New Labour got its surrender in early, but surrender (to the articulated interests of the dominant sectors of locally-based capital) has been a central feature of Labour Party politics throughout.

  • Historically, the incapacity of Labour Governments effectively to control UK-based capital has been the product of the UK’s imperial past. Previous Labour Governments faced a capitalist class divided between financial and industrial interests in the way described in Hutton’s The State We’re In, experienced the superior political resources of the financial sector itself, and progressively succumbed to its political demands at the cost of continuing manufacturing under-performance. There were times in the past when Labour governments came near to breaking and resetting that class mould, tipping the center of gravity of dominant classes back towards locally-based manufacturing industry. The Attlee Government certainly tried, as did the Wilson administrations of the 1970s. But neither managed to fuse a bloc of social classes behind its industrial modernization programmes for more than a brief period: in part because sections of the trade union movement were opposed, but primarily because of the ingrained liberalism (in a classical anti-statist sense) in UK capital-owning circles – a liberalism consolidated there in the heyday of Victorian economic supremacy and never shifted since (on this, Coates 1994, 206-8). Wickham Jones and Hay may now both want that bloc re-constituted. In a sense we all do; but even before we ask if the component elements of it still exist, we have to recognize that, even when they did, the balance and character of class forces surrounding the UK state put their mobilization beyond the reach of Labour governments that were more ‘preference shaping’ than New Labour seems willing to be. And in this sense, the Hutton programme which Hay endorses, and which Wickham Jones has Kinnock inching his way towards, is really a ‘back to the future’ call for Britrish Labour. Labour governments did not manage to implement a state-led industrial modernization programme of a progressive kind in the past; and it is hard to see what has changed to make its achievement any more likely in the future.

  • In fact, what has changed is only likely to make it more difficult to implement such a programme than before; and it here that ‘globalization’ enters the story. We have to ask if there exists any longer a ‘national industrial bourgeoisie’ waiting for/available to an interventionist Labour Government committed to the reconstitution of a strong manufacturing base; or whether, on the contrary, as much of the evidence suggests, the leading sections of UK manufacturing capital have already become global players, unavailable for dirigiste reconstitution within the UK itself. The New Labour government inherited a low wage, low investment economy on the edge of a more prosperous European bloc of economies, and as such, found its manufacturing base attractive to foreign direct investors keen to build in the UK and sell into Europe: keen, that is, to invest in the UK so long as the economy remained in its existing place in the international order of things. New Labour also inherited an increasingly globalized economy – one qualitatively transformed not just by the idea of globalization but by the proletarianization of significant sections of the East Asian peasantry (Coates, 1999a, 658-9; 2000a, 251-9). These competitive conditions were even less conducive to the creation of a more generous ‘social structure of accumulation’ around UK-based industry than had been the competitive conditions surrounding previous Labour governments attempting a similar social resetting. That globalization may not have obliterated the space for social reform, but it has definitely squeezed it (Coates, 1999a, 656-60); and, ‘since the Labour Party was never very good at pursuing [either its industrial modernization or social reform] projects in power even when the space was greater, it is hard to see why it will be any more effective when the space is less’ (Coates, 1996, 71). What Mark Wickham Jones and Colin Hay advocate is, in this sense, a classic ‘progressive competitiveness’ strategy: one that I and others have argued is – in the present context of global economic relations – both self-defeating and ultimately non-progressive (Coates, 2000, 254; Albo, 1997, 8-22; Panitch, 1994, 83)

As such, gives us a third (and much bleaker) chain of causality through which to understand New Labour: namely

  • Capitalist models are to be differentiated by the character and balance of class forces embedded in their social structures of accumulation;

  • Changes in the global economy are squeezing the space for political projects committed to improving the industrial and social rights of workers;

  • The UK economy is already locked into that global order as a relatively low-wage, low investment economy with a high level of capital export;

  • The Labour Party has historically been unable to reset that position, or to avoid subordinating its social programmes to the articulated interests of the local employing class;

  • New Labour is even less keen to challenge UK-based capital than were previous Labour governments, and is hence even less likely than they to trigger a major repositioning of the UK economy in the global.

A concluding note
The three bodies of material surveyed here contain some major disagreements of a general as well as of a specific kind. Their authors seem to disagree on what is structural and what is contingent in the economic and social context surrounding the contemporary UK state; and they seem also to disagree on the extent to which the Labour Party has, or has not, become locked into some inexorable trajectory of political conservatism. Positions in wider debates on structure and agency, and on path dependence and political voluntarism, underpin each of the characterisations and explanations of Labour politics outlined here, and divide each from the others. Not surprisingly therefore, the three positions also suggest different politics for the next generation of the British Left: two (by implication at least) calling for reforms and activity within the Labour Party, one requiring the construction of a new political formation to its left (on this, Coates and Panitch, 2001). All three however share, by the very material they have chosen to deploy, a set of general understandings which their disagreements must not obscure. All three seem to imply that - no matter which left-wing political formation will or should be the main focus for action - the agenda to be pursued there ought properly to be set wider than has traditionally been the case in British labour politics. Each of the three arguments canvassed here suggests in its own way that, in the realignment of political forces that will no doubt follow New Labour’s period in power, any radical agenda worthy of its name will have to possess at its centre a set of views on the nature of capitalism as a global system, on the particular place of the UK economy within that system, and on the social forces operating outside the United Kingdom with which progressive elements within the UK will have to liaise and co-ordinate their politics. If the setting of these three positions alongside one another has no other benefit, it must at least indicate the importance of ways of thought and action that link national trajectories to wider trans-national issues, and so by implication at least signal the need to fuse the local and the global in the design of an effective politics for the Left in the first quarter of the twenty-first century. It is a fusion that the fragmentation of the academic community into closed sub-disciplines invariably serves to obscure, and one that is long overdue in a world in which capital is already so extensively globalized.

(8706 words)

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