The neoliberal era in Britain: Historical developments and current perspectives

Issue: 139

Neil Davidson

The world economy has experienced four systemic crises since the emergence of capitalism as a global system; the years 1873, 1929, 1973 marked the commencement of the first three. As Gérard Duménil and Dominique Lévy write: “Each of these earthquakes introduced the establishment of a new social order and deeply altered international relations.” However, it is less clear whether, as they also claim, “the contemporary crisis marks the beginning of a similar process of transition”.1 The end of neoliberalism has been proclaimed several times before, often by the same people on different occasions. For example, the late Eric Hobsbawm regularly produced obituaries for it throughout the 1980s and 90s, lastly in his 2002 autobiography.2 Hobsbawm refrained from making a similar pronouncement in 2008, even though it would have had greater plausibility than its predecessors. For states throughout the developed world—including those like Britain and the US which had been most committed to
neoliberalism—bought massive and in some cases dominant stakes in failing banks, using levels of public spending we had previously been told were no longer available or which could not be used without distorting the market.

Thatcher’s personal demise on 8 April 2013 might then have simply confirmed the sense of an ending. Her funeral, although an obscene insult to her many victims, would have merely represented theatrical compensation for her admirers, who were otherwise left contemplating a world in which she was reduced to “a historic footnote in a culture that had abolished history”.3 Unfortunately, as obituaries and commemorative pull-outs across the political spectrum from the Daily Telegraph to Socialist Worker attested, we still live in the world which she helped create. A degree of scepticism is therefore in order when confronted with claims that that “neoliberalism has self-destructed”.4 The current crisis has not yet led to a new period of “postneoliberalism”. Nor is there even a crisis of neoliberalism, as Duménil and Lévy claim.5 In Alfredo Saad-Filho’s terms, we are instead experiencing a crisis in neoliberalism, which, in the absence of successful resistance by the exploited and oppressed, may lead not to its extinction, but to its further evolution.6

There is, however, one fundamental difference between neoliberalism pre- and post-2008. As we shall see, the key figures in the former period—including Thatcher herself—were always more pragmatic and opportunistic than either their supporters or their opponents claimed. Nevertheless, they all shared a small but clear set of key objectives and strategies, even though these had unintended consequences. Their successors in the current period no longer do so. Instead they display an increasingly well-founded sense of panic and consequent incoherence. Yet in the midst of this chaos and uncertainty the ruling classes of the world have found one measure of agreement: that the cost of the current crisis will be borne by the people over whom they rule, rather than by themselves.

We have therefore in many respects returned to our starting point in the mid-1970s. After nearly 40 years of neoliberalism the very same solutions are now being offered to the same problems, with the same intended victims. But this is not an occasion in which “the great events and characters of world history” are repeated “the first time as tragedy, the second as farce”; for if the ruling classes do achieve their goals, they will simply extend and deepen the original tragedy, in circumstances where the social welfare provision built up during the post-war era has in many countries already been significantly reduced.7 Resistance to the phase of neoliberalism has already begun. We are not in a position to say what the future of capitalism will involve: a further mutation of neoliberalism; the replacement of neoliberalism by a new method of capitalist organisation; or—however distant this may seem—the overthrow of the entire system. However, we can say what neoliberalism was before 2008 and, equally importantly, what it was not.

Neoliberalism as a period in the history of capitalism

Up to this point I have treated neoliberalism and contemporary capitalism as if they were essentially synonymous, but this is of course precisely one of the major points at issue. With some exceptions—notably Alex Callinicos and the present author—contributors to this journal, above all the late Chris Harman, have been sceptical about the notion of neoliberalism as anything other than an ideology, or perhaps a set of policies.8 The real question, however, is whether neoliberalism is a useful way of characterising the entire historical period from 1973 to 2008 and possibly beyond. There seem to be two reasons for our suspicion of the term “neoliberalism” to denote a historical period, one valid, the other not.

The valid reason is a response to some of the ways in which certain characteristics of neoliberalism, especially financialisation and debt, have been used to explain the present crisis. Writers unwilling to abandon core tenets of Marxist crisis theory, including several associated with this journal, have argued instead that its origins have to be found in the systemic long-term problem of profitability experienced by the system since the late 1960s.9 I agree with these authors, but reasserting the inescapability of the law of the tendency of the rate of profit to fall (TRPTF) is a necessary but insufficient approach and can produce its own problems. The school of Political Marxism associated with Robert Brenner, for example, tends to focus on the underlying exploitative and competitive relationships constitutive of the system, rejecting attempts at periodisation as being focused on mere epiphenomena.10 But capitalism has never existed in a pure form, operating according to the model established by Marx in Capital, and this is precisely why we attempt to identify successive stages of capitalist development. Indeed, one way of characterising these periods is precisely by identifying the shifting nature of the main countervailing tendencies to TRPTF.

In the International Socialist tradition we tend to identify three main periods in the history of capitalism. The period of “classical capitalism”—that is the one most closely approximating to that described by Marx—entered crisis in 1873. This led to the second period, involving the simultaneous formation of monopolies within the heartlands of the system and expansion of colonialism without, ultimately leading to the fusion of both these processes in a new phase of capitalist development variously known as “finance capitalism”, “monopoly capitalism” or “imperialism”. The crisis of monopoly capitalism in 1929 in turn led to a third stage, consisting of the consolidation of state capitalism and underpinned from the start of the Cold War by the permanent arms economy, most completely in the Stalinist states, with social or liberal democratic variants in the advanced West and hybrid forms emergent in non-Stalinist areas of the former colonial world.11

This brings me to the invalid reason for rejecting the concept of neoliberalism: our reluctance to accept, at least until very recently, that a new stage or period did in fact open in 1973. Faced with changes to capitalism it is possible to adopt one of three main positions. One is to claim that there has been a fundamental transformation requiring the abandonment of pre-existing positions. “New, new, new. Everything is new”, as Tony Blair exclaimed to no doubt bemused representatives of the Socialist International shortly after Labour’s election victory in 1997.12 But even among actual socialists there are, of course, right and left wing responses to allegedly novel situations. The defunct journal Marxism Today, associated with the Eurocommunist wing of the former Communist Party of Great Britain, adhered to a right wing version, in which changes to capitalism since the Second World War had supposedly so weakened the working class and its organisations, that only alliances with sections of the middle class could deliver “progressive” outcomes.13

Italian “autonomism” is a left—indeed ultra-left—response to an earlier set of changes, the emergence of the so-called “mass worker” during the Italian post-war miracle; only in this case the prospects for the working class are apparently excellent, not least because, in the late version associated with Michael Hardt and Antonio Negri at least, the working class has grown to engross everyone who is exploited or oppressed by capital in any way, in the form of a “multitude” which constitutes the new “dangerous class”.14 The latter claim shows that even individual concepts can have both optimistic and pessimistic versions. Guy Standing, for example, argues that what he calls “the precariat” is also the new dangerous class, but not, as in the case of Hardt and Negri, because of their potential to overthrow capital, but because of their potential susceptibility to far-right demagoguery.15 In the face of this type of theoretical impressionism and the political indeterminacy to which it gives rise, a sense of the continuities involved in capitalism is an indispensable barrier to the adoption of fashionable stupidities.

But there is a second position that, far from exaggerating changes to capitalism, refuses to acknowledge that it has undergone—or in some versions, can undergo—any significant changes. Continuity is all. More commonly, this “fundamentalist” approach is encountered in the politics of the most dogmatic sections of the revolutionary left where the assertion of eternal truths such as “capitalism is still capitalism; the working class is still the working class” substitute for any real analysis. The most famous example of this is, of course, the position adopted by the mainstream Trotskyist movement in 1948, where adherence, not to general claims about the nature of capitalism in this case, but to specific claims made by Trotsky in 1938 that then became the measure of orthodoxy. This example is particularly important in the IS tradition, which was founded on Tony Cliff’s rejection of these claims and his revision of their theoretical assumptions on the grounds that they no longer corresponded to reality. This was not mere iconoclasm, but a recognition that, whatever their original merits, history had overtaken and rendered invalid Trotsky’s views on the nature of Stalinist Russia, the prospects for the world economy and the range of revolutionary outcomes in the Third World.

Cliff’s approach, particularly between 1948 and 1963, in a series of ground-breaking works from “The Nature of Stalinist Russia” to “Permanent Revolution” therefore exemplifies a third possible response to change, starting from the understanding that capitalism involves underlying continuities, without which it would cease to exist, but also that it undergoes periodic changes in form, which are the expressions of its historical development. Revolutionaries have to recognise and respond to the latter, rather than denying their existence just because they threaten to disrupt venerable organisational forms or established interventionist strategies. They should instead look for what new possibilities these changes offer, however unfamiliar or unsettling they may be.

Writing in this journal in 1979 Cliff used the metaphor of “the downturn” to encapsulate the situation of retreat and demoralisation that the British working class was beginning to undergo in the late 1970s, although the term was rapidly extended to encompass the global decline in the class struggle from the post-war high point between 1968 and 1975. This was a necessary recognition of reality which was contested within the SWP, but as Ian Birchall writes in his biography of Cliff: “The real argument in this period was not so much with those who denied the downturn, but with those who drew different conclusions from the facts.” Birchall is thinking here of the likes of Hobsbawm and André Gorz, and, unlike them, Cliff, “was concerned with a shift in the balance of class forces, not with a change in the nature of society”.16 Now, it is obvious that no one could have predicted what was to come from the vantage point of the late 1970s, not least because—as is always the case at decisive turning points—the future direction was undetermined, dependent as it was on the outcome of the global class struggle; but by the beginning of the 1990s the outline should have been clear: the mid-1970s had seen the beginning of a new period in the development of capitalism. We were dealing with a change in society, not just a change in the balance of class forces. But compared to our analysis of the period between 1948 and 1973, clarity failed to emerge from our discussion of the subsequent decades. Why?

The theory of the permanent arms economy was never as complete an explanation for the post-war boom as tends to be assumed in our tradition, but in retrospect it appears that Cliff regarded it as an exceptional interlude in the history of capitalism, after which unresolvable crisis and the “stagnation of the productive forces” proclaimed by Trotsky on the eve of the Second World War would resume, inevitably leading to a revival of the class struggle, regardless of temporary setbacks: “Capitalism in the advanced countries is no longer expanding and so the words of the 1938 Transitional Programme that ‘there can be no discussion of systematic social reforms and the raising of the masses’ living standards’ fits again”.17 There would be no more countervailing tendencies to the TRPTF, at least of any significance. The concluding passage to Harman’s Explaining the Crisis, first published in International Socialism in 1982—the year the neoliberal boom began—expresses the perspective:

This does not mean that the world economy is doomed simply to decline. An overall tendency towards stagnation can still be accompanied by minor booms, with small but temporary increases in employment… The present phase of crisis is likely to go on and on—until it is resolved either by plunging much of the world into barbarism or by a succession of workers’ revolutions.18

Harman later noted that the notion of “permanent crisis” was wrong: “It was a mistake on my part to use such a formulation—although I think excusable as we faced only the second real recession my generation had experienced and did so a mere four years after the end of the first.” But this concession was less significant than at first appeared: “It may not be in permanent crisis, but it is in a phase of repeated crises from which it cannot escape, and these will necessarily be political and social as well as economic”.19 I am not clear whether there is any substantive difference between undergoing a permanent crisis and merely experiencing an endless series of repeated crises: both formulations involve the same reluctance to admit that capitalism might be capable of recovering from the recession which opened in 1973.

Of course, there were immensely challenging implications for revolutionaries in a situation where it might not be enough to simply retrench while intervening as best they could until the balance of forces was once more in their favour. It was as if reaching an understanding of a new period, one in which both labour and capital were being profoundly restructured, and then developing a perspective and a strategy based on that understanding, was simply too massive, too much of a distraction from our immediate tasks to undertake. Without that understanding, however, our ability to accomplish even these immediate tasks will remain in doubt. “But history has shown us too to have been wrong, has revealed our point of view at that time as an illusion”, wrote Engels in 1895, reflecting on the German Revolution of 1848: “It has done even more; it has not merely dispelled the erroneous notions we then held; it has also completely transformed the conditions under which the proletariat has to fight”.20 Comparable reassessments of both the “erroneous notions” which we have held since the 1970s and “the transformed conditions under which we have to fight” are now in order. Of course, preparation of such an assessment involves knowledge already acquired from ongoing practical intervention as much as from theoretical study, but even direct experience of the struggle has to be interpreted.

What follows is therefore a first approximation, no doubt inadequate, at assessing the neoliberal era in Britain that has brought us to this point.21 My aim is to treat the neoliberal era as a totality. Whatever my other disagreements with Harman on this issue, he was certainly right to say that crises cannot be understood simply in economic terms. As Loïc Wacquant has written, “the prevalent conception of neoliberalism is economic”.22 At best, discussions of it as a historical phenomenon focus on the terrain where the economic and the political intersect. But to consider neoliberalism as a whole, we must pay at least as much attention to the social domain that overlaps with and mediates between the economic and the political.

The long-term effects of capitalist globalisation

During the period of unparalleled growth associated with the great boom of the 1950s and 1960s three developments took place in the world economy that established the framework for what followed. These rendered obsolete the largely national assumptions within which economic policy had been conducted since the Great Crash of 1929. The first was the unprecedented three-fold expansion of international trade, growing twice as fast as actual output across the period, with the biggest increase taking place in the decade immediately prior to the crash of 1973. But as the economies of the major states became more dependent on imports and exports than internal transactions, the relative differences between production costs across borders became far more significant than when the bulk of trade had been territorially self-contained.

The second development was an increase in the extent of cross-border production, utilising world forces of production rather than only those of one territorial state—a process driven, above all, by the need to achieve economies of scale that were only possible within a multinational market. We need to be careful of exaggerating the impact of this change: the spread of production across several states, and the consequent partial detachment from the control of any one, tended to be a regional rather than a truly global phenomenon, and it remained more difficult for capital simply to close production in one area and move it to another than multinational corporations would have workforces and governments believe. Nevertheless it did strengthen the position of multinational corporations and weaken that of states in relation to each other.

The third development was another example of internationalisation, but in this case of finance rather than production. It had two aspects. One was the increase in large-scale foreign direct investment (FDI). The scale of FDI in particular needs to be understood: it grew twice as fast as goods and services in the 1960s and four times as fast in the 1980s, while in the 1990s: “FDI soared by 314 percent, utterly eclipsing the 65 percent increase in world trade and the 40 percent increase in world gross domestic product”.23 The other aspect was the creation of “offshore” banking and flows of money capital unlimited by national boundaries: unlike factories, money can be moved with ease and is not dependent on protection of a territorial state or states. More than any other, this made government policies vulnerable to attack when they were seen to be acting against the interest of capital.

None of these developments rendered states completely powerless in the face of markets—that is the myth of globalisation assiduously cultivated by politicians seeking to evade responsibility for their actions. Neoliberalism represented a choice, but it was a choice increasingly difficult to avoid so long as the goal was the preservation and expansion of capitalism at all costs. When Nixon devalued the US dollar and detached it from the Gold Standard in August 1971, this first of all neoliberal policy decisions was, as Morris Berman points out, “the result of globalisation”, of the cumulative changes brought about by the resumption of the internationalisation of capital after 1945.24 In so far as there is a relationship between capitalist globalisation and neoliberalism, it was that the former set the conditions for the latter: a highly internationalised economy that had now returned to crisis conditions.

There were two direct preconditions for neoliberalism. One was the increasing size of the capitalist enterprise. During the great boom there was general support for state intervention among the larger businesses and corporations, while small businesses retained their traditional hostility to it. These differences expressed the relative security of their positions within the market: corporations were protected from the worst exigencies of price competition and were able to plan for longer-term investment growth, often in alliance with the state; small businesses were much more vulnerable and, to them, the state simply represented a source of predatory taxation and bureaucratic regulation.

Increased global competition changed the relative position of the corporations, so that all but the largest transnational corporations were placed in a similar position to the small businesses of the post-war period, in terms of their relative size within the market: “The process of globalisation has sharply increased the degree of competitive pressure faced by large corporations and banks, as competition has become a worldwide relationship.” Corporations still needed a home state to act as a base, but they increasingly required it to behave differently. Neoliberal globalisation “pushes them towards support for any means to reduce their tax burden and lift regulatory constraints, to free them to compete more effectively with their global rivals”.25 Corporations therefore began to demand some of the policies long advocated by Frederick von Hayek and Milton Friedman, and politicians and state managers began to implement them, not because individual opportunities to do so which previously been missing finally presented themselves, but because changed conditions of accumulation required changed strategies. Given the limited number of these available (assuming them to be in the interests of capital), it is unsurprising that the new practices now demanded began to overlap with existing theories.

The short-term impact of capitalist crisis

The second, more dramatic development was the resumption of economic crisis in 1973/4. As Ashley Lavelle writes, globalisation is a “proximate” explanation for the rise of neoliberalism, the end of the post-war boom an “ultimate” one: “Thus, the rapprochement [of social democracy] with neoliberalism is best understood as a response to changed economic conditions, which in turn shaped the ideological and political climates to put pressures on governments to open up their economies to cross-border flows of investment and trade, in the process creating the ‘globalisation’ many mistakenly credit with undermining traditional social democratic politics”.26 The precise causes of the return to crisis after 1973 have been widely debated, but some key features are highlighted by most analysts. Increased price competition from West Germany and Japan within the advanced world was made possible by intensive investment in technology and relatively low wages. This forced their hitherto dominant rivals—above all the US—to lower their own prices in a situation where production costs remained unchanged. American corporations were initially prepared to accept a reduced rate of profit in order to maintain market share but ultimately they too undertook a round of new investments, thus raising the capital-labour ratio and increasing the organic composition of capital, leading to consequent further pressure on the rate of profit.27

As Al Campbell writes, neoliberalism was therefore a solution to “a structural crisis of capitalism” in which “policies, practices and institutions” which had hitherto served capital accumulation no longer did so: “More narrowly, one can say that capitalism abandoned the Keynesian compromise in the face of a falling rate of profit, under the belief that neoliberalism could improve its profit rate and accumulation performance”.28 But the inadequacy of Keynesian policies was itself the result of changes to the nature of the world economy which had taken place during the long boom, and which made these policies increasingly difficult to apply with any possibility of success.

The emergence of neoliberalism as a conscious ruling class strategy, rather than an esoteric ideological doctrine, therefore took place in response to the end of the post-war boom, but in changed conditions created by that boom. The failure of Keynesianism and other forms of state capitalism predisposed many capitalists, state managers and politicians, not just to accept, but to wholeheartedly embrace, theories which they would earlier have rejected as eccentric, or even dangerously destabilising; but even then the policy shifts which followed were as often pragmatic adaptations as they were born of ideological conviction. In 1974 the Economist, at that time still advocating a more or less Keynesian approach, accused Sir Keith Joseph of being a “follower” of Friedman. Joseph responded saying that “the evolution of my views owes little to him”:

On the contrary, it stems primarily…from critical re-examination of local orthodoxies in the light of our own bitter experience in the early 1970s… By early this year [1974], we had a historically high rate of inflation, an enfeebled economy, the worst relations with the trade union movement in decades, and a lost election with the greatest fall in our share of the vote since 1929. Surely this was sufficient incentive to rethink—we are practical people who judge ideas and policies by results.29

In public pronouncements neoliberals initially tended to focus less on restoring profitability and more on reducing the amount of state expenditure and the size of the state itself (although usually treated as synonymous these are of course very different goals) and controlling inflation, since these could be presented as beneficial to citizens as taxpayers and consumers. But regardless of the way in which neoliberal goals were expressed, the major obstacle to the reorganisation of capital required by the crisis lay elsewhere. The Argentinian military junta of the 1970s had originally regarded their main opponent as the Peronist movement, but as one member later admitted, “by 1976 we already knew that the problem was the working class”.30 In fact, the imminence of revolution was no longer a threat by the mid-1970s, so in what sense was the working class “the problem”?

During the Second World War the Polish economist Michael Kalecki predicted that although “a regime of permanent full employment” would actually increase profits, employers would nevertheless oppose such a development because it would build working class self-confidence, encourage industrial action for improved wages and “create political tension”. In the end, Kalecki wrote, “’discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders”.31 The Golden Age did, of course, see many intense industrial struggles, but no concerted attempts to roll back the position of trade unions until the very end. Kalecki underestimated the extent to which employers would be prepared to accept pressure on wages, however unwillingly, provided the rate of profit was maintained at a sufficiently high level.

Once it fell below a certain level, as was increasingly the case from the late 1960s, this situation was no longer sustainable for capital, meaning, attacks not only on workplace terms and conditions, but also on those aspects of the welfare state—the “social wage”—which were beneficial to the working class. The main source of funding for welfare provision came from redistribution within the working class itself; but to the extent that it was also a cost to capital, a drain on investment, it was one which capitalists had reluctantly been prepared to pay so long as the system was expanding. When it began to contract, as it did after 1973, these costs to capital, like wages, had to be reduced, by directly attacking provisions directly in the hands of employers (pensions, health insurance) and shifting the burden of taxation even more decisively onto the working class. How was this to be achieved—and who was to achieve it?

Vanguard neoliberalism: a regime of reorientation

The unevenness of the global spread of neoliberalism indicates not only the relative strength and determination of national labour movements, but the presence of these qualities among the politicians who were intent on making neoliberalism a reality. Capitalist states are sets of permanent institutions run by unelected officials who act in the interests of capital more or less effectively; parliamentary government involves a series of temporary regimes consisting of elected politicians who act in the interests of capital, more or less willingly. But in times of crisis capital requires politicians who will decide on a particular strategy and fight for it with absolute conviction, if necessary against individual members of the capitalist class themselves. During the 1930s Antonio Gramsci discussed this type of ruling class response to crisis as “an organic and normal phenomenon”: “It represents the fusion of an entire social class under a single leadership, which alone is held to be capable of solving an overriding problem of its existence and of fending off a mortal danger”.32 By autumn 1976 leading figures on the right and centre of the Labour Party had essentially accepted the monetarist case for reducing public spending and indeed a number of other New Right positions besides, including those on immigration and education—in some cases from intellectual conversion, but in most from temporary expediency, at least at this stage.

The result, however, was to both give credibility to the arguments of those who advocated these solutions from principle and to expose Labour’s own inability to deliver them in the face of opposition from a still-powerful trade union movement and its own left wing.33 This was typical: only in the exceptional case of New Zealand after 1984 did an incumbent social democratic party transform itself into the agent of neoliberalism before it became the dominant form of contemporary capitalist organisation. The establishment of neoliberal hegemony in the late 1970s usually required an entirely new political regime, one which did not reluctantly acquiesce in policies they would rather have avoided, but who were fully committed to their implementation and, initially, this meant the established parties of the right.

In a British context, the role of Margaret Thatcher was therefore crucial to what followed. Her governments directly represented capital in so far as it was opposed to the working class movement (“vertically”), but could not represent every component of capital (“horizontally”), because there was no general agreement on capitalist strategy during the late 1970s, not least because individual capitals could and did suffer from the one eventually adopted from 1979 onwards.34 The transition from one form of capitalist organisation to another does not require the bourgeoisie to develop the new institutional forms required for a workers’ revolution: the state is already dedicated to the defence of capitalism in a general sense, but the activity of the various state institutions needs to be decisively turned in a specific and different direction. In the British case the dynamic behind the neoliberal turn came from a minority within the newly elected Conservative Party that acted as the vanguard of the British capitalist class. As late as the aftermath of the 1983 general election, Thatcher could still note that: “There was revolution still to be made, but too few revolutionaries”.35

What was the significance of Thatcher as an individual? According to Andy Beckett in his history of the 1970s: “Right up until the last days of the 1979 general election Margaret Thatcher was not the only possible answer to the questions the decade posed.” To support this conclusion he cites an assessment of her ascendancy by Alfred Sherman: “It was chance.” Callaghan could have called the general election for October 1978 and Labour would likely have won, but even if they had not and the Conservatives had taken office at the earlier date, the latter party would then have had to deal with the Winter of Discontent—a contest for which they were unprepared and which Thatcher herself believed would have destroyed the government before it had begun.36 And, as Colin Hay has argued, Callaghan’s caution in not calling an early election allowed Thatcher and her allies in the media to “construct” the “Winter of Discontent” as a crisis of governability which gathered her support.37

The opposite view to that of Beckett has been taken by the Scottish writer James Kelman, who wrote shortly after Thatcher’s removal from office: “If she hadn’t been around somebody else would have been chosen. The very notion of ‘Thatcherism’ suggests that what is happening in this country began with her and will therefore end with her”.38 Beckett sees the period as involving a series of contingent events which could have had other outcomes. Kelman is deterministic, emphasising the conditions of crisis which would have ultimately brought forth the necessary political leadership in an attempt to resolve them in the interests of capital. Both arguments have some validity, but both ultimately underestimate the role of leadership.

Thatcher was in a minority among the leadership of her party which had itself been elected (as it would subsequently be re-elected) by a minority of voters. She nevertheless had several advantages. One was the financial support provided by revenues from the export of North Sea oil, the price of which had soared as an unintended consequence of the Iranian Revolution, and which began to make a serious impact on the balance of payments around the time of the 1979 general election. If this windfall can genuinely be described as a happy accident in terms of her project, the same cannot be said for the fact that the Conservatives faced a compromised and incoherent Labour Party, a section of whose membership and voting base had shifted to the newly formed Social Democratic Party. This rather reflected the crisis of an entire social democratic tradition which depended on the continuing health of the capitalist system to provide reforms, the possibilities for which had now ended.

Finally, the real enemy of the Conservative government, the broader labour movement, was in ideological and organisational turmoil, already disillusioned by the previous Labour government and weakened by unemployment (although offered some relief by the emergence of the economy from the depths of the 1981-2 slump).39 Thatcher still came close to defeat on several occasions during the first years of the 1980s. One Thatcherite acolyte, John Hoskyns, Head of the Downing Street Policy Unit in 1980, later claimed that if the steel strike of that year had ended in “humiliation” for the government, “it is quite possible that Thatcher would not now be a household name, nor would union reform, privatisation or any other radical policies have been adopted”.40 Her position only became unassailable through two victories.

The first was over the Argentinian military in 1982. The “Falklands factor” did not have any lasting popular impact, although it was widely believed to have done by writers around the then influential Marxism Today. The real impact was to consolidate Thatcher’s supremacy over the Conservative Party. The war was a gamble for Thatcher, not in the sense that there was ever much likelihood of the British forces losing; their relative weight compared to the Argentinians, the military balance of forces, was far too one-sided for that to be plausible. The real risk was that victory would come at the price of so many British casualties as to be publicly unacceptable. It did not.41

The second victory was over the National Union of Mineworkers (NUM) in 1985, which finally consolidated the neoliberal regime in Britain. In order to win Thatcher was quite prepared to abandon market principles and use the state, in Georg Lukács’s words, “as a weapon”.42 She later revealed that in 1990, when her government began to consider further pit closures as a prelude to privatisation, she “never had regard to the commercial aspects alone”. This, she claims, was partly from a sense of “loyalty and obligation” to the working miners who had scabbed on the 1984-5 strike, but there was another reason: “I knew we might have to face another strike. Where would we be if we had closed the pits at which moderate miners would have gone on working, and kept more profitable but left wing pits open?”43 Thatcher at any rate understood that the general interests of her class sometimes required the adoption of strategies that were contrary to particular economic doctrines.

These victories demonstrated that Thatcher was the genuine embodiment of the bourgeois vanguard, an anti-Lenin prepared to take risks before which more cautious but less decisive members of her class would have retreated or sought compromise. She was necessary to capitalism in Britain in a way that, say, Ronald Reagan was not to capitalism in the US, his role being that of a charismatic but replaceable front-man for the collective leadership of neoconservative ideologues and corporate representatives which actually directed White House policy during his presidency.44 In that sense Kelman was wrong. Neoliberalism could not have been introduced at the speed and intensity it was without Thatcher or a similar personality. But Beckett is also wrong. The crisis in which British capitalism was engulfed would have forced whichever party was in office to move in neoliberal directions, albeit more slowly and with greater caution; there could be no return to the final years of the Golden Age, which Beckett is concerned to defend.

The attack on trade union power involved three chronologically overlapping strategies. The first was to deliberately allow mass unemployment to grow by maintaining high interest rates and refusing to provide state aid to industries in the form of subsidies, contracts or import controls. Interviewed by Adam Curtis in 1992 for his BBC documentary Pandora’s Box, Sir Alan Budd said that he was concerned that some of politicians “never believed for a moment that this was the correct way to bring down inflation”:

They did, however, see that it would be a very, very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes—if you like, that what was engineered there in Marxist terms was a crisis of capitalism which re-created a reserve army of labour and has allowed the capitalists to make high profits ever since.45

By January 1982 unemployment in Britain exceeded 3 million for the first time since the 1930s and remained at roughly this level until 1986: “Benefit payments were sufficiently low to cut many people off from the company of those who remained in work, which itself reduced the possibility of working class solidarity, but they were not so low that they induced the desperation that might have come from the prospect of starvation”.46 The effect of growing unemployment on the workplace was to discipline trade unionists into accepting what would previously have been unacceptable, including foregoing wage increases or even agreeing to reductions in existing wage levels (“givebacks”) in order to prevent closures which were in many cases only postponed. In some respects this internal discipline still persists. When workers express their concern over the possibility of redundancy, it is often treated as a proof of precarity when, as Kevin Doogan has pointed out, it is not the “likelihood” of job loss that is uppermost in their minds, but the “consequences”—the possibility of a catastrophic fall in income, inability to pay debts, bankruptcy and homelessness, all accompanied by enforced interaction with state institutions whose default attitude towards the unemployed is suspicion or outright hostility.47

The second strategy, the success of which ensured that little effective resistance to closures took place, was to provoke decisive confrontations between state-backed employers and one or two important groups of unionised workers: the showdowns with postal workers in Canada (1978), car workers in Italy (1980), air traffic controllers in the US (1981), textile workers in India (1982) all preceded that with the miners in the UK (1984-5). In 1981 the then general secretary of the Scottish Trade Union Congress, Jimmy Milne, denied that the current recession was comparable to that of the 1930s: “The 30s happened after the severe defeat of the 1926 General Strike. Today the movement is largely undefeated and it is still unbroken”.48 This was true in the sense that there had been no single defeat comparable to that of the British General Strike; indeed, the so-called “Winter of Discontent” of 1978-9 in Britain had seen the highest level of strike days since 1926 in actions which were largely successful: 29,474,000 strike days were “lost” in 1979 compared to 14,750,000 in 1974. But unlike the latter year, or the period from 1968 to 1975 more generally, these strikes were not imbued with feelings of optimism and hope, but of pessimism and despair.

The labour movement had been organisationally and ideologically weakened both by compromises with social democracy in office (the “Social Contract”) and an inability to conceive of any alternative to it in opposition. The imposition of neoliberal regimes required imposing the type of defeat which had not yet occurred, but which the weakening of the trade unions made possible. These defeats then acted as examples to other unions, against a background of multiplying legal restraints and increasing employer intransigence. Victory was not guaranteed in advance; it was achieved not only by the unleashed power of the state—formidable though that was—but also by the failure of other unions and the TUC to give effective support to unions under attack. Thatcher rightly gambled that most sections of the trade union bureaucracy would instead give priority to the continued existence of their organisations, however much reduced in power, rather than offering effective solidarity to those under attack.

The only event which would have resulted in an alternative vision of the future would have been the defeat of the government by the labour movement; in concrete terms, the victory of the NUM in the Great Miners’ Strike. This was by no means the impossibility that tends to be argued by those who—openly or not—welcomed the actual outcome; there were crucial turning points at which the NUM could have achieved victory as late as six months into the strike.49 Neoliberalism could have suffered a reverse in Britain, as it was later to do in France in 1995, and this would have spared many people from the ravages that in fact occurred. Trade union membership reached an all-time high in 1980 of 13,289,000; by 1990 this had fallen to 9,947,000 and by 1997 to 7,841,000. What is less clear is whether resistance within Britain would have qualitatively shifted the balance in international terms to the extent of preventing neoliberalism becoming established as the dominant regime of capitalist organisation at the international level. Once the neoliberal order had been established in the US and imposed on the transnational economic institutions which it controls, the model acquired a cumulative force: in the developed world the need to compete with the US compelled other states to try to adopt the organisational forms which seemed to have given that economy its advantage; in the Global South states accepted conditions which restructured their economies in neoliberal ways in order to obtain access to loans and aid.

The third strategy was to establish new productive capacity, and sometimes virtually new industries, in geographical areas with low or non-existent levels of unionisation and to prevent as far as possible the culture of membership from becoming established; latterly the process was repeated in the very areas, like Glasgow, where unionisation had previously been strongest. One of the reasons why unemployment remained high even though new jobs were being created was that these involved new entrants to the labour market such as married women and the young, rather than those who had lost their jobs. This was a more prolonged, molecular process than the first two strategies, and one in which the employers rather than the state took the lead, although the latter gave support through grants, subsidies and tax breaks. If the classic example of this strategy was the movement of productive capital from the old “rustbelt” industrial regions of the north east USA to the southern sunbelt, similar, less extreme versions of the same process took place in England (from the north east and north west to the “M4 Corridor”) and Scotland (from Glasgow to “Silicon Glen” and the New Towns like Livingston). By 1987 fewer than one male worker in ten in Glasgow was employed in manufacturing while nearly a quarter of all workers were women employed in public services.50

These geographical shifts within nation-states were more common and more damaging to trade union organisation than the threatened geographical shifts to locations in the Global South, threats which were often made by employers, but far less frequently carried out, not least because of the uncertainties over the ability of developing states to provide technological infrastructure and the cost in abandoning fixed capital which such relocations involved.51 However, as Graham Turner notes, “it is the threat of relocation that proves just as powerful as the reality of a transfer somewhere cheaper”.52 These threats proved successful at least in part because of the way in which sections of the trade union bureaucracy and the left have exaggerated the extent of outsourcing and external relocation, the principal effect of which has been to further reduce the confidence of union members to resist.53

The relative success of these strategies allowed corporate restructuring, the closing of “unproductive” units and the imposition of “the right of managers to manage” within the workplace, which in turn ensured that wage costs fell and stayed down, so that the share of profits going to capital was increased. The neoliberal onslaught also opened up the possibility of two longer-term developments, to which I will return below. The first was to increase the probability that, when economic growth was resumed, working class organisation would not be in a position to take advantage of increased profit rates by pushing for higher wages and better conditions: in other words, that any future boom would primarily benefit capital, not labour. In Britain trade union density in 1979 was 55.4 percent; by 1983, 47.6 percent; by 1987, 43.4 percent; by 1992, 36.3 percent; and by 1997, 29.9 percent.54 The second was to assist the social and liberal democratic parties to adapt to neoliberalism by weakening the main source of countervailing pressure from the broader labour movement, thus ensuring that fiscal and other changes favourable to capital were less likely to be reversed.

The successful onslaught on the labour movement allowed all the other components of the neoliberal repertoire that Harman called “anti-reforms” to be implemented.55 Any catalogue of those which proved more enduring would have to include the following, although the list is by no means exhaustive: privatisation of state-owned industries and utilities, flexible labour markets, outsourcing of non-core functions, deregulation of financial markets and the removal of exchange controls, abolition of protective tariffs and subsidies on essential goods, commodification of services once provided free at the point of use, the shift from direct and progressive to indirect and regressive taxation, and a monetary policy dedicated to the maintenance of low levels of inflation.

Neoliberalism as a system incorporating these elements only emerged in a piecemeal fashion, after many false starts, accidental discoveries, opportunistic manoeuvres and unintended consequences. Privatisation is usually treated as an example of how theory was turned into practice by the Conservative regime after 1979, not least by Thatcher herself, in whose autobiography it is retrospectively presented as a consistently held component of her programme for transforming Britain.56 There is no doubt that this led to major changes in social and economic life by the opening years of the 21st century.57 In particular it offered longer-term advantages to individual
capitalists (and to the state managers and politicians with whom they increasingly exchanged roles), if not to their states or the system as a whole: it allowed companies to expand markets into sectors from which they were previously excluded and established conditions for international mergers and acquisitions which state-ownership tended to deter.58

But the privatisation strategy was largely improvised in response to the adverse circumstances Thatcher encountered during her first term in office, and in particular to the combined impact of two pressures on the government, which were themselves aspects of the economic crisis that helped propel the Conservatives into office in the first place. One was the continued upward pressure on state spending caused by both the need for technological investment in the public sector and high levels of unemployment; the sale of key industries and services would both remove the need for the former and provide the Treasury with revenue to meet the latter. The other was the continuing fact of minority support for the Conservatives, despite two general election victories made possible by the British electoral system; the creation of mass share ownership from the flotation of state-owned public assets seemed to offer the possibility of a “people’s capitalism” whose adherents would henceforth look to the Conservatives as their natural political home.

Beyond the short-term cash injection attendant on each sale, neither of these goals was achieved. The current costs of subsidising the fragmented rail network, post-privatisation, may actually be greater than those formerly incurred by subsidising British Rail, while there is no evidence to suggest that either former tenants who bought their council houses, or workers who bought shares in privatised companies were any more likely to vote Conservative than before.59 Anthony Heath and his colleagues found in their study of the British General Election of 1983 that the council house buyers who voted Conservative were already predisposed to do so and that those who had previously voted Labour continued to do so in the same proportion as those who remained council house tenants.60

But neoliberal hegemony need not manifest itself in voting for the Conservatives. In fact, the ideological impact of privatisation on the working class was in most cases more subtle than is usually supposed. The shift which most people in Britain were forced to make from rented council housing to private home ownership, for example, did not in itself signal a dilution of working class consciousness; it did, however, mean that workers were in a weaker strategic position. As the Scottish novelist Alan Bissett notes of his friends’ current situation: “They can’t go on strike for longer than a day, because, well, who’s going to pay the mortgage?”61 Any prolonged industrial action by workers threatened their ability to meet debt repayments and consequently raised the prospect of repossession, bankruptcy and homelessness, and this is, of course, a function of debt more generally.

The situation led to caution in the face of neoliberal attacks, not conversion to the truth of neoliberal beliefs. Indeed, the way in which high interest rates tended to turn home ownership into a massive financial burden or even, in the era of negative equity, an outright liability was inclined to produce dissatisfaction with the system rather than acceptance of it. The real ideological consequences of privatisation occurred in two other ways.

The first is that when public services like health and education are privatised (or simply run as if they were private companies) those aspects of service provision which are not purely functional for capital, such as social justice in the case of the former and personal development in that of the latter, tend to be reduced.62 In education there is an additional ideological component. As Sheldon Wolin notes, privatisation “represents more than a switch in suppliers”, it also involves a “culture of competitiveness, hierarchy, self-interest”. Even under capitalism education involves not only the acquisition of literacy and other skills, but empowerment, in so far as students develop the ability to think independently: “Privatisation of education signifies not an abstract transfer of public to private but a takeover of the means to reshape the minds of coming generations, perhaps to blend popular education and media culture so as better to manage democracy”.63

The second consequence of privatisation is that when the state retreats from ownership and control it is much easier to present the effects of recession as outwith the reach of human intervention, except through participation in the market. “Separating industry off from the state and subjecting it to the market can depoliticise the attacks on workers that accompany the crisis,” explains Harman, “shifting the blame to the seemingly automatic, natural forces of the market”.64 At the same time, once the market is naturalised in this way, it can also have a consoling effect on those who suffer from its operations: “Frederick Hayek knew that it was much easier to accept inequalities if one can claim that they result from an impersonal blind force”, writes Slavoj Zizek, and “the good thing about the ‘irrationality’ of the market and success and failure in capitalism is that it allows me precisely to perceive my failure or success as ‘undeserved’, contingent”.65

Within a ten-year period, between the fall of the Berlin Wall in 1989 and the Battle of Seattle in 1999, all of the vanguard regimes of reorientation had been replaced by parties, or at any rate, individual politicians ostensibly committed to an alternative path: Chile (1989), New Zealand (1990), the USA (1992), Britain (1997), and the USSR (1999). Yet as Callinicos notes, “the hegemony of neoliberalism is demonstrated precisely by the fact that its policies survived the electoral defeat of the parties that inaugurated it”.66 This suggests two questions. First, why did nothing fundamental change? Second, since it did not, why could the neoliberal order not simply have been maintained by the original vanguard regimes?

Social neoliberalism: a regime of consolidation

Neoliberals claim that the establishment of free market policies will automatically produce comparably beneficial effects in other areas of social life. Not only are these claims false, neoliberalism also exacerbates all the inherent evils which capitalism involves in all its incarnations. Consequently, so long as citizens are able to vote, and as long as they have political parties prepared to represent their interests, however inadequately, for which to vote, there is always the possibility that the neoliberal order might be undermined. Neoliberal ideologues offer two solutions to this ruling class dilemma.

The first was to ensure that only sympathetic politicians are in control of the state, if necessary by non-democratic means. Hayek argued against making a “fetish of democracy” from The Road to Serfdom (1944) onwards, but his position is perhaps most clearly expressed in a justly infamous letter to the Times in 1978, where he wrote: “I have not been able to find a single person even in much-maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende”.67 The Chilean option is not, however, the preferred one, mainly because of the many inconveniences which military and still more fascist dictatorships tend to involve for bourgeoisies themselves.

The second solution was suggested precisely by the recognition that while formal democracy was desirable, substantive democracy was problematic. And in this respect at least, neoliberalism has attempted to implement the programme of its theoretical antecedents. Ellen Meiksins Wood rightly identifies the current attitude of the US ruling class to democracy as consisting of two strategies: “One is to find electoral processes and institutions that will thwart the majority in one way or another. The other—and this is ultimately the most important—is to empty democracy of as much social content as possible”.68

In concrete terms, it was increasingly apparent to more thoughtful members of the bourgeoisie that initial successes against the working class based on a strategy of all-out frontal attack had reached the limit of what was possible, particularly in Britain where the regime overreached itself by imposing a poll tax which provoked the first example of successful generalised resistance to the neoliberal programme. The earlier onslaught had achieved the basic aim of weakening the labour movement, instilling among the trade union bureaucracy a generalised structural reluctance to engage in official all-out action. The achievement of this condition is perhaps the greatest service neoliberalism has achieved for capital. Yet these same successes meant that it was possible to consider supporting, or at least tolerating, different parties from those of the right that had formed the original vanguard.69

Perry Anderson has pointed out that an electoral base, even a much reduced one, is unlikely to be attracted by “the pure doctrine of the free market that is the animating spirit of neoliberalism”. But the “ideological supplements” offered by Thatcher and Reagan—respectively imperialist nationalism and religious fundamentalism—were as likely to alienate support as to cultivate it. What were required were “regimes of consolidation”, formally characterised by social or liberal democratic rhetoric, which were able to incorporate the rhetoric of social solidarity while maintaining and even extending the essential components of neoliberalism.70 The social and liberal democratic parties could therefore bring an additional, more ameliorative element into the otherwise forbiddingly bleak repertoire of neoliberalism. This apparent supplementing of the naked laws of the market was originally marketed as a “third way” between traditional social democracy and neoliberalism.71 It is more accurately described by Alex Law and Gerry Mooney as “social neoliberalism”, since it involves not a synthesis of the two, but an adaptation of the former to the latter.72

The transition from regime of reorientation to regime of consolidation involved a transition from what, in Gramsci’s terms, was a war of manoeuvre to a war of position: the first involved a frontal onslaught on the labour movement and the dismantling of formerly embedded social democratic institutions (“roll-back”); the second involved a more molecular process with the gradual commodification of huge new areas of social life and the creation of new institutions specifically constructed on neoliberal principles (“roll-out”).73 Central to this shift were the social democratic parties that had traditionally seen their role as reforming or even transcending capitalism. How did they come to play the role of open, unapologetic, supporters of the capitalist system in its most uninhibited form?

Gregory Elliott argues that social democracy evolved over three distinct periods: 1889-1945, 1945-1975, and 1975 to date.74 As a movement, it has always been fundamentally supportive of capitalism in practice, but during the first period it was at least programmatically committed to abolishing it. The second period coincided with the post-war boom and allowed the possibility of positive reforms for the working class without threatening the system, although these were also delivered by forces to the right of social democracy, by Christian democracy in particular. Once the possibility of reform was removed, all that remained, for the leaderships at any rate, was the commitment to capitalism and some residual rhetoric. Central to this process was the crisis of Keynesianism. In ideological terms, the collapse of the Stalinist regimes did not so much “prove” as confirm the already widely held belief that any alternative form of economy to neoliberal capitalism was impossible.

When Blair took office he did not need to reconstruct the state on neoliberal lines, as that had already been accomplished by Thatcher: he inherited the new structure ready made. Relationships between the leadership and the party membership were also different. Like Thatcher, Blair was in a minority in the leadership of his own party, but could draw on the support of a membership which was prepared to support more radical changes in policy. But here the comparisons break down. Thatcher was supported by Conservative Party members who saw her as returning to
traditional policies eroded by years of compromise with the trade unions and social democracy. Blair was supported by Labour Party members who were prepared to abandon traditional policies out of desperation at their apparent inability to win elections and the consequent need to compromise with the policies of the Conservatives, which were assumed to have a popular resonance. In many cases the bitterness of this compromise was only made palatable by the self-delusion that the leadership was only pretending to embrace neoliberalism in order to gain power, after which the reforms they wished to see would be implemented.

No such reversal took place, of course—if anything, the New Labour leadership embraced capitalism and capitalists more enthusiastically than representatives of the traditional right have ever found necessary. As the house journal of neoliberalism, the Economist, noted, Blair’s “lasting legacy” was the way in which no mainstream politician now pursues policies that are radically different from his: “New Labour’s particular blend of free-marketry and social justice is now widely seen as the natural path of British politics, and few politicians of any stripe would dare veer far from it”.75

One of the key successes that neoliberalism has achieved for capital has therefore been to render inconceivable alternatives to the economic policies established by the initial regimes of reorientation—or at any rate, alternatives to their left. In Britain, for example, each successive phase of the neoliberal experiment saw the incremental abandonment of the repertoire of measures through which governments had traditionally influenced economic activity, beginning with Geoffrey Howe’s abandonment of exchange controls in 1979 and concluding (to date) with Gordon Brown’s transfer of the power to set interest rates from the Treasury to an unelected committee of the Bank of England. Anderson described the former as the Thatcher regime’s “first and most fundamental act on coming to power”, but the same may be said of the second in relation to Thatcher’s successor.76 The acceptance of neoliberal economic nostrums among mainstream parties has led a form of “depoliticisation”, which, as Peter Burnham says, “is a governing strategy and in that sense remains highly political”; it is a strategy which operates by “placing at one remove the political character of decision making”. It can take three forms:

First, there has been a reassignment of tasks away from the party in office to a number of ostensibly “non-political” bodies as a way of underwriting the government’s commitment to achieving objectives… The second form…is in the adoption of measures ostensibly to increase the accountability, transparency and external validation of policy… Finally, depoliticisation strategies have been pursued in an overall context favouring the adoption of binding “rules” which limit government room for manoeuvre.77

The potential for these developments has always been present in capitalist democracy. During the 1930s Gramsci distinguished between what he called “conjunctural” and “organic” phenomena. The former “do not have any very far-reaching historical significance; they give rise to political criticism of a minor, day to day character, which has as its subject top political leaders and personalities with direct governmental responsibilities”. The latter, on the other hand “give rise to socio-historical criticism, whose subject is wider social groupings—beyond the top figures and beyond top leaders”.78 What has changed is that the conjunctural is no longer an aspect of politics; it has become its essence. Consequently, most discussion of politics—in the developed world at least—is devoted to expending more or less informed commentary and speculation on essentially meaningless exchanges within parliaments and other supposedly representative institutions. Peter Oborne’s discussion of party convergence in Britain incorrectly assumes the process is complete, rather than simply well advanced, but his essential point is valid: “In practice the differences between the main parties are minor and for the most part technical. The contradiction between apparently bitter party competition on the political stage, and collaboration behind the scenes, defines the contemporary political predicament”.79 Debates therefore have the quality of a shadow play, an empty ritual in which trivial or superficial differences are emphasised in order to give an impression of real alternatives and justify the continuation of party competition.

The increasing irrelevance of politics has given rise to several clear trends across the West, not only in Britain, including increasing voter volatility and decreasing partisanship, indicating that many of those electors still involved in casting their vote do so—appropriately enough—on a consumer model of political choice, where participation is informed by media-driven perceptions of which result will be to their immediate personal benefit. Unsurprisingly, the numbers prepared to carry out even this minimal level of activity are declining.80 A British survey from 2004 showed that New Labour’s triumphant re-election of 2001 was achieved on the basis of the lowest poll (59 percent) in any post-war election, although it has since sunk further. The lowest point prior to 2004 was the general election of 1997, when the Labour Party, supposedly reunited with its electoral base, actually won with a lower share of the vote than it received in 1987, when it lost to the Conservatives for the third time in a row.81

The combination of increasing political convergence on the one hand and voter abstention on the other has led to a reconfiguration of the relationship between politicians and the state outlined at the beginning of this section. As Peter Mair notes, where once they were as concerned with “representation” as with “procedure”, the emphasis has now shifted decisively to the latter, away from civil society towards the state:

Parties have become agencies that govern—in the widest sense of the word—rather than represent; they bring order rather than give voice. It is in this sense that we can also speak of the disengagement or withdrawal of the elites, although while exiting citizens are often headed towards more privatised worlds, the exiting political leadership is retreating into an institutional one—a world of public offices.82

The balance sheet of neoliberalism

So much for the process by which our current situation was brought about: what type of Britain did the neoliberals create between the economic crises of 1973 and 2008? And how far does that world resemble the one they actually wanted to create?

A boom economy? David Harvey has argued that neoliberalism can be interpreted “either as a utopian project to realise a theoretical design for the reorganisation of international capitalism or as a political project to re-establish the conditions for capital accumulation and restore the power of economic elites”.83 There are actually three elements in this formulation, not two. One is neoliberal theory (“a utopian project”) which bears only a tenuous relationship to capitalist reality. The other two are different aspects of what Harvey describes as “a political project”, restoring power to economic elites and re-establishing the conditions for capital accumulation, although they do not depend on each other. I reject the first part of this definition on the grounds that there was no need to restore what had never been lost. What of the second and third?

Harvey is right to observe that neoliberalism “has not been very effective” in this respect.84 The underlying problem is that it has failed to increase the rate of profit consistently. As Robert Brenner explains:

During the long expansion of the 1990s, the average rate of profit in the [US] private economy remained 15-20 percent below that for the 1950s and 1960s, and a good deal more depressed than in Germany and Japan. From 1997, moreover, profitability plummeted in the US and across the world economy, even as the New Economy boom reached its zenith. Rather than setting the US and the world economy on a new course, the forces driving the New Economy actually exacerbated the fundamental problem making for long-term slowed growth—namely, persistent chronic over-capacity in manufacturing and related sectors making for reduced profit rates for the economy as a whole.85

Brenner correctly points to the failure of neoliberalism in achieving profit rates comparable to those of the Golden Age, but this is not the decisive issue. As David McNally points out: “[The] great boom was the product of an exceptional set of socio-historical circumstances that triggered an unprecedented wave of expansion. But, prolonged expansion with rising levels of output, wages and employment in the core-economies is not the capitalist norm; and the absence of all these is not invariably a ‘crisis’.”86 Constant use of the great boom as a reference point is problematic for two reasons.

First, it has led critics to expect that any subsequent boom must involve similar consequences for workers in terms of rising living standards, expanding welfare provision and increasing class confidence. Since the period after 1973 had precisely the opposite characteristics, the temptation has been to read back from the condition of the working class to the condition of the capitalist system, and claim that the entire period has been, if not one of crisis, then at least one of stagnation. But it is deeply implausible to think that a system as dynamic as capitalism could exist in a state of permanent crisis (or even recurrent crises) for 40 years—indeed, it would be difficult to understand why the events of the latter date could have had such significance had they not been preceded by a period of growth and expansion. There have been booms before, such as those of the 1890s and 1920s, during which most workers did not benefit and indeed continued to be subjected to generalised attacks on their wages and conditions. One of the objectives of the neoliberal assault, after all, was precisely to weaken trade unions to the point where they would be unable to take advantage of any improvement in economic conditions.

Second, unlike Marxist economists, capitalists and managers do not tend to look back over a 40-year period to compare conditions then with their current situation. It may be deeply significant to us that capitalist recovery after 1982 never resumed the levels of growth typical of the post-war boom, but this is somewhat unlikely to enter the calculations of the average CEO. Moreover, as Duménil and Lévy write: “The objectives of managers depend on the social order in which management is performed.” These objectives have changed: “After World War II, management basically aimed at growth (within corporations and in the definition of policies) and technical change. In neoliberalism, the main target became the stock market and capital income”.87 Managers now respond to demands from shareholders to produce immediate returns greater than their own performance compared with last year, or with those of their competitors from the current year. The decisive issue is instead whether the rate of profit is sufficiently high for them to continue to invest in production and be confident of an acceptable return, and between 1982 and 2007 this was largely the case.88 It is true, of course, that the general trajectory of the rate of profit was downward throughout the period since 1973, but the key word here is “continue”, since the general trajectory was also downward throughout the period of the postwar boom.89

The neoliberal boom from 1982 was in part the result of the partial recovery from any recession caused by the destruction of some capitals and the rationalisation and retooling of those which survived—although as is widely recognised the destruction of capital was insufficient to purge the system of accumulated dead labour. As a result, four other factors assumed major importance, each of which had, however, in-built limitations.90 These factors overlapped with each other in time, but their maximum impact on the system occurred in the following order.

The first and most fundamental was simply greater exploitation of the workforce, by increasing productivity on the one hand (making fewer workers in each enterprise work harder and longer) and decreasing the share of income going to labour on the other (paying workers less in real terms). The balance between the two differed from country to country: in Britain, for example, unlike the United States, it was the former which had the greatest impact, as average wages tended to increase—although this reflected the experience of workers in unionised and/or public sector workplaces, not all workers, as we shall see below—until 2010, when they began a decline which has still to be reversed.91 Both means of increasing exploitation were made possible by the relative success of the attack on the labour movement; both contributed to a partial restoration of the rate of profit. Both also had definite limits: the former was not physically sustainable on an indefinite basis and the latter restricted the realisation of value created in production by reducing expenditure on commodities.92

The second and closely related factor was a massive increase in consumer debt. As McNally notes, credit became crucially important in preventing the return to crisis only after the post-1982 recovery had exhausted itself. The East Asian crisis of 1997 and the dotcom collapse of 2000/1 signalled a “gargantuan credit expansion, increasingly fuelled after 2001 by record-low interest rates, postponed the day of reckoning”.93 The main reason for increased debt has been the need to maintain personal or familial income levels. The threefold strategy of allowing unemployment, disciplining labour and relocating production could never be permanently effective in cowing resistance, but the effect was prolonged by the very nature of the neoliberal boom. Because such growth as did take place in the heartlands of the system was based on investment in services rather than manufacturing or other productive sectors of the economy, such new jobs as were created tended to be characterised by more insecure employment or underemployment: “Britain now holds the EU record in the proportion of people employed in such occupations as data entry and call centre reception; there are as many people ‘in service’ (eg maids, nannies, gardeners and the like) as there were in Victorian times”.94 As the British government’s own statisticians recognise, these occupations are at the bottom of the pay scales; on average “personal service occupations earned £14,146 for the 2002/03 tax year”.95

But the creation of low-wage jobs was not the only reason. As we have seen, one of the characteristic features of neoliberalism is privatisation, a consequence of which has been the charging for services which were once either paid for or subsidised out of general taxation. The levels of taxation to which working class people are subject have not fallen; indeed they have increased as the sources of tax revenue have moved from income and property towards consumption, but they are now additionally required to pay for essential services which now take the form of commodities. The need for higher levels of necessary expenditure by the working class therefore encouraged—indeed, one might say, necessitated—a massive expansion in borrowing. At the same time debt also provided an alternative to struggle, in conditions where that was difficult or impossible. While New Labour was in office, total debt held by individuals rose from £570.0 billion to £1,511.7 billion, an increase of 165.2 percent. During the same period the ratio of personal debt to disposable income rose from 101.6 percent to 173.1 percent—an increase of 71.5 percent which exceeds even the increase of 49.8 percent registered during the preceding period of Conservative government.96

The third factor is what Harvey calls “accumulation by dispossession”.97 There are several major difficulties with this notion.98 Nevertheless, in the British context, one of the processes Harvey identifies was important in the partial recovery of capitalism: the privatisation of state-owned industries and public services. Again no new value is created, but neither is the process simply relocating resources within the system from the public to the private sector. Privatisation provided resources which—potentially at least—could be used directly for production rather than in the process of realisation or as part of the social wage. But here too there are limits to the process. There has been resistance and, although there have been subsequent re-nationalisations in response to the current recession, the opportunities provided by transfers from public to private ownership were essentially once and for all operations the scale of which will never again be repeated. Only the NHS still remains as the great remaining prize for privatisation and in England at least, this is already happening, although in a far more fragmentary way than those of the 1980s or 1990s.

The fourth factor, itself a result of profit rates failing to consistently reach what capitalists considered acceptable levels, was a fall in the proportion of surplus value being invested in production and the rise in the proportion being saved, to the point where the latter is greater than the former. Not for the first time in the history of the capitalist system, the need to find profitable uses for surplus capital, where productive investment was insufficiently attractive, tended to draw industrial capitalists towards financial speculation.99 Indeed, Duménil and Lévy have claimed that neoliberalism operates mainly or even solely for the benefit of the financial component of capital, which “managed the crisis according to its own interests, which prolonged the crisis” and which in turn “made it possible for finance to shift the course of history in its own interests”.100

However, it is not true that financial and industrial capital can be separated in this way. The Great Depression of the 1930s showed productive capital that accumulation could no longer depend on a largely unregulated system. “Financial capital, on the contrary, largely continued to adhere to the liberal line that unregulated markets always work best, including financial markets”. 101 The point at which productive capital came to share this view in the 1970s signalled the opening of the neoliberal era, but did not mean that it has become subordinated to financial capital, rather that their interests had converged. The new focus on finance had wider implications than the shifting focus of investment, which tends to be compressed into the term “financialisation”.102 But among all the complexities of arbitrage, derivatives, hedge funds and the rest, the essential point about financialisation is that speculation, like several of the factors discussed here, can increase the profits of individual capitalists at the expense of others, but cannot create new value for the system as a whole.

Given that the system was bound to re-enter a period of crisis at some point, it is perhaps unfair to criticise neoliberalism for failing to maintain the rate of profit permanently. It did, however, provide one other major service to the capitalist class and the bourgeoisie more generally, which are outside the terms of Harvey’s definition, although it might be compatible with it if we recast the notion of restoring power to the ruling class in terms of the transfer of wealth and resources to the ruling class and its hangers-on. As Sidney Pollard pointed out as early as 1990, of all the advanced economies, Britain had the highest inflation, the highest interest rates and the highest unemployment, combined with falling output, declining national income and the longest hours: “The exception was the one aim which, curiously, the government did not stress in its statements of policy, though it clearly played a large part in its programme; the transfer of income from the poor, and especially the poorest, to the rich, and especially the richest”.103

These transfers were a general phenomenon. Duménil and Lévy note two movements in the fortunes of the ruling class: one involving a “relative deterioration” in their holdings at the beginnings of the crisis in the 1970s, and the other “a restoration and more under the neoliberal banner”. The latter is what they describe as a “tour de force accomplished by the dominant classes through neoliberalism, both in the absolute and relative to the other classes of the population”, but it was one which involved diverting declining profits from productive investment.104 As Saad-Filho writes, in one sense, “the notorious inability of the neoliberal reforms to support high rates of investment or high GDP is really irrelevant…it has been able to support much higher standards of consumption for the top strata of the population and its promotion of consumer debt”. This, rather than the capacity “to promote growth, reduce inflation or even to increase the portfolio choices of the financial institutions” was the real consequence of neoliberalism.105 The neoliberal programme benefited individual members of the capitalist class by increasing their personal wealth, at the expense of the living standards of the poor and the working class. In Britain, even after ten years of Thatcherism, the average CEO of one of the FTSE top one hundred companies in 1988 earned “only” 17 times the wage of an average worker; by 2008 it had risen to 75.5 times.106

Neoliberalism had always been an ideology—not disinterested theory, but the articulation of particular class interests. It is unsurprising, therefore, that no significant section of the international ruling class has abandoned its belief in the fundamentals of neoliberal capitalism: they have too much to lose. But neoliberalism is also an ideology in a second sense, not only one which presents the perspective of a particular class as universal, but also one which seeks to explain or justify the discrepancy between theory and reality, between the promise of improved standards of living for all and the delivery of inequalities in which benefits are reserved for the rulers of society. Although the clearest expression of the view that “a fully free, capitalist system has not yet existed anywhere” is to be found in the writings of Ayn Rand and her acolytes, the sentiment is much more widespread.107 Yet precisely because this vision is unrealisable, neoliberalism can never be satisfied; enemies are never completely overcome, if only because they must be constantly invoked to explain neoliberal failures: “Even after decades of neoliberal reconstruction, it is remarkable how many present-day policy failures are still being tagged to intransigent unions, to invasive regulations, to inept bureaucrats, and to scaremongering advocacy groups”.108

A market state? The other area where theory and reality have been at odds is in relation to the role of states.109 Privatisation notwithstanding, neoliberal capitalism could not dispense with their services—a truth upon which the chief executives of many an ailing financial institution has had occasion to reflect since September 2008. Unlike their neoclassical predecessors, however, neoliberals tended to emphasise anti-state rhetoric, whatever their record in practice. But, as we have seen, the opposition of interventionist state and free market is false. “Neoliberalism rejected the state of the social democratic compromise, not the state in general”.110 Indeed, in some respects states under neoliberalism have accrued even more power to themselves than they did during the Keynesian era.

The measures of nationalisation and state control in response to the present crisis are therefore not a return to state interventionism, since it has never ceased. Indeed, even though the neoclassical and neoliberal schools both see an important role for states—enabling market activity on the one hand, disabling collective opposition on the other—their actual role in direct economic terms has gone much further than either theoretical tradition allows. Both the size of states and the level of state expenditure remain substantial and much of this expenditure was directed towards forms of state activity long established during the preceding social democratic era. As far as the economy is concerned, the arms industry saw no diminution of government largesse in either Britain or the US, and more targeted assistance was made available for companies deemed too important to the economy (“too big”) to fail. Harman points out that “states have intervened more to deal with crises since the 1970s than in the 1960s and 1950s for the simple reason that the crises have been much more severe”.111 What then has changed under neoliberalism?

It is not the amount of state expenditure and areas of state intervention that have changed, but where money is spent and how activities are carried out. The process has been one of “reorientation rather than decline”.112 As Costas Lapavistas explains: “What has vanished irretrievably is the notion—characteristic of post-war Keynesianism—that economic intervention should aim at achieving full employment and securing social welfare”.113 John Clarke and Janet Newman have argued that, in effect, this is already happening as the state follows a strategy of “dispersal”: “The state delegates—through a variety of means—its authority to subaltern organisations that are thus empowered to act on its behalf”.114 The result has involved new relationships with private capital. Welfare provision best illustrates the point. Until the advent of the coalition’s austerity programme in 2010 actual levels of spending were maintained, partly because of resistance to attacks, but also because there are limits beneath which expenditure on the social wage cannot drop without endangering the process of accumulation.115 But beneath headline spending figures, the services have been reconfigured. Care of children, the elderly and people with disabilities or long-term illness, for example, has increasingly been passed from the state to the family—which generally means the female members of the family—with these “informal” arrangements then subject to evaluation by state agencies: “While the state has withdrawn in some ways, its powers and apparatuses have been extended in others—transferring ‘responsibilities’ but simultaneously creating the capabilities of surveillance and enforcement to ensure that such responsibilities are being fulfilled”.116

These changes demonstrate the fundamental difference between classical liberalism and neoliberalism. Mark Olssen writes that in the latter the state creates “the appropriate market by providing the conditions, laws and institutions necessary for its operation” and “an individual who is an enterprising and competitive entrepreneur”, the link between them signalled by:

a change in subject position from “homo economicus”, who naturally behaves out of self-interest and is relatively detached from the state, to “manipulatable man”, who is created by the state and who is continually encouraged to be “perpetually responsive”… It is not that the conception of the self-interested subject is replaced or done away with by the new ideals of “neoliberalism”, but that in an age of universal welfare, the perceived possibilities of slothful indolence create necessities for new forms of vigilance, surveillance, “performance appraisal” and forms of control generally.117

As this suggests, it is in the areas of repression and surveillance that the power of the state has heightened to a degree previously unimaginable except under conditions of total war last experienced between 1939 and 1945.

A broken society? Since neoliberalism has been met with resistance as well as submission, we have seen an extension of the type of legal constraints earlier imposed on trade unions to social movements concerned with, for example, Third World debt or the environment. The limitation on the number of strikers allowed to picket outside a workplace, for example, has its analogue in the more recent proliferation of restraining orders issued against demonstrators outside research laboratories, company headquarters or in urban public space. But resistance was only one driver behind the growth of the state’s repressive capacities. Two other consequences of neoliberalism were of equal significance.

The first was the failure of neoliberal policies to achieve what they promised in material terms for the majority of people, and the resulting increases in poverty and inequality on the one hand, and of the illnesses, family breakdown and crime which they tend to bring on the other. As Richard Wilkinson and Kate Pickett note:

Long before the financial crisis which gathered pace in the latter part of 2008, British politicians commenting on the decline of community or the rise of various forms of anti-social behaviour would sometimes refer to our “broken society”. The financial collapse shifted attention to the broken economy, and while the broken society was sometimes blamed on the behaviour of the poor, the broken economy was widely attributed to the rich.

They argue that both breakages are in fact primarily caused by the growth of inequality, which is to say, by the rich:

Although it does look as if neoliberal policies widened income differences…there was no government intention to lower social cohesion or to increase violence, teenage births, obesity, drug abuse and everything else… Their increase is, instead, an unintended consequence of the changes in income distribution.118

Unintended or not, renewed rounds of the kind of state intervention supposedly rejected by neoliberalism in theory were required to deal with the social problems neoliberalism generated in practice.

The second consequence was not neoliberalism’s material failures, but its inherently contradictory aspiration to create a population that behaves as sovereign individual consumers in the marketplace, obedient wage labourers in the workplace and subordinate mass citizens before the state. As several very different authors have noted, a market which entrenches personal fulfilment through consumer choice as the ultimate value not only destabilises those forms of identity which have traditionally helped support the capitalist system, like the family and the nation, but the very personal constraints which allow accumulation to take place.119 As Zygmunt Bauman argues:

any turn of events that plays havoc with the expectations suggested by a person-focused ideology is perceived and “made sense of”, in the same ideology of privatisation, as a personal snub, a personally aimed (even if randomly targeted) humiliation; self-respect, as well as feelings of security and self-confidence, are its first casualties. The affected individuals feel debased, and since the ideology of privatisation assumes the presence of a culprit behind every case of suffering or discomfort, there ensues a feverish search for the persons guilty of debasing them; the conflict and enmity that arises is deemed personal. The guilty ones must be located, exposed, publicly condemned and punished. “Them” are as individualised as “us” in the ideology of privatisation.120

The political implications are ominous. Andrew Sinfield once wrote that “the larger danger of Thatcherism”, which can here be taken as a surrogate for neoliberalism as a whole, was not so much its victories over trade unions or social democracy, but “its eventual failure to satisfy or control the emotions it arouses”: “The rhetoric of Law and Order and victimisation of subordinate groups, with which it attempts to make plausible its social and economic policies, provoke forces of retribution and stimulate expectations that may find terrible kinds of satisfaction”.121 It is this that has helped feed the growth of fascism in Europe, but this may not be the most frightening consequence. Fascism, even under the mask of respectability worn by the Front National in France or by the British National Party, can be identified, isolated and crushed; and in Britain at least there has been a tradition of successfully doing so from the mobilisations of the Anti Nazi League and Rock against Racism in the late 1970s, to those of Unite Against Fascism and Love Music Hate Racism today. A bleaker, because more insidious, scenario would be for racism and xenophobia to become treated as commodities which can be chosen by consumers, not as part of a far-right project, but routinely, like cars or foreign holidays.

The changes in the form of property ownership brought about by neoliberalism, which did not in any fundamental sense alter capitalist relations of production, nevertheless had effects on human subjectivities. The neoliberal state therefore cannot simply be that of economic management, but also that of social control. Thus, although the late Neil Smith was right that “the neoconservative moment has passed” as a result of the debacle in Iraq, this only refers to a very narrow aspect of neoconservatism as a particularly “adventurist” strategic option for US imperialism.122 Neoconservatism as a necessary repressive accompaniment to neoliberalism in domestic terms is still alive and well. “The anarchy of the market, of competition, and of unbridled individualism…generates a situation that becomes increasingly ungovernable”, writes David Harvey. And in the face of “social anarchy and nihilism” he notes, with perhaps excessive restraint, that “some degree of coercion appears necessary to restore order”.123

The turn to neoconservatism in this sense will now become even more marked, as the unemployed, single parents, migrants, refugees and asylum seekers find themselves the target of a cynical scapegoating strategy to divert hostility away from those responsible for the crisis towards those who will suffer the most as a consequence of it: a classic case of blaming the victims of neoliberalism, in this case to shift responsibility for the failures of neoliberalism to resolve the problems created by capitalism. Unchecked, the future may well be as foreseen by George Steiner at the fall of the Berlin Wall, combining repression and commodification: “The knout on the one hand; the cheeseburger on the other”.124


If the preceding analysis of neoliberalism is correct, what strategic conclusions can revolutionaries draw for Britain? It was obviously essential for revolutionaries to throw themselves into the attempt to build a strike movement in defence of pensions. Similarly, an organisation like Unite the Resistance is required to link and inform the often very different struggles against austerity. But these are responses to the immediate onslaught which our class faces; what is also required is a strategic orientation which takes into account “the changed conditions under which the proletariat has to fight”, as these have developed over the last 40 years. Clearly this conclusion is not the place for a detailed discussion but some elements of such a strategy might include the following:

The first is in relation to the state. One justification for the existence of a revolutionary party is the need for the working class to match the centralised power of the state with a comparably centralised organisation able to act decisively, coherently and uniformly across the national territory. This is obviously still relevant since one feature of neoliberalism has been a continuation of long-term tendencies, dating back to the late 19th century, towards the ever-greater accumulation of state power, especially in the areas of surveillance and repression. (that includes the devolved nations: the Scottish National Party government in Edinburgh is currently engaged in establishing an all-Scottish police force.) But if, as I have argued elsewhere, neoliberal strategy is increasingly to devolve responsibility for imposing austerity down to the lowest elected administrative levels, then this points towards a structure characterised as much by fragmentation as consolidation—with the former tendency being strengthened by the disintegrative effects of privatisation.125 In these circumstances the ability of the revolutionary party to act in a centralised way has to be complemented by a far greater sensitivity to local situations, not simply in the devolved nations, but at regional and city level, where a variety of different responses and initiatives will be required. This is not a call for the establishment of “federalist” structures, but for recognition of the fact that general perspectives conceived at a national level—which are obviously still essential—must be creatively adapted and applied to specific situations which arise at the local level.

The second is in relation to the Labour Party and the question of reformism more generally. For revolutionaries in Britain a central question is whether the Labour Party has been fundamentally changed by the adoption of social neoliberalism. For John McIlroy there is no doubt: “What Lenin had characterised as a contradictory formation, a bourgeois workers’ party would become, in the hands of Blair and Brown, a straightforward bourgeois neoliberal party, its affairs complicated by the institutional role of trade unions”.126 This obviously raises the question of how we define a social democratic party. Revolutionaries tend to emphasise, or oscillate between, highlighting different characteristics at different times, depending on the nature of the argument at hand. It is clear, however, that working class perceptions of Labour alone cannot be decisive unless they actually correspond to reality. Many organised workers and oppressed groups in the US regard the Democrats as fundamentally different from the Republicans, rather than as the second party of US capitalism. This does not, of course, mean that the two parties are identical—there would be little point in having two parties if that were the case. Over some social issues Democrats are notably more liberal than the Republicans, which has benefited workers and oppressed groups, and this is why the former played a vanguard and the latter a social neoliberal role. On fundamental issues like support for US imperialism, however, there are no significant differences. What is it then that workers recognise as making Labour different from other parliamentary parties? There seem to be three main qualities: (i) policies which are specifically designed to improve the condition of the working class (“reforms”) rather than “the people” or “the nation” in general, (ii) working-class membership, and (iii) links to the organised working class.

Historically, Labour has a number of important achievements to its credit. We tend to be over-dismissive of these, concentrating instead—for obvious and usually justified reasons—on the record of Labour betrayal. The trouble with this approach is that it makes it difficult to explain why anyone ever believed in the Labour Party in the first place. But these achievements are all in the past—in some cases the very distant past. Increasingly, voting Labour on the basis that it will make any practical difference is more of a historical memory than a contemporary reality. And this is not just about programmes like John Wheatley’s council house building in the 1920s, institutions like the NHS, or legislation like the Equal Pay Act. There used to be a layer of Labour activists in most working class communities—often quite right wing activists—who would lobby councils, organise petitions, and generally act as a focus for local community reformism. This layer is greatly diminished. These activities still get done, but it is no longer Labour members who initiate them as a matter of course.

Similar changes have taken place in relation to membership. Originally the Labour Party was predominantly working class, although it also had a strong component of the professional middle classes, typified in their different ways by the Webbs, Attlee and Gaitskell. It was this actual class basis that led Lenin to describe it as a “capitalist workers’ party”, consisting mainly of workers, but acting in the interests of the bourgeoisie. This class base has been declining since the 1960s and especially since the mid-1980s, to the point where the individual membership is dominated by members of the new middle class. In his analysis of the transformation of the European Social Democratic parties, Gerassimos Moschonas notes that although their electorates have retained working class majorities, their membership increasingly consists of the salaried public-sector middle class, the implications of which are more than numeric: “Yet given the cultural ascendancy of these strata, usually recruited from public service and ‘educated bourgeoisie’, as well as their considerable individual and collective mobilising potential, we are witnessing a much greater decline in the influence of working class culture than the strictly arithmetic relations of force disclose.” As Moschonas points out, while the working class presence is certainly not “residual”, its influence on the parties is increasingly “indirect” and exercised through the trade unions rather than by membership. Within the parties, working class participation declines and passivity grows, to be followed by silence and departure “which in turn reinforces middle class predominance”.127 Most of Labour’s working class membership now comes from the affiliated trade unions, whose role is therefore decisively important.

The affiliated trade unions and, more distantly, the TUC, Scottish TUC and Welsh TUC acted as channels for the expression of organised working class views within the Labour Party. Although always heavily mediated through the bureaucracy, these views did influence Labour policy, a process which reached its peak around 1974. In theory this could still take place, but in practice the bureaucracy have exercised a self-denying ordinance since the advent of New Labour which has led to the marginalisation of working class influence over the party. Other than at the level of rhetoric—principally from Len McCluskey of Unite—there are no signs of this changing. There is no doubt that in purely financial terms Labour would effectively cease to exist without the support it receives from the unions, now that its corporate sponsors have deserted it. It is, however, difficult to identify many policies which the unions have received in return: the minimum wage certainly, Gordon Brown’s covert increase in public sector jobs perhaps, but beyond these? In fact, the main fruits of the trade union link are mainly in other ways: officials holding back struggle on the grounds that it will endanger Labour’s chances of re-election, even though, once re-elected Labour promises nothing but the same policies as the Tories in slow motion.

It is therefore no accident, as we say, that the unions which are the most politically radical—PCS, UCU—are not affiliated to Labour and their rank and file tend to regard it with the most hostility. It is possible that affiliated unions could reassert themselves, but the point is that the main characteristic which distinguishes Labour from all other parties has had virtually no beneficial effects for the working class. Nevertheless, it will remain a social democratic party so long as it retains the link with the trade unions, which holds open the possibility that working class demands—in however bureaucratised a form—might once again influence what it actually does. But changes to the working class and its consciousness will not remain conveniently frozen while we await this happening.

Since reformism remains the dominant form of consciousness within the working class, it may appear that nothing much has changed and that this reformism will continue to find expression in the Labour Party, as it has for the last hundred years or so. But there is no necessary connection between reformism in general and the specific form taken by Labourism. A combination of Labour’s own behaviour in office and opposition—above all its acceptance of neoliberalism—together with structural changes in the nature of the working class and the current diminution of trade union consciousness, means that for many working class people, Labour does not appear to be fundamentally different from the other parties, but is simply “the least worst” of the choices on offer. The willingness of working class people in Scotland to vote for a non social democratic but apparently reformist organisation in the form of the SNP—without which that party would not have been able to form a majority government after the 2011 Holyrood elections—demonstrates
that this can have direct political effects. The central issue here is not whether or not revolutionaries continue to call for a Labour vote in certain circumstances; it is to recognise the ways in which the role of the Labour Party has changed. Like similar organisations in Europe and Australasia, Labour has moved extraordinarily far to the right; but there are more fundamental issues, since shifts back to the left are theoretically always possible. On the one hand, the Labour Party no longer acts to inculcate and maintain a degree of basic reformist class consciousness—a problem exacerbated by the fact that for over 85 percent of workers in the private sector, neither do the trade unions. This presents revolutionaries with a significant problem, since we tend to assume a set of pre-existing shared “social democratic” values and beliefs among the people we hope to win to our politics: their absence creates, at the very least, a potential barrier. On the other hand, where social explosions do occur—and we can assume that under crisis conditions they will continue to do so—the Labour Party is no longer in as strong a position to restrain the working class from taking action.

Moreover, the volatility of the present situation means that radical shifts in class consciousness are likely to occur in unpredictable ways—this is one of the few respects in which uneven and combined development is applicable in the West. It would be a mistake, however, to rely on the possibility of the second aspect counteracting the actuality of the first. The crisis of working class electoral representation requires a response other than simply waiting to see what kind of formation emerges and then becoming involved at a stage when structures and policies have already been set by other political forces. A better approach would be to start by identifying what form of electoral organisation we think is necessary (and it is by no means clear that any of the existing models is adequate) and then fighting to establish it—not as a way of bringing together the existing left (ie another round of rearranging the deck chairs on the Titanic) but of unifying those sections of the class which have broken with or simply been abandoned by Labour.

The third and final point is in relation to the working class itself. I stressed earlier that the ability of state managers, politicians and capitalists to introduce neoliberal measures was directly or indirectly dependent on their success in weakening the labour movement. Any hope of reversing neoliberalism, let alone of moving towards socialism, will therefore depend on rebuilding that movement and doing so on a basis that is independent of political parties committed to the existing order. Ultimately, then, the issue is one of class power, but it is precisely this conclusion which even critics of neoliberalism find difficult to accept. Many see the working class as a residual element, at least in the West. “With the working class a minority,” write Polly Toynbee and David Walker, “those on low incomes are despised, whether they work or don’t work”.128 But even those who concede its continued existence doubt its ability to act as the potential gravedigger of capitalism. “Today,” writes Andrew Gamble, “as the capitalist wagon careers out of control down the track, spilling its load and its passengers, there are few gravediggers in sight”.129

The first claim, about the size of the working class, relies on the widely believed but nonetheless incorrect belief that the majority of workers in service industries belong to the middle class.130 It is the second claim, about the capacity of the working class, which requires more serious consideration, since the first is only possible because of the lack of visibility of the organised working class as a social agent. Neoliberalism has always been resisted in its heartlands, even after the 1980s defeats of the labour movement. As the example of the poll tax suggests, ruling class initiatives did not go unopposed. Indeed, all the major issues to have arisen in Britain since the late 1980s—from the poll tax to the Criminal Justice Bill, from hospital closures to the sell-off of council housing, from the British National Party to asylum seekers, from the imperialist wars in Afghanistan, Iraq and Gaza to solidarity with the Arab Spring, from student opposition to increased tuition fees to the Bedroom Tax—have involved people responding either to attacks on their communities or to geopolitical injustices. The problem has been that, although trade unions have certainly been involved, trade union action has not been central. The point is not that trade unions have ceased to take action over workplace issues: public sector workers (and those in privatised industries such as the railways) in particular have continued to defend both their wages and conditions and the services they provide with heroic resilience through several decades of neoliberal attrition. But even those who rightly reject the claim that workers have come to accept neoliberalism cannot fail to notice that most workers are not unionised, above all in the private sector where union density currently hovers around 14 percent and those who are unionised often belong to declining sectors of the economy.

The rise of increasingly precarious (or “flexible”, in ruling class language) employment acts as a disincentive to organisation. The extent of precarity should neither be exaggerated nor underplayed. Precarity is a relationship to the labour market, not an indication of class position. For most of the history of capitalism precarity has been the normal experience of most of the working class. The only period in which stable employment has been the norm, across the developed world at least, has been since the onset of the great boom. Like many other aspects of this wholly exceptional period in the history of capitalism, this is now in decline and part of the reason why precarity has become an issue is because many, particularly young workers find themselves in a situation of precarity where they had expected stability. In addition, certain categories of financial, managerial and administrative employment which previously had the greatest security have now become more vulnerable, not least because of the extent of corporate rationalisation and downsizing that tended to follow the acquisitions and mergers boom of the 1990s and 2000s.131

A more serious problem than precarity is simply the failure to unionise, let alone achieve recognition in the many workplaces where workers do have permanent contracts, either formally or in effect. Key groups like engineers still have the potential ability to bring individual workplaces and, in some cases, whole industries to a standstill; but this is more to do with their strategic position rather than their numerical strength. For the purposes of this argument the steep decline of unionisation, especially in the private sector, means that many working class people do not have the opportunity to develop “trade union consciousness”, with all that means in relation to the likelihood of their holding left wing political positions and accepting the need for collective action to improve their condition. These workers could be unionised, but for the moment they are not, and this has had political effects. Of the factors which are supposed obstacles to effective unionisation, there is little evidence that small workplace size (at least above that of the family firm), or the increasingly complex relation between or within firms caused by outsourcing and contracting out, or jobs particularly associated with women or ethnic minorities, necessarily involve barriers to organisation; much depends on how committed and imaginative trade unions are in recruiting.132

There is no reason why non-union workplaces should remain un-unionised and, although it would be foolish to pretend that there are not huge difficulties in the way, it would be equally foolish to believe these are insurmountable. Unionisation took place in Britain during the 1930s following the great defeat of the 1926 General Strike—think of light engineering and car manufacture in the East Midlands and around London, for example—and, although the process was hardly automatic, mass membership was established relatively quickly. Perhaps even more pertinently, the great unionisation movements in the US during the 1930s were motivated by the desire of a workforce to participate in the consumerist paradise of the 1920s boom from which they were excluded by low wages, but, even more important, by their resistance to the discipline of the foremen and the pressure of keeping up with the production line.133 These conditions are quite similar, in terms of both financial exclusion and the nature of the workplace regime, to those which currently prevail in the great telesales or financial services office-factories.

What role can revolutionaries play in this process? There is always a danger of adapting to the environment in which we have achieved a degree of successful implantation, so that a particular sector is treated as decisively important to the working class simply because it is decisively important to us. The public sector trade unions play this role for the Socialist Workers Party. Resistance by lecturers, civil servants and council workers is obviously important, particularly in political and ideological terms, but with some exceptions—refuse workers, custom and excise officials—it cannot replicate the economic impact of miners, dockers and electricians. (It would be unwise to place too much hope on a strategy which assumes that the nation will be brought to a standstill by working parents having to stay at home during any future national action by the teachers’ unions.134) However, nostalgia for the pits, shipyards and power stations, and its corollary, despair over the call centres, supermarkets and dispatch centres, are not only useless, but also quite unnecessary. In this context it is necessary to remember the maxim taught to Walter Benjamin by Bertolt Brecht: “Take your cue not from the good old things but the bad new ones”.135

But unionisation has to be treated as an actual objective in which revolutionaries must be involved rather than merely complaining about the failure of trade union officialdom to do so. In other words—and this is one of the occasions where historical analogies might be useful—how can revolutionaries play a role comparable to the British and US Communist Parties in the 1930s in unionising aerospace and auto workers? For without the entry of the currently unorganised private sector workers into the trade union movement any revival of struggle will be unnecessarily weakened and limited, and their recruitment will not happen automatically. In any case it is not by any means clear that generalised resistance will begin in workplaces, although to succeed it will have to spread there. Most private sector workers (and many public sector workers too) do not currently feel strong or confident at work, and may well find it easier to mobilise in their communities, among friends and family, than they do at work under the gaze of the supervisor.

One of the central problems, not merely of neoliberalism, but of the capitalist system it seeks to defend, is that it is ultimately incapable of improving or even maintaining the conditions of the majority. Since, to put it mildly, there is unlikely to be a return to generalised boom conditions in the foreseeable future it is—paradoxically—in this contradiction that hope lies. For most people under the neoliberal order, economic life has become more uncertain, political life more meaningless, social life more fragmented and cultural life more degraded. Since, contrary to the neoliberal viewpoint, human beings are not just greedy little bundles of appetite armed with effective demand, they are rebelling and will continue to rebel against these assaults on their humanity. And in this context it is important to remember that we have not returned in all respects to our starting point in the late 1970s. At least some of the people who might have previously been persuaded to accept a supposedly temporary deterioration of their living conditions in order to restructure capitalism for the greater good are considerably less likely to be fooled again, given the way in which over 30 years of sacrifice has benefited only those at the top of society and furthermore failed to prevent a further recession. “My friends’ hatred of the rich is now palpable”, writes Alan Bissett:

It’s not because they themselves didn’t become rich, but because they’ve realised that the system was rigged all along. Having rejected socialism for most of their adult lives, having rejected even the very existence of a working class, they now burn with fury at a system which purports to be meritocratic but which in reality works against them. Their arrival into the “middle class” had become an illusion, sustained by easy credit and an economy requiring conspicuous consumption to sustain itself.136

Terrible though the experiences behind these developments have been, they represent potentially positive changes in consciousness, if the revolutionary left is capable of offering an alternative.


1: Duménil and Lévy, 2011, p2.

2: Hobsbawm, 1994, pp412-413; Hobsbawm, 1998, p4; Hobsbawm, 2002, p277.

3: Sinclair, 2013, p39.

4: Birch and Mykhnenko, 2010, p255.

5: Duménil and Lévy, 2011, p33-42.

6: Saad-Filho, 2010, pp242, 249.

7: Marx, 1974, p146.

8: Harman, 2008.

9: One of these writers, Andrew Kliman, helpfully gives references to the authors who take this view, including Carchedi, Desai, Freeman, Harman, Mattick, Roberts, Onishi and Potts. To these we can also add Choonara, 2011, Choonara 2012 and-in specific relation the US-Paitardis and Tsoulfidis, 2012, and Smith and Butovsky, 2013.

10: See, for example, Brenner and Glick, 1991.

11: Harman, 1984, pp52-99.

12: Rawnsley, 2001, p309.

13: Hobsbawm, 1981; Hall and Jacques, 1983, pp14-16.

14: Hardt and Negri, 2004, pp99-138.

15: Standing, 2011, pp25, 147-154.

16: Birchall, 2011, p449.

17: Cliff, 1999, pp81-82; Trotsky,1970, p4.

18: Harman, 1984, p121.

19: Harman, 2007, p157 n48, p159.

20: Engels, 1990, p510.

21: For issues not covered here, see Davidson, 2009, and Davidson, 2010a,pp3-21.

22: Wacquant, 2009, p306.

23: McNally, 2006, p39.

24: Berman, 2007, p54.

25: Kotz, 2002, p104.

26: Lavelle, 2009, p23.

27: Harman, 1984, pp99-102; Brenner, 2006, pp99-101.

28: Campbell, 2005, p189.

29: Joseph, 1974.

30: Levy, 2006, p142.

31: Kalecki, 1943, p327.

32: Gramsci, 1971, p211.

33: Beckett, 2009, pp322-323, 335-339; Panitch and Leys, 1997, pp110-118.

34: Gamble, 1988, pp194-197, 224-227.

35: Thatcher, 1993, p306.

36: Beckett, 2009, pp5, 282, 463.

37: Hay, 2010, pp464-466.

38: Kelman, 2002, p122.

39: Harvie, 1994, chapter 10; Young, 1989, p298.

40: Hoskyns, 2000, 147.

41: Sanders and others, 1987; Vinen, 2009, pp143-146, 150-153.

42: Lukács, 1970, chapter 5.

43: Thatcher, 1993, p686.

44: Blumenthal, 1986, chapter 9; Wolin, 2008, pp271-272.


46: Vinen, 2009, pp132-133.

47: Doogan, 2009, p192.

48: Aitken, 1997, p267.

49: Former NUM president Arthur Scargill has repeatedly drawn attention to how near the Thatcher government came to a settlement on several occasions. See, for example, Scargill, 2009. The vulnerability of the government, even as late as the beginning of 1985, is supported by two historians otherwise unremittingly hostile to Scargill’s leadership of the strike. See Beckett and Henke, 2009, pp146-155, 186-187, 198-201.

50: MacInnes, 1995, pp73, 74, 87.

51: MacInnes, 1995, pp74, 80-85; Massey, 1995, pp281-286; Moody, 1997, pp43-47.

52: Turner, 2008, p10.

53: Doogan, 2009, pp78-82.

54: McIlroy, 2009, pp27, 37.

55: Harman, 2008, p118.

56: Thatcher, 1993, pp676-687.

57: See, for example, Leys, 2001, pp53-54.

58: Harman, 2008, pp104-108; Leys, 2001, pp83-84.

59: Gamble, 1988, pp124-125, 138; Glyn, 2006, pp37-42; Jenkins, 2005, pp91-92; Stedman Jones, 2012, pp308-315; Vinen, 2009, pp199-200.

60: Heath and others, 1985, p49.

61: Bissett, 2012, p33.

62: For the impact of neoliberal managerialism see, in relation to healthcare, Pollock, 2005, pp38-41, 106-107, 225-228, and, in relation to higher education, Callinicos, 2006, pp16-23, and Law and Work, 2007, pp140-150.

63: Wolin, 2008, p213.

64: Harman, 2008, p106.

65: Zizek, 2008, p76.

66: Callinicos, 2001, p7.

67: Hayek, 1944, pp52-53; Hayek, 1978.

68: Wood, 2006, p21.

69: Gamble, 2003, pp181-182.

70: Anderson, 2001, p7.

71: Giddens, 1998, chapter 1.

72: Law and Mooney, 2007, pp264-265.

73: Peck and Tickell, 2002, pp40-45; Law, 2009, paragraphs 2.2, 2.4-2.6. The latter text draws explicitly on Gramsci. For the original discussion, see Gramsci, 1971, pp229-239.

74: Elliott, 1993, pp1-17.

75: Stevenson, 2007, p15.

76: Anderson, 1992, p181.

77: Burnham, 1999, pp47-50.

78: Gramsci 1971, pp177-178.

79: Oborne, 2007, p93.

80: Mair, 2006, pp32-45.

81: Whiting, 2004, p91.

82: Mair, 2006, p48.

83: Harvey, 2005, p19.

84: Harvey, 2005, p19.

85: Brenner, 2006, p268.

86: McNally, 2009, p45.

87: Duménil and Lévy, 2011, p77.

88: McNally, 2012, 38-40.

89: Shaikh, 2010, pp48-56. Methods of calculating the rate of profit vary, but all serious analysis shows it heading in the same downward direction since around 1948. See, for example, Kliman, 2012, pp84-85.

90: As far as the system as a whole is concerned, a fifth factor, namely the expansion of capitalism into new centres of accumulation, above all China, is of great significance, but for the purposes of this discussion this mainly impacted on Britain through the availability of cheap manufactured goods.

91: Osborne 2013; Varoufakis, 2011, pp127-139. Andrew Kliman has questioned whether the wages of US workers did fall as a proportion of annual income, and argues that they in fact rose in real terms (Kliman, 2012, pp152-160). As Joseph Choonara says, this is a “genuinely heretical claim” against conventional wisdom (Choonara, 2012, p174). Unfortunately, it is also extremely dubious and seems to spring from Kliman’s-otherwise admirable-determination to close off any possibility of an underconsumptionist explanation of the crisis. The issue is too large to explore in detail here but, as Murray Smith and Jonah Butovsky write, his claim “is badly compromised by his failure to recognise that a sizeable and rising share of ‘wages and salaries’ in the national-income accounts is actually a disguised form of profit (surplus value): namely, the salaries of corporate executives” (Smith and Butovsky, 2013, p63).

92: Brenner, 2006, p335.

93: McNally, 2009, p55.

94: Irvin, 2008, p190.

95: Shaw, 2004, p30.

96: Turner, 2008, p26.

97: Harvey, 2003, pp144-161; Harvey 2005, pp159-165.

98: Harman, 2008, pp100-108.

99: Arrighi, 2007, pp156-161, 228-234; Harman, 2008, p100.

100: Dumenil and Lévy, 2004, pp16, 69.

101: Campbell, 2005, p190.

102: Law and Mooney, 2010, pp139-146.

103: Pollard, 1992, pp2-3.

104: Duménil and Lévy, 2004, p139.

105: Saad-Filho, 2007, pp342-343.

106: Toynbee and Walker, 2008, p5.

107: Rand, 1964, p151.

108: Peck, 2008, pp7-8.

109: The idea of a “market state” emerging under neoliberalism is developed by the ex-White House adviser Philip Bobbitt-see Bobbitt, 2002.

110: Duménil and Lévy, 2011, p88.

111: Harman, 2008, p97.

112: Dunn, 2009, p29.

113: Lapavistas, 2005, p35.

114: Clarke and Newman, 1997, p25.

115: Glyn, 2006, pp165-167; Harman, 2008, pp112-116.

116: Clarke and Newman, 1997, p29.

117: Olssen, 1996, p340.

118: Wilkinson and Pickett, 2009, pp5, 190-191.

119: Ash, 2009; Giddens, 1998, p15; Gray, 2007, p46.

120: Bauman, 2008, p23.

121: Sinfield, 2004, p349.

122: Smith, 2005, p208.

123: Harvey, 2005, p82.

124: Steiner 1990, p131.

125: See Davidson 2010b, pp332-336, and Davidson 2012, pp33-34.

126: McIlroy, 2009, p55.

127: Moschonas, 2002, pp120-122. For Britain see Lavelle, 2009, pp79-107.

128: Toynbee and Walker, 2008, p10.

129: Gamble, 2009, p8.

130: Harman, 2009, pp332-337; Law and Mooney, 2010, pp153-155.

131: Doogan, 2009, pp191-192, 198; Harman, 2008, pp109-112; Mitropoulos, 2005; Neilson and Rossiter, 2009, pp54-55.

132: Dunn, 2009, pp241-244.

133: Davis, 1986, pp55-56.

134: As is suggested in Choonara, 2013, p62.

135: Benjamin, 2002, p340.

136: Bissett, 2012, pp33-34.


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