The New Labour Experiment: Change and Reform Under Blair and Brown - Softcover

Faucher-King, Florence; Le Galés, Patrick

Softcover

ISBN 10: 080476235X ISBN 13: 9780804762359

Verlag: Stanford University Press, 2010

Inhaltsangabe

The book provides a clear assessment of the New Labour public policies and their outcomes in Britain under the leadership of Tony Blair and Gordon Brown from 1997–2009. Authors Florence Faucher-King and Patrick Le Galès argue that New Labour, in contrast to its European counterparts, developed a right-wing economic policy program based upon light financial regulation and strict macroeconomic management. Blair and Brown developed a large controlling bureaucracy, making Britain's government one of the most centralized in the world.

While some progressive policies were implemented, Faucher-King and Le Galès point to an overarching program of authoritative controls, massive surveillance, and illiberal social policies. Profound reforms were therefore linked to a new bureaucratic revolution that has subsequently been rejected by the British people. According to the authors, the financial crisis and the collapse of part of the banking system have signaled the end of the New Labour project.

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Über die Autorin bzw. den Autor

Florence Faucher-King is a research director at the Centre for Political Research at Sciences Po, and Fellow of the Max Kade Center for European and German Studies, Vanderbilt University.

Patrick Le Galès is a research professor at the National Center for Scientific Research (CNRS) at Sciences Po, and professor at King's College London.

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THE NEW LABOUR EXPERIMENT

Change and Reform Under Blair and BrownBy FLORENCE FAUCHER-KING PATRICK LE GALS

STANFORD UNIVERSITY PRESS

ISBN: 978-0-8047-6235-9

Contents

Acknowledgment........................................................................ixNote to Readers.......................................................................xForeword by Jonah Levy................................................................xiIntroduction..........................................................................11. The British Business Model versus the European Social Model........................172. Bureaucratic Revolution, or Privatization of Public Services?......................423. Decentralizing or Centralizing Institutions?.......................................624. The Reinvention of the Labour Party. "New Labour, New Britain".....................885. Democratization or Control?........................................................110Conclusion: Toward a Market Society...................................................133Postscript: The Fall of New Labour....................................................143Notes.................................................................................159Bibliography..........................................................................175

Chapter One

The British Business Model versus the European Social Model

Economic and social policy was the main linchpin of the New Labour project. It justified most of the policies pursued, and a number of assessments focus on this dimension. It was neither a servile adoption of Thatcherite policies, nor a textbook example of good governance according to the criteria of international organizations. Nor was it an updating of British social-democracy, consisting in alleviating the harsh impact of capitalism on individuals, or reducing the most unjust inequalities in terms of wealth and power in the framework of parliamentary democracy. In order to understand the originality of New Labour, we need to remember that the failure of previous Labour governments was primarily economic. Stop-and-go policies had led to erratic fluctuations in interest rates and to inflation's reaching 24 percent in 1975. The Wilson government had to negotiate a loan from the International Monetary Fund, helping to establish a reputation for economic incompetence on the part of Labour.

The New Labour elites were convinced that their credibility and their ability to stay in power were going to be determined by economic issues: they had to reassure both the markets and the middle classes who would swing the results of elections in marginal constituencies. In 1992 Labour lost the elections mainly because of the announcement of tax increases in the budget. Gordon Brown-who was working at the time with John Smith, then in charge of economic affairs for Labour-drew the lesson. In the months that followed, his team published working documents and pamphlets that signaled a major break with the traditional Labour vision. Impressed by the role of innovation in U.S. growth in the 1990s, he rejected both monetarism and the old Keynesianism. He educated himself in recent economic theory and took a particular interest in new theories of endogenous growth and the logic of globalization. The knowledge economy seemed to open up opportunities for a type of capitalism that was more favorable to individuals, and hence remote from the traditional conflict between capital and labour: the new capital was supposedly composed of individuals' social capital, knowledge, skills, and capacity for initiative.

The discovery of this new mode of capitalist development of knowledge, technological innovation, and globalization inspired radical policies in New Labour. On the other hand, criticism of power structures and power relations was, so to speak, forgotten. The experience of the Blair governments has prompted many debates on the more or less social-democratic or neo-Keynesian character of the reforms accomplished. Relative macroeconomic relative success was qualified by profound imbalances that persisted or deteriorated.

The dynamic of the policies implemented during the decade is key; the "cool Britannia" of May 1997 became "cruel Britannia" in 2005, when Tony Blair decided to become more radical in his reforms. Social-democratic intellectuals like Colin Crouch or David Marquand argued that New Labour had abandoned any reference to the reduction of inequalities or support for the losers from capitalist modernization, and that they identified with the winners, with the new meritocratic, transnational bourgeoisie (Sklair, 2001).

The Activist, Innovative State

In taking their inspiration from new theories of growth, Brown and his team positioned themselves in a framework of neoclassical economic theory, in which markets are competitive, efficient, and dynamic. It was not a question of abolishing the role of the state, but of reorganizing and redirecting its activity so as to benefit from the potential for dynamism and efficiency delivered by markets. Consequently, it was initially necessary to maintain a stable, predictable macroeconomic framework, in order to reassure the markets and appear credible in their eyes. Fiscal, monetary, and budgetary credibility and stability were therefore essential, so as to avoid jolts and negative effects. Next, economic policy must be targeted as closely as possible on individuals, with microeconomic policies of incentives and sanctions (the influence of rational choice theory) to encourage/compel individuals to seize the opportunities offered by the job market and not be dependent on the state.

Gordon Brown's historical success consisted in stabilizing the macroeconomic environment through noninflationary growth, while maintaining a low level of taxation. Compared with other major countries in the European Union, New Labour's economic record was unquestionably exceptional until the crisis in 2008:

The growth rate of 2.6 percent per annum between 1997 and 2007 was higher than that of the Eurozone, especially France or Germany.

Inflation averaged 1.5 percent between 1997 and 2006.

Interest rates were low.

The unemployment rate fell to around 5 percent, half that of the German or French rates.

Britain remained the most attractive country in Europe for foreign investors. Every year since the 1990s, it has attracted an uninterrupted flow of investment in firms and services-a key criterion for the dynamic British economy.

Fiscal and financial policy was prudent, without massive deficits or inopportune tax reductions. The public debt was reduced from 44 to 36 percent of Gross Domestic Product (GDP) (it has since increased to 41 percent), and New Labour committed itself not to exceeding 40 percent of GDP.

The stock market and property market grew rapidly (a 150 percent increase in property values in nine years), enriching homeowners.

Thanks to a notable improvement in per capita GDP, Britain rose from last to third place in the G7.

A ten-year period of uninterrupted economic growth, coupled with a stabilization of macroeconomic indicators, is unique in British history. This success was very largely attributable to the chancellor, who was never over ruled despite tensions. Nevertheless, Gordon Brown inherited a favorable context from the Conservatives, created after the disaster of Britain's exit from the European Monetary System in 1992. Moreover, at the end of the first Gulf War all European countries enjoyed a bright spell economically. Thus, the phase of economic growth began in 1993 and extended beyond Britain from 1997. The other European countries likewise obtained excellent results during this period in terms of inflation and interest rates; and the Nordic countries grew more rapidly. But even if the gap is not so spectacular vis--vis other countries in the Eurozone, Brown was an excellent pilot. Still, these results also have a supranational origin.

The strategy pursued by the chancellor, "Mr. Prudence," was neither altogether shared nor altogether transparent-two characteristics that frequently irritated the prime minister, Tony Blair. According to Brown, financial markets needed a stable framework, and it was imperative that investors be reassured about medium-term macroeconomic stability. In order to achieve his goals and make New Labour electable, Gordon Brown reversed the usual perceptions and anticipations of economic actors, applying himself to converting his decisions into slogans and dramatizing them:

In 1996 New Labour committed itself not to increase taxes or public expenditure for two years and to maintain the Conservatives' budgetary framework during the first term.

Scarcely had he been appointed chancellor of the exchequer than Brown announced that he was committing himself not to manipulate interest rates or let inflation develop in spectacular fashion, by granting independence to the Bank of England. A committee of nine, comprising internal members and others who were external to the bank, would fix interest rates in a transparent way. "Depoliticization" was very popular in the City. The surprise effect was complete.

He laid down two "golden rules" for British public management: the reduction of debt below 40 percent of GDP and restriction of borrowing to finance public investment (not for current expenditure).

Although he denied being a monetarist like Margaret Thatcher, Chancellor Brown clearly took account of the priorities that his advisors sometimes called a "postmonetarist strategy," combining the struggle against inflation, a strong currency, and iron financial discipline. His economic rigor and his ability to stage his budgets made Gordon Brown a political star particularly appreciated by financial markets and firms. Confronted with a Conservative Party still marked by the disaster of 1992, Brown established an image for himself of recognized economic competence. Year after year he honed his image as a shrewd, rigorous chancellor who inspired respect among the Europeans and in the City. His stature strengthened New Labour's economic credibility and made a decisive contribution to the electoral victories of 2001 and especially 2005, when Blair was in difficulty because of Iraq.

Discreetly, Gordon Brown brought off some neat maneuvers that added substantially to the public coffers without affecting income tax. A windfall tax was voted on companies that manage privatized services such as water or energy. A little later, the national insurance contributions paid by employers were raised to fund the National Health Service (NHS). Numerous tax dodges were abolished in one budget after another. Finally, invitations to tender for the new generation of telephone networks enabled the Treasury to bank around 25 billion. During the first term, the budget was regularly in surplus; not only did this afford an opportunity to reduce debt, but it was an additional argument in favor of New Labour's economic competence.

The price for this financial discipline was paid by the less well off strata. Despite the promise made during the electoral campaign to prioritize education and the regeneration of public services, which had been abandoned by the Conservatives and were in a very poor state, they were left in abeyance. The situation in hospitals and schools deteriorated. In fact, financial rigor was such that public expenditure was not simply frozen at the level projected by the Conservatives for two years, but reduced. Waiting lists lengthened in hospitals, and the NHS was incapable of meeting needs. In addition, as soon as he arrived in government, Brown abolished some benefits for single parents (they were actually very low), which worsened the situation of single mothers with children. Finally, while pensions were among the lowest in Europe, New Labour blocked increases.

The Resumption of Public Investment

The social record of the first term was negligible. Many services, in particular those most in the public eye, such as hospitals and schools, had suffered from underinvestment for years, but the situation deteriorated and redistribution in favor of the poorest was minimal. From 2000 onward, economic success and budgetary surplus made it possible to announce an unprecedented program of public investment. Brown developed a system for piloting public action through information assembled in detailed indicators, allowing him to justify investment by improvements in productivity of the services, management reforms, and recourse to the private sector. The message to the middle and upper classes was clear: public investment is increasing, but the money is being better spent and better managed. To reassure economic actors, Brown demonstrated that he controlled the process and insisted on respect for the economic indicators and forecasts of receipts and expenditure over three years. New Labour's economic competence would not be caught out: Britain would simultaneously experience growth, low inflation and interest rates, and massive investment in health and education. Who can top that? The Conservatives had real difficulty finding chinks in the chancellor's armor.

Total expenditures were announced before the 2001 elections and provided for in the April 2002 budget. In sum, the government planned to invest around 100 billion in public services, particularly health and education. In 2000 health expenditures represented 6.8 percent of GDP, compared with 8 percent in Europe. Blair therefore promised a massive catch-up in the space of a few years: the NHS budget doubled between 1997 and 2005. Following two decades of scarcity, public investment was very considerable. While all-round growth in public expenditure doubled, rising in the next three years to 2.75 percent, the figure was nearly 5 percent for health and education. The share of public expenditure as a percentage of GDP moved upward, rising from 36 percent in 1998 to 44 percent in 2005. By contrast, investment in the social sector, transport, and housing was low. Defense expenditure was not a priority and variations in it were small.

The chancellor's shrewdness did not only consist in this dramatization of a massive investment that was going to enable New Labour to save the public services. Anticipating a change in the economic cycle, Gordon Brown used the investment in countercyclical fashion to maintain growth. In the purest Keynesian tradition, public investment played an important role in job creation: between 1998 and 2003, more than 500,000 jobs were created in the public sector, making it possible to sustain growth. Government borrowing respected the golden rule of public investment and did not finance current expenditure. Obviously, as all specialists on indictors are aware, it is sometimes the case that the difference between the two is essentially a question of presentation. The Treasury teams were not lacking skill in this exercise, even in the reinterpretation of the length of an economic cycle, in order to justify some particular program. The Keynesian minireflation was a success: growth rates were kept at relatively high levels (compared with those of other countries in the Eurozone, particularly France, Germany, and Italy); job creation continued to be sustained; and tax receipts were excellent.

The government likewise committed itself to an ambitious program of building and refurbishment of schools and hospitals, whose objectives are on the way to being realized. The chancellor's shrewdness will have to be assessed in the long term. The use of the PFI (Private Finance Initiative) procedure made it possible to transfer debt and risk to the private sector. Accordingly, this investment does not appear in the sacrosanct macroeconomic balances. Consumers and users (individuals or organizations) will of course pay for using these facilities. But a proportion will be financed by public bodies. As the total debt contracted by the PFI is now rising to more than 7 billion, particularly in health, Gordon Brown's debt indicators are in part an accounting trick (obviously, he is not the only finance minister to have resorted to this kind of practice). We may add that numerous problems persist in the management of these contracts and that, in some cases, the firms involved in such PFI have either earned colossal sums because the contract was highly advantageous to them, or have collapsed leaving sizable unpaid bills. For now, the difficulties involved in public-private partnerships have not been mastered by the public sector. Considerable hidden costs are likely to show up in future years, but the debate cannot be resolved in the foreseeable future.

A Long-Term Project

The effects of these reforms were unquestionably positive: improvement in the health and education services is an acquis attributable to the New Labour governments. The first difficulty in drawing a balance sheet derives from the proliferation of performance indicators that render the improvements scarcely credible and difficult to compare. Rather as in George Orwell's 1984, announcements of progress and performance lose all meaning with the multiplication of indicators.

A few robust assessments clearly indicate a reduction in waiting lists for a whole series of surgical operations and an improvement in emergency reception and within hospitals. Similarly, repeated inspection of schools suggests greater success in exams, a mastery of basic knowledge, and a reduction in class size. However, the record is not as spectacular as was hoped and as measured objectively. It was above all perceptions of improvement that were challenged by the public. The very serious financial crisis of the NHS in 2007, and the program of hospital closures, provoked strikes and discontent on the part of workers and users alike. The closure of schools, university departments, and other services deemed inefficient created opposition and doubts about the reality of improvements. This skepticism induced despair in Tony Blair and his advisers, who did not fail to mobilize a mountain of (more or less relevant) statistics to justify their actions. Thus, during the 2005 election campaign, distrust of leaders and indicators clouded some real successes.

(Continues...)

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Details zur Ausgabe

• Verlag: Stanford University Press
• Erscheinungsdatum: 2010
• Sprache: Englisch
• ISBN 10: 080476235X
• ISBN 13: 9780804762359
• Einband: Tapa blanda
• Anzahl der Seiten: 200
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar