The Political Economy of New Labour: Labouring Under False Pretences? (Book Reviews).

Colin Hay 

Manchester, Manchester University Press, 1999, pp.xiii+242

ISBN 0-7190-5482-6 (pbk)

ISBN 0-7190-5481-8 (hbk)

The blurb on the back of this book describes it as 'the most theoretically informed and conceptualized account of the modernisation of the 'Labour Party that we have'--and indeed it is an intelligent, through, well structured, well written and closely argued piece of analysis. However, it is also written with at powerful moral urgency. Completed shortly after Blair's election victory, its worst fears have been confirmed and its pertinence has not diminished.

Chapter in questions the novelty of the 'new times' under which 'New Labour' effected its 'modernisation'. To explain he changes, Hay rejects both an over emphasis on sor iccture, which he calls 'structuralism economism' (e.g. the harsh economic reality of globalisation forced Labour to modernise), and an over-emphasis on agency's 'intentionalism-politicism' (e.g. modernisation was brought about through the charisma of Tony Blair, or the emergence of a key group of policy analysts in the party, or a shift in the relationship with the unions). In order to avoid this impasse, Hay suggests that we need to develop more sophisticated understandings of the relationships between the 'ideational' and the material and between the domestic and the international-that we develop a more three-dimensional description of these sorts of changes.

After this methodological introduction, the next three chapters look at the political logic of modernisation. Chapter 2 argues that, by the completion of Labour's Policy Review (if not before), it had ceased to be a social democratic party, but became a party of 'Thatcherite revisionism'. This shift entailed a rejection of 'preference-shaping' or the 'politics of advocacy', in favour of preference-accommodation', playing the politics of 'catch-up'. The central concept for the politics of catch-up is 'electability', by which '(perceived) electoral expediency and (perceived) economic necessity are simply and conveniently conflated' (p. 61). Hay highlights three main dangers in this strategy: (I) the Thatcherite agenda is further legitimated by Labour's accommodation to it; (2) the electorate can no longer tell the difference between the two parties and the electoral gain collapses; (3) the accommodating party reaches office just as the old agenda's contradictions have become so intense that the electorate is cr ying out for change. To support this argument, Hay notes the similarities between the 1979 Tory victory and the 1997 Labour victory: two moments of crisis in government. Labour, he argues, could have learned from the Tory strategy in 1979: preference-shaping, a new political agenda that addressed popular frustration at the intense contradictions of the Keynesian agenda.

He is not calling for a return to Labour's past, but for a new preference-shaping strategy for Labour, to 'build a populist political project capable of transcending neo-liberalism and of providing the modernising role that the free play of the market has consistently failed to deliver' (p. 70). This means Labour must 'identify and narrate' the contradictions of neoliberalism (p. 160).

Chapter 3, 'On New Labour's Ups -- and (Anthony) Downs', is concerned with the impact of psephology (and particularly the 1950s consensus-era electoral analysis of Anthony Downs) on Labour's 'catch-up' strategies. Among the topics covered here are Labour's technologies of assessing middle England's opinion; its rejection of a 'bimodal' (class) understanding of the electorate in favour of a courting of the 'median voter'; and its decision to not worry about 'voter leakage' (working-class' or left disaffection) because its majority in working class areas was 'insurmountable'.

Labour could adopt policies which would appease the median voter in middle-class middle England. at the cost of irritating to the point of disaffection its most loyal and traditional supporters in seats it could scarcely fail to win (p. 99).

Chapter 4 describes 'the politics of conspicuous convergence' arising from the obsession with electability, intensified with Blair in office. In exhaustive detail, Ha demonstrates the near-identical convergence (around neoliberalism) of he two parties on every issue. In so doing, he proves (if proof were needed) the wrongness of left Labour voters who imagined Labour in office would 'return to its true convictions'. In fact, New Labour 'conceives neither of the need for, nor indeed the possibility of, such an alternative to the ascendant neo-liberalism of the times' (p. 134). 'Macro-economic conservatism, fiscal fortitude and an increasing disavowal of both labour market re-regulation and consistent demand- or supply-side intervention' have displaced any confidence in redistributive justice (p. 139).

In the final two chapters, Hay turns from the political logic of modernisation to its economic logic. Indeed, concerns with 'the harsh economic realities' of globalisation have been as significant in driving Labour's changes as the Downsian 'harsh political realities' of electoral liability. Hay's analysis proceeds by a dissection of the 'structural dependence thesis' of Przeworski and Wallerstein (crudely, that the state's power is heavily circumscribed by capital's power) and then of the 'revised structural dependence thesis' of Wickham-Jones. The latter suggests that 'social democratic parties may well be incapable of winning elections in today's advanced capitalist societies' (p. 150). However, in arguing that social democracy is a viable strategy, Hay rejects Wickham-Jones' conclusion for:

its historically undifferentiated conception of the relationship between the state and capital; its assumption that social democratic governments act in the interests of labour to the detriment of capital...; and its failure to assess either the strategic alternatives to, or the consequences of, preference-accommodation for social democratic parties (p. 151).

Labour's ditching of social democracy meant it has presented itself 'on the basis of its relative competence in managing the Thatcherite legacy'; it 'has chosen to restrict itself to a repertoire of managerial techniques and resources heavily circumscribed by a neo-liberal economic imagery' (pp. 159-160). Hay's critique of this is not just driven by a moral commitment to social democracy, but also by a contention that a turn away from neoliberalism is a 'necessary (though not in itself sufficient) condition of restoring an investment-led growth dynamic to the British economy' (p. 162). Hay wants to save capital from itself: by acting against capital's shortterm interests, a social democratic state can 'secure the conditions for long-term economic competitiveness' (p. 151).

Hay moves, therefore, towards sketching a social democratic alternative. The possibility of such a project, Hay suggests, was present in opposition, in Labour's shadow DTI under Bryan Gould, but was marginalised by the 'fiscal fortitude' dogma of the shadow Treasury. But, for Hay, the time is right (to repoliticise the economic and to reclaim local, regional and national economic spaces' and to restore 'an indigenous investment ethic to British capitalism' (pp. 183-4).

Through an analysis of comparative political economy and the Will Hutton! Perry Anderson schools of British economic exceptionalism, Hay identifies the afflictions of British capitalism most in need of remedy: short-termism; risk aversion; acquisitions, mergers and asset-stripping as responses to failure; and lay-offs as a response to recession. What is therefore needed, Hay argues, is a strategy to restore an indigenous investment ethic': targeting institutional investors (e.g. pension funds) through conditional exemptions from capital gains tax and re-defining investors' 'best interests' to impose obligations on trustees. Secondly, Hay proposes "'sharp", local and regional interventions (principally on the supply side)'; 'regional structures of innovation' (regional and metropolitan development agencies, regional investment banks, regional training agencies and regional economic fora), 'regional institutions of investment' (such as regional pension funds) and 'regional stakeholding' (through 'a broader nexu s of regional institutions'). These would be supported by a national investment fund, which would back trans-regional infrastructure projects (pp. 169-171, 203-6).

In conclusion, Hay's diagnosis of New Labour's ills is extremely powerful. However, I am sure that many Capital & Class readers will not share his faith in the desirability of the social-democratic management of capital "" the desirability of privileging industrial capital, for them his diagnosis will prove more interesting than his prescription

Ben Gidley's recent publications or co-publications include: 'Ghetto Radicalism' in New Voices in Jewish Thought (1999, Limmud); The Proletarian Other: Charles Booth and the Politics of Representation (2000, cUcR London); Integrated Communities and Sustainable Regeneration (2000, Policy Press); and www.coalition.org, an electronically published collection of papers about racism in a digital age.