Even the Tories are walking away from the old economic consensus
2016 may well be remembered as the year Blairism died.
First, there was the Chilcot report. That excruciating post-mortem found that the decision to go to war was unfounded, taken in haste and of questionable legality. Most importantly, it shed a revealing light on Blair’s geopolitical vision.
In a memo to George Bush, entitled ‘The Fundamental Goal’, Blair explained: ‘This is the moment when you can define international politics for the next generation: the true post-cold war world order… That’s why, though Iraq’s WMD is the immediate justification for action, ridding Iraq of Saddam is the real prize.’
Fully convinced of the post-1991 liberal consensus, Blair was driven by a crusading zeal, determined to spread liberal democracy throughout the world. Never mind the old strictures of international law, designed for a bygone age. It was time to bring about Francis Fukuyama’s ‘end of history’, at the point of a gun if necessary.
Chilcot condemned Blair, not only for his haste, but for the naïveté which convinced him he could lend a conscience to the American war machine. It turns out that not every party to this adventure shared Blair’s moral zeal. Thus on 6 July, one of the two fundamental pillars of Blairism crumbled before our eyes.
The other pillar, of course, was Blair’s economic vision. Like his foreign policy, Blairite economics was a child of the 1990s. With the fall of the Soviet Union and the ebb of social democracy in the West, it seemed clear that history was moving inexorably toward the universal reign of unfettered free markets—the ‘end of history’ in the economy, as well as politics.
This was compounded by economic theory. In response to the 1973 oil crisis, the 1980s had seen the rise of neoliberal thought, packaged globally as the Washington Consensus.
This heady, ideological brand of microeconomics gave intellectual justification to the notion that there was no alternative to maximal privatisation and deregulation.
By the 1990s, Blair and his colleagues were in no position to question this new orthodoxy. They drew their economic policies directly from the neoliberals, continuing privatisation and overseeing the completion of deindustrialisation.
But the microeconomics textbooks left them with one key lever. According to the theory, so long as unfettered markets reign, governments are still free to redistribute as they wish. Thus the unemployment which results from deindustrialisation is unproblematic, because the government can compensate the unemployed through benefits.
Microeconomics suggests that for any unfavourable policy, there is always some amount of monetary compensation that will mollify those who lose out.
Thus Blairism represented a dramatic shift in what it meant to be left-wing. Previously, left-wing politics was about suggesting alternative ways of organising the economy — institutional arrangements that could be more efficient, as well as more socially desirable, than a pure market solution.
Blairism gave up that argument entirely, and accepted market fundamentalism. From that moment, to be left-wing no longer meant arguing over institutional arrangements. It simply meant arguing for a higher level of redistribution, whether through transfer payments or through service provision.
While Labour in 1945 campaigned as the party of progress, with a more efficient and forward-looking vision for a mixed economy, today many Labour supporters present it simply as the party of ‘fairness’ and ‘equality’. This focus on redistribution is a legacy of Blair’s capitulation to 1990s economic theory.
But all that is beginning to change.
Last year’s election of Jeremy Corbyn as Labour leader brought the mixed economy back into public discourse for the first time in three decades. The ensuing debate has revealed what pollsters have long known: the majority of the public never supported privatisation of natural monopolies like rail and electricity, and would gladly back their renationalisation.
Tellingly, Owen Smith’s challenge to Corbyn is based on broad agreement with his economic policies. While arguably he must accept these to win the support of Labour’s new members, it is revealing that these once-heretical ideas are now being openly discussed by moderate Labour politicians.
But the most important chink in Blairite dogma has come not from Labour, but from the Tory government. Following the Brexit referendum, George Osborne swiftly announced the end of austerity.
While Brexit was a convenient excuse, in truth governments worldwide have been mulling fiscal stimulus for some time now. The Keynesian ideas which were so roundly rejected in the 1990s are suddenly acceptable again.
Even more symbolically, Theresa May has resurrected the concept of industrial strategy, for the first time since Thatcher — a move warmly welcomed by business. This is further recognition that the key planks of neoliberal ideology have been discredited.
The most successful economies in the world — whether in East Asia or northern Europe — are those which never succumbed to neoliberalism, but instead made pragmatic use of an active state to guide and stimulate the economy.
Blairism, as it was, is dead. The ‘end of history’ never arrived, international law is more necessary than ever, and it turns out the neoliberals were wrong: market fundamentalism is not an efficient way to run an economy. The events of this year have put the final nails in the coffin.
The question now is not whether we will move backward to that discredited belief system, but how we will move forward, and who will decide our new direction.
It would be a great irony if it is not Labour, but Theresa May’s Conservatives who make the final break with Thatcherism and Blairism. Sadly, the parlous state of the left makes this a possibility.
Labour’s present convulsions have been heavily marked by the ‘Blairite’ epithet, but the challenge now is not to fight a losing battle between the ghosts of decades-old ideologies, but to forge a new, positive vision for the future.
Blairism is dead, and we must now begin to define what comes next.
Mark Stanford is a teaching fellow in International Development at King’s College, London.
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