Was New Labour really 'neo-liberal'?

If we created one of those ever-fashionable ‘word clouds’ from the posts of Corbynistas on social media, two phrases would probably appear larger and bolder than many of the others. One would be ‘neo-liberal’ and the other would be ‘MSM’ – their short-hand for what they describe as ‘mainstream media’.

The first of these two terms does have a meaning, but one which has become increasingly debased through misuse. The second is vacuous and means nothing at all unless you’re a fully-fledged conspiracy theorist.  So let’s leave the MSM just for the moment – I’ll maybe return to it another post – and focus instead on this idea of neo-liberalism.

Activist and Guardian journalist George Monbiot has described it is an ‘ideology that dominates our lives’ and says it ‘redefines citizens as consumers’. In the neo-liberal world, he argues, ‘tax and regulation should be minimised, public services should be privatised’. 

I don’t particularly disagree with his definition and interpretation.

The ‘neo’ in neo-liberalism does, after all, imply that we’ve been here before. All we’re really talking about is the revival of ideas that had always been part-and-parcel of laissez-faire capitalism in the nineteenth and early twentieth centuries. Back then, tax and regulation were indeed minimal and spending on effective public services a rarity.

What happened was that with the growth of communism – and, perhaps more significantly, social democracy, Keynesian economics and the creation of the nascent welfare state – this traditional free-market ideology was very effectively challenged, particularly in the decades immediately following the Second World War.  

This swing towards redistribution of wealth, planning and co-operation created a space for the ‘neo’ liberals.  These were the people who rejected the new interventionism and advocated a conscious, politically motivated return to the economic liberalism of the past. Intellectually, supporters were inspired by the so-called ‘Austrian School’ of intellectuals, which included figures such as Ludwig von Mises and Friedrich Hayek.

So far, so straightforward.

The case against neo-liberalism is obvious and it’s the same case that would have been made against the laissez-faire liberalism of the past.  It’s a philosophy which usually benefits the rich. 

Free-market economic policies lead to exploitation of the weak and vulnerable, absence of a proper safety net for the poor, lack of respect for our environment and a widening divide between rich and poor. 

This is the reason, of course, many people choose to join social democratic and socialist political movements.  Rather than accept the inequalities of capitalism, these dissenters rightly challenge them and look for ways to ameliorate them. They believe, fundamentally, that humans achieve more when we co-operate than when we are locked in perpetual competition.

So where does the problem arise? Well, Corbynistas use ‘neo liberal’ as a term of abuse. Critically, however, they don’t just apply it to Conservative politicians. The phrase is used to tarnish the track record and achievements of the Labour governments under Blair and Brown. And that’s where their rhetoric stands up to very little scrutiny.

Blair, in the eyes of many Jezuits, is the ultimate symbol of neo-liberalism. The argument would be that the former Labour Prime Minister fully accepted the free-market agenda of Margaret Thatcher and merely perpetuated and expanded it during his own tenure.

When pressed for examples to back up this attack on Labour’s most successful leader, critics often point to the light-touch regulation in the banking sector and the use of private finance to rebuild public infrastructure such as hospitals.  The former might rightly be seen as causal factor in the 2008 financial crisis, while the latter is creating problems today for a number of NHS Trusts which are struggling to meet what are effectively heavy mortgage repayments.

Blair’s supporters can’t hide away from legitimate criticism here. While the reality is that the Tories advocated even laxer regulation of the financial sector and the costs of PFI only represent a tiny fraction of the total amount of money spent on the NHS each year, there is little point in denying the consequences of the decisions that were made.  It is hard to justify either policy with the benefit of hindsight.

But do these examples really constitute evidence that Blair and Brown were pursuing neo-liberalism?  That they presided over neo-liberal governments?

Even a cursory glance at the track record of New Labour would reveal any number of interventions that would horrify neo-liberals.

First – and perhaps most significantly – let’s look at government spending.

As a proportion of GDP, it did fall during the early years of the Blair administration (when New Labour had pledged prudence in financial management), but it then steadily grew from 2001 onwards and was slightly higher at the end of the term of office than it had been at the start.

Is this evidence of neo-liberalism?  Absolutely not. Neo-liberals are inherently suspicious of government (‘spending somebody else’s money on somebody else’, in the words of right-wing economist Milton Friedman) and they therefore aim to drive down tax and spending. 

The Blair and Brown governments were actually heavily interventionist in many areas too.

They famously introduced a national minimum wage – opposed by many on the free-market right.

They extended rights in the workplace, an idea which sits very uneasily with neo-liberal support for enterprise and entrepreneurship. While it’s true there was no attempt to overturn the tightening of trade union laws introduced by Thatcher, workers were granted greater parental leave, given the right to more paid holiday and empowered to request flexible working from employers.

New Labour created new tiers of democratic government in Wales, Scotland and London – a policy anathema to neo-liberals, who favour a shrinking state and less regulation.

They invested in some of the nation’s poorest communities through programmes such as the New Deal and Sure Start.  Social housing stock was upgraded at a cost of some £20 billion.

And so it goes on. Policy after policy that would fly in the face of anything an economic liberal held dear. After all, if you’re someone who believes in every aspect of human life being dictated by the market, you don’t extend state-sponsored free bus travel for elderly and disabled people, offer state-funded free eye tests to the over 60s or tell people they can wander around museums free of charge, courtesy of the government.

So when you’re told that Blair and Brown were neo-liberals, it’s worth stopping for a moment and considering what real neo-liberalism is.  While New Labour may not have reversed all the market reforms under Thatcher, they signalled a distinct and positive break from the right-wing ideology of her 1980s government, which had been openly influenced by the likes of Hayek and Friedman.

She supported a smaller state, but struggled to achieve it. They supported greater state intervention and modestly increased spending as a proportion of GDP.

She believed in championing the rights of employers. They believed in enhancing the rights of workers.

She wanted less government and less regulation. They gave us more.

Inconvenient facts that Corbynistas never like to get in the way of a good story.