So now it is clear. The ‘progressive coalition’ is about to embark upon what will be nothing less than a bonfire of the public sector, a brutal cutting of welfare below its already derisory level, a thinly veiled assault on the poorest in society, a dramatic increase in regressive taxation, and a reduction of public services to the barest minimum. They are quite openly picking up where Margaret Thatcher left off, using the government deficit as an excuse to finish what she started.
In the wake of the greatest capitalist crisis since the 1930s this revival of aggressive neo-liberalism could not be more historically ironic. But already the record of the political-economy of the past three years is being distorted. In the years of unprecedented cuts and redundancies that lie ahead, the real politics of the events leading to this axing of the public sector will be buried beneath the official line, repeated ad nauseum, that ‘this has to be done’, and that ‘there is no alternative’.
We will also hear a lot about the ‘economic mess left by the previous Government’ and about a ‘bloated’ public sector and an ‘unsustainable’ welfare bill. But let’s be clear. The truth is that it was the massive bail out of the banking system and not the growth of the size of the state under Labour that caused the current deficit. The root of the problem was not an excessively large state ‘crowding out’ the private sector, but in fact the exact opposite; it was the endemic instability of under-regulated finance capitalism.
It cannot be said enough that the banking crisis was a structural crisis of capitalism, not a fiscal crisis of the state. Indeed, without massive Keynesian intervention to prop up finance capital as it teetered on the brink of total collapse, we would now very likely be bartering for goods and services. Just as, without the stimulus of public sector spending and investment, the moribund private sector would by now have dumped us into a far more severe depression. These are the historical truths. But the de-facto election of the Tories, facilitated by the deplorable hypocrisy of the Liberal Democrats, has given credence and currency to the lie that Labour profligacy was the main cause of the deficit and that not less but more capitalism is the answer.
The claim now being peddled by the new Government is not just that the deficit must be reduced – that is undeniable – but that it must be completely eliminated within one parliament, which is not just economically illiterate but extremely reckless, making mass redundancies not only likely but inevitable, even according to the Treasury’s own leaked projections. The fundamentally ideological nature of this crusade against the state is revealed in the oft-repeated claim that the UK economy is ‘unbalanced’, especially in the North, and that the public sector must be drastically reduced in order to allow the private sector to thrive.
But if the economy is unbalanced then it is not the public sector that is too large, but finance, and it is not the private sector that most needs to expand, but manufacturing. The neo-liberal myth that only the private sector ‘creates wealth’ whilst the public sector is parasitic upon it is an inverted reflection of the truth, namely that only the real economy creates wealth whilst the financial sector is parasitic upon it. The forcible shrinking of the state in an economy still grossly skewed towards finance will not lead to some spontaneous flowering of private enterprise, but merely to increased poverty and the entrenchment of a sharp North-South divide.
This is Thatcherite economics through and through. The use of politically orchestrated recession and unemployment in order to drive through a restructuring of state-market relations in the interests of capital and the wealthy, along with the emasculation of the state as a mechanism for redistribution and a force for restraining the excesses of the free market. If this project is successful then by the time this parliament is over the political consensus will have shifted even further to the right, and it is highly unlikely that Labour, if re-elected in the future, will have the political will to attempt to shift it back. This is Thatcherism phase two, an assault on what little remains of collectivism and social democracy. Only the labour movement and the left can fight it, albeit with worn out tools.
Dr Richie Nimmo is a lecturer in Sociology at the School of Social Sciences, University of Manchester.
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This post was written by Richie Nimmo