New Labour or the Normalization of Neo-Liberalism

This on-line version is the pre-copyedited, preprint version. The published version can be found here:

‘New Labour or the normalization of neo-liberalism’, British Politics, 2 (3), 282-88, 2007.

For some, the landslide victory of the Labour Party in 1997 held the promise of a reversal of the socio-economic transformation of Britain that had been achieved through nearly eighteen years of Conservative government. But it did not take long for the Blair government to disappoint these hopes. For, in many ways, the three successive Labour Governments under Blair’s continuing authoritarian plebiscitary tutelage have deliberately, persistently, and wilfully driven forward the neo-liberal transformation of Britain rather than halting or reversing it. And, as Blair proudly proclaimed at the 2005 Labour Party Conference, every time that he has tried to introduce modernization, with hindsight he regrets that he has not been more radical. Moreover, having announced that he would not serve a full third term as Prime Minister, he seems determined to constrain his successor’s capacity to depart from the neo-liberal agenda.[1]

The immediate political background to the rise of New Labour was the lessons drawn from the Blair camp’s reflections on the rise of Thatcherism as a dissenting social and political movement and its subsequent consolidation as a radical neo-liberal project for the ‘modernization’ of the British economy, state, and civil society. It is a curious paradox that radical leftwing critics of the rise of Thatcherism had a better grasp of the role of political discourse in preparing the war of position than did ‘Old Labour’; and yet it was the centre-right in the labour movement that applied those lessons to enable ‘New Labour’ to defeat an increasingly demoralized and disunited post-Thatcher Conservative party and thereby prepare the ground for a renewal and consolidation of her neo-liberal project rather than its radical reversal. Consolidated Thatcherism was characterized above all by a ‘two nations’ authoritarian populist hegemonic project, a centralizing ‘strong state’ project, and a neo-liberal accumulation strategy (Jessop et al., 1988; Jessop et al., 1990). It is crucial to distinguish these three aspects of Thatcherism not only because they developed unevenly in the Thatcher-Major years; but also, and more importantly for present purposes, because the so-called ‘break’ with Thatcherism initiated by New Labour’s ‘Third Way’ affects Thatcherism’s hegemonic vision more than its state project and has left its neo-liberal accumulation strategy more or less intact. Following Mrs Thatcher’s ejection from office, the Major government maintained the main thrust of consolidated Thatcherism, albeit in a less charismatic manner. In turn the crisis of ‘Thatcherism with a grey face’ facilitated the emergence of the ‘New Labour’ project within the labour movement and, especially, the Labour Party. This enabled the emergence of another phase of Thatcherism, this time with a ‘Christian socialist face’.

It is tempting to attribute New Labour’s first electoral victory to a cunning combination of ‘an organizational fix and floating signifiers’. For its organizational reforms had enabled the leadership to distance New Labour from its past and to assert control over its future; and its resort to soundbites and malleable ‘big ideas’ enabled it to leave its strategic line and detailed political programme undefined as far as the electorate was concerned. It was sufficient for many voters that New Labour was a serious, disciplined alternative to a discredited Conservative Government and Party in a period when the electorate felt overwhelmingly that ‘it was time for a change’. Paradoxically, following its election, New Labour was content to administer much of Thatcherism’s legacy in regard to the neo-liberal economic strategy, as if considering their effects to date as so many economically or politically irreversible faits accomplis.

This involved more than an initial prudential desire not to frighten the electorate with the prospects of radical change or a return to the now firmly, if unfairly, discredited postwar Labour tradition. It clearly reflected Blair’s strong Christian socialist leanings and marked personal antipathy to collectivism and corporatism.  Thus New Labour has largely followed in the tracks of the neo-liberal regime shift it inherited, as can be seen by examining the main elements of neo-liberalism as pursued in the Thatcher-Major years. It has maintained the broad strategic line embodied in the six planks of neo-liberal economic strategy: namely: liberalization, deregulation, privatization, re-commodification, internationalization, and reduced direct taxes. Indeed, it has willingly committed itself to further liberalization and de-regulation in many areas, old and new; to the privatization or, at least, corporatization, of most of what remains of the state-owned sector; to reliance on expensive ‘private-finance initiatives’ as a way of raising funds for public investment whilst keeping such borrowing off the government’s balance sheet; and to the extension of direct or proxy market forces into what remains of the public and social services at national, regional, and local level as well as to the spread of market forces into the provision of such services elsewhere in Europe and the rest of the world. Its policy on this last point reflects its firm attachment to the internationalization of the British economy, as evidenced in its welcome to inward investment and the foreign takeover of companies quoted on the London Stock Exchange, its active promotion of the international interests of British-based (but not always British-owned) financial, commercial, and industrial capital, and its support for the Washington Consensus on the benefits of free trade in services on a world scale. Indeed, spurred on by Blair, New Labour has warmly embraced the logic of neo-liberal globalization as a whole, proclaiming its inevitability, desirability, and truly global benefits. Finally, it has continually re-affirmed a principled commitment to not increasing the top rate of income tax – which necessitates in turn reductions in unemployment, ‘efficiency savings’ in the state sector, and social policies that ‘would make a difference at little or no cost’ (Blair 1996, cited in Panitch and Leys 1997: 252).

Finally, the Blairite hegemonic vision rests mainly on a ‘one nation’ rather than ‘two nations’ social imaginary. Nonetheless it is not that of ‘one nation’ united under the Keynesian welfare national state. Instead social inclusion is to be secured primarily through labour market attachment and the economic regeneration of marginalized communities; and individual, family, and child poverty are to be alleviated mainly by a series of ‘stealthy’ (rather than proudly proclaimed) redistributive measures that ideally involve redirecting revenues within what would still remain rigid fisco-financial parameters. In this sense there are strong Ricardian rather than Keynesian elements in the Blairite economic and social vision of inclusion and a strong focus on ‘workfare’ in the sense of the subordination of social policy to the imperatives of economic flexibility and putting downward pressure on the social wage. Thus, to the extent that the Blairite vision emphasizes communitarian themes and policies, they usually involve flanking measures to ameliorate the effects of a neo-liberal accumulation strategy rather than providing the basis for a massive assault on the profit-oriented, market-mediated logic of neo-liberal capitalism. In addition, the right to membership of this ‘one nation’ and its plural communities excludes those who belong to the ‘enemy within’, whether regarded in terms of a lack of respect for the norms of civilized behaviour and the responsibilities as well as rights of citizenship or denizenship or in terms of the now permanent ‘war on terrorism’. In this regard, the tendency to authoritarian populism and a love for the strong state have not so much diminished as been reinforced over the course of three New Labour governments.

Under Blair’s authoritarian plebiscitary leadership, New Labour has sought to move beyond the ‘roll-back’ neo-liberalism of the Thatcher-Major years to develop its ‘roll-out’ phase. Conservative governments were mainly concerned to eliminate the ‘exceptional’ corporatist and dirigiste elements of government introduced or intensified to cope with crisis in the Fordist mode of growth and its Keynesian welfare national state and, in addition, to dismantle many of the ‘normal’ elements of the institutional architecture and policy landscape of the postwar settlement. In contrast, New Labour has been more concerned to introduce the putatively ‘normal’ elements of a neo-liberal state that would be formally and functionally adequate to a globalizing knowledge-based economy. The new economy promoted by New Labour requires a new state form – a Schumpeterian workfare post-national regime (Jessop 2002).

Presented in ideal-typical terms, the emerging Schumpeterian workfare post-national regime (SWPR) is the product of four broad trends in the crisis-induced restructuring of the preceding Keynesian welfare national state. The first is a shift from Keynesian aims and modes of intervention to Schumpeterian ones; the second is a shift from a welfarist mode of reproduction of labour-power and the broader population to a workfarist mode; the third is a shift from the primacy of the national scale in economic and social policy-making to a post-national framework in which no single scale predominates; the fourth is a shift from the primacy of the state in compensating for market failures in a mixed economy to an emphasis on networked, partnership-based economic, political, and social governance arrangements. There is wide variation in these trends, both severally and in combination, in the various Atlantic Fordist economies but the overall trend in the United Kingdom (and, above all, in England) is towards a neo-liberal variant reflecting the distinctive position of the UK economy in the world market.

Thus New Labour is committed to high-tech civilian innovation, to modernizing state and civil society in the interests of international competitiveness, to welfare-to-work programmes and an enterprise culture with flexible subjects, to devolution at home and ‘putting Britain at the heart of Europe’, and to an expanding role for public-private partnerships and the informal sector. Yet all of this is to be pursued within tight budgetary constraints and without upsetting either international capital or ‘Middle England’ – the affluent and conventional middle mass of electors. Moreover, despite early ‘Third Way’ rhetoric, aims, and institutional design, many policies are often niggardly and mean-spirited and subject to Blair’s desire to control all aspects of the New Labour project. This means that many of New Labour’s initiatives have failed and this has led in turn to policy-churning, a permanent revolution in which failed initiative follows failed initiative before lessons can be learnt, with an emphasis on policy-based evidence rather than evidence-based policy, and with greater trust being placed in management consultants and other private sector producer services firms than in the expertise, experience, and opinions of public sector professionals.

There are nonetheless significant discontinuities with the Thatcher-Major years. These are partly rooted in the political legacies of the old labour movement and its social bases, which provide a measure of resistance to the New Labour ‘project’ even inside the Cabinet; and are partly related to the more general aim to adapt neo-liberalism to new exigencies on a global, European, and national scale. In particular its economic strategy reflects a further intensification of the dominant neo-liberal mode of globalization and the increasing equation of post-Fordism with the alleged transition to the ‘knowledge-based economy’. Thus, within the framework of a strong commitment to expanding the European single market and maintaining the dominant position of the City of London, New Labour has gone well beyond the Thatcher-Major commitment to making the economy more flexible and entrepreneurial by rolling back the rigidities associated with Britain’s ‘flawed Fordism’.  It has also been developing a strategy for a knowledge-driven or knowledge-based economy based on knowledge-intensive business services, high tech innovation (especially big pharma), and the cultural and creative industries. New Labour is less concerned to manage the transition from rigid labour markets to flexible labour markets in response to the crisis of Fordism – a task already largely achieved under Thatcherism – than to create a framework conducive to a globalizing ‘knowledge-based’ economy. This is common to most OECD countries and is pursued on many scales but New Labour’s preferred model is neo-liberal rather than neo-corporatist or neo-statist.

Likewise, New Labour’s social strategy reflects not only the continuing desire to subordinate social policy to the alleged economic imperatives of global competition but also to address the marked increase in social polarization and exclusion that has accompanied the neo-liberal project as pursued by the Thatcher-Major governments. This is especially important given the markedly uneven North-South development of the Thatcher-Major years and is reflected in a series of New Labour flanking measures to improve the efficiency of flexible labour markets as well as to temper the social costs of labour market reforms and other neo-liberal economic measures. These were nonetheless limited by cost constraints in the first two to three years of the New Labour government and by worries that they might create political space for opposition to the New Labour project. Initially more impressive in their rhetoric, aims, and institutional design than their implementation, they received greater weight in New Labour’s second term. This can be seen in New Labour’s adoption of neo-communitarian rhetoric with a strong US-American inflection as well as in the proliferation of area-based economic, educational, housing, poverty, and other initiatives targeted at the socially excluded. Indeed Blair, his principal policy advisers, and his favoured ministers are far keener to export lessons of US enterprise culture and welfare-to-work to the European Union than they are to export modernized European social democracy and the European Social Model to the USA.

The primacy of neo-liberalism in this changing policy mix can be discerned in many aspects of New Labour strategy from 1984 until 1997 (Hay 1999). And, in power, many of its economic and social policies display a neo-liberal bias as they move from initial policy formulation through local experimentation to full-scale implementation. This impression of neo-liberal primacy is reinforced when one contrasts the constancy and conviction that marks the pursuit of neo-liberalism both rhetorically and practically with the oscillation and hesitation in those aspects of New Labour discourse and actions that seem to run counter to neo-liberalism. Thus, at different times, New Labour has invoked ‘the stakeholding society’, ‘the giving society’, ‘communitarianism’, ‘social citizenship’, ‘social capital’, ‘partnership’, and, of course, ‘the Third Way’ to distinguish its approach from Thatcherite neo-liberalism. But these are rarely followed through in practical terms lest they threaten the neo-liberal project. Instead New Labour has implemented its social programme through ‘stealth’ rather than by mobilizing the socially excluded behind a radical hegemonic project. Moreover, whilst it toughs out opposition from party members, trade unions, and new social movements, New Labour is highly sensitive to business criticism about its alleged neglect and/or backsliding regarding the market mechanism. Business is also over-represented in scores of official review and advisory bodies and is being given an increasing role in the creeping privatization of public and social services. New Labour has embraced the City agenda and neo-liberalism more generally and pays less attention even to regional chambers of the CBI, Chambers of Commerce, and other representatives of the domestic economy, let alone the trade unions. Indeed, it has become the natural governing party of international capital.

While neo-liberalism has been modified compared to the Thatcher and Major years, this does not mean that it has been rejected. It is an evolving economic and political project that has already passed through several stages, that can be adjusted as its effects unfold in different fields and on different scales, and that has to be adapted to changing economic, political, and social circumstances. In particular, as the neo-liberal regime shift comes to be consolidated, significant changes in the state’s role should be anticipated. As noted above, the transition period was marked by a concern with rolling back the exceptional forms of state intervention linked to attempts at crisis-management in the previous regime (Atlantic Fordism) as well as the more normal forms of intervention associated with the Keynesian Welfare National State; and by a concern with rolling forward the institutional architecture for a new regime, securing the balance of forces needed for this, and establishing the new forms of state intervention deemed appropriate to that regime should it be successfully consolidated. This period has been followed by the first steps on the road to a routinization of neo-liberalism. Thus more emphasis has been given to securing the operation of the emerging neo-liberal regime through normal politics, to developing supporting policies across a wide range of policy fields, and to providing flanking mechanisms to compensate for its negative economic, political, and social consequences. All of these measures are being pursued, of course, in a context marked by continuing political worries about state unity and territorial unity, political legitimacy, and re-election as well as more general concerns over social cohesion. This is the legacy of Blairism and Cameron’s leadership of the Conservative Party represents the further routinization of this stage of normalized neo-liberalism. Indeed, if Mrs Thatcher once proclaimed that her most important legacy was Blair, Blair could equally proclaim that his most important legacy is Cameron.


Hay, C. (1999) The Political Economy of New Labour. Labouring under False Pretences? Manchester: Manchester University Press.

Jessop, B. (2002) The Future of the Capitalist State, Cambridge: Polity.

Jessop, B. (2006) ‘Der Dritte Weg: Neoliberalismus mit menschlichen Zügen?’, in S. Berg and A. Kaiser, eds, New Labour und die Modernisierung Großbritanniens, Augsberg: Wissener Verlag, 333-366.

Jessop, B., Bonnett, K., Bromley, S., and Ling, T. (1988) Thatcherism: a Tale of Two Nations, Cambridge: Polity

Jessop, B. Bonnett, K., and Bromley, S. (1990) ‘Farewell to Thatcherism? Neo-Liberalism vs New Times’, New Left Review, 179, 81-102.

Panitch, L. and Leys, C. (1997) The End of Parliamentary Socialism: from New Left to New Labour, London: Verso.

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