Rendering the Contingent Necessary: New Labour's Neo-Liberal Conversion and the Discourse of Globalisation  ^*  

Colin Hay and Matthew Watson

Center For European Studies

Abstract

Though widely and convincingly discredited in academic circles, the crude business school globalisation" thesis continues to dominate the political discourse of globalisation as does the political 'logic of no alternative' that it is seen to conjure. In this paper we argue that it is this political discourse of globalisation rather than globalisation per se that summons the "inevitability" of welfare retrenchment, labour-market deregulation and fiscal conservatism writ large that has come to set the terms of bipartisan convergence in contemporary Britain. As such, it is the political deployment of the discourse of globalisation, rather than the transformation of the international political economy that such a discourse purports to represent, that is the most significant factor in restricting the parameters of that considered politically and economically possible. We illustrate this argument with reference to the downsizing of New Labour's aspirations for government in the two years prior to the 1997 General Election and in the months subsequent to its landslide victory, revealing and scrutinising the narrative of globalisation upon which this has been publicly predicated. In the concluding section, we argue that New Labour in government is likely to prove far more successful in revitalising the ailing and antiquated structures of Britain's antediluvian capitalism as it resists the logic of neo-liberal convergence that globalisation is seen to summon, and to which it has thus far subscribed.

"[T]he endless round of meetings, speeches ... occupy much of the time of the economic opinion leaders. Such interlocking social groupings tend at any given time to converge on a conventional wisdom, about economics among other things. People believe certain stories because everybody important believes them. Indeed, when a conventional wisdom is at its fullest strength, one's agreement with that conventional wisdom becomes almost a litmus test of one's suitability to be taken seriously". ¹

Globalisation is increasingly seen to circumscribe the parameters of the politically and economically possible within the contours of contemporary capitalism. Heightened capital mobility, labour-market deregulation and financial liberalisation, it is argued, conspire to announce not only the passing of the Keynesian welfarism of the post-war years, but of a positive agenda for welfare reform (as opposed to the subordination of social policy to the imperatives of competitiveness), an active and interventionist role for the state (whether on the demand or the supply-side) and indeed social democracy itself. In this paper we suggest that the impact of globalisation on the British political economy may be more rhetorical than substantive (but no less real for this). It is the political discourse of globalisation rather than globalisation per se , we argue, that summons the inexorable `logic of no alternative' (of welfare retrenchment, labour-market deregulation and fiscal conservatism writ large). We illustrate this argument with respect to the British case, suggesting that it is the political deployment of the discourse of globalisation, rather than the transformation of the international political economy that such a discourse purports to represent, that is the most significant factor in restricting the parameters of that considered politically and economically possible in contemporary Britain. In this way, the highly contingent, though now ascendant, politics of neo-liberalism is rendered necessary by the discourse, if not the reality, of globalisation. We illustrate this argument with reference to the downsizing of New Labour's aspirations for government in the two years prior to the 1997 General Election and in the months subsequent to its landslide victory, revealing and scrutinising the narrative of globalisation upon which this has been publicly predicated.

Our analysis proceeds in four stages. In the first section we examine the `political logic of globalisation' conjured by the voluminous `business globalisation' literature (associated in particular with a certain blend of wishful thinking and the self-fulfilling prophecy on the part of neo-classical economists). Although this crude globalisation thesis has been widely and convincingly discredited in academic circles, it nonetheless continues to dominate the political discourse of globalisation, as does the (convenient) `political logic of no alternative' that it is seen to conjure. <sup>2</sup> Despite the clear and, one might surmise, strategic  associations between neo-liberal economics and the politically expedient crude globalisation thesis (announcing the victory of the market and the obsolescence of capital controls, social democracy and the state itself), such a view of the highly circumscribed parameters of the politically possible is considerably more widely held. Thus, in many respects much closer to New Labour's view of the constraints imposed by an interdependent world of heightened capital mobility than the business globalisation literature is Adam Przeworski and Michael Wallerstein's `modified structural dependence thesis'. ³ We identify and trace the similarities between these seemingly convergent, if rather differently-informed, accounts.

In the second section we seek to demonstrate the Labour Party's deployment of the discourse of globalisation and, moreover, its deployment of such a discourse as a means of revising, indeed downsizing, its aspirations for government and its perception of the parameters of the politically feasible. By way of a detailed textual analysis of speeches, statements and supporting policy documents -- in particular a flurry of speeches by Tony Blair and Gordon Brown in May 1995, during which Labour abandoned any lingering vestiges of a distinct industrial strategy for government ⁴ -- we examine the means by which the discourse of globalisation has been used to render economically `necessary' the politically contingent logic of neo-liberal convergence.

Of course, to demonstrate that the contingent has indeed been rendered necessary in this way, requires that we also demonstrate the analytical poverty and empirical paucity of the implicit globalisation thesis upon which Labour has consistently drawn. For if the processes of financial liberalisation and heightened capital mobility that underpin a putative globalisation have indeed circumscribed the parameters of the possible to dictate a multilateral neo-liberal convergence, then the formerly contingent is now necessary. This we reject. It is to the crucial task of critically evaluating the globalisation thesis to which Labour subscribes, then, that we turn our attention in the penultimate section of this paper. In so doing we develop and add to a now well-established literature that seeks to `demystify' the excesses of an overblown globalisation thesis. ⁵

In the concluding section, we re-consider the contingent realm of the politically and economically possible once the shadow cast by a discursively constructed (yet no less real) globalising neo-liberal imperative has been lifted. We suggest that despite the economic logic of no alternative that globalisation is seen to imply, New Labour in government is likely to prove far more successful in revitalising the ailing and antiquated structures of Britain's antediluvian capitalism if it resists the logic of neo-liberal convergence that globalisation is seen to summon, and to which it has thus far subscribed.

The political logic of globalisation 

" ... the explanation itself has become a political force helping to create the institutional realities it purportedly merely describes". ⁶

The political logic of neo-liberal convergence and of the end of social democracy, the state, and history (in that order) announced by the `business globalisation' literature is now so familiar and so widely discredited in the secondary literature that it may seem both peculiarly perverse and strangely morbid to exhume once again this dismembered theoretical corpse. Yet if in theoretical and, perhaps more importantly, empirical terms, the crude globalisation thesis of Kenichi Ohmae, Robert Reich and other `globalisation gurus' is as dead as Francis Fukuyama's (sense of) history, then sadly in political terms, rumours of its death are, as yet, greatly exaggerated. Globalisation, it might almost be suggested, has become one of the myths by which we live; and, in so far as it has, it is the crudest, most teleological, reductionist and one-dimensional variant of the globalisation thesis by which we live, and, more importantly for current concerns, by which we are governed. Indeed, it is precisely this fact that makes the political logic of globalisation so familiar. As Linda Weiss notes,

"political leaders .. have themselves played a large part in contributing to [the] view of government helplessness in the face of global trends. In canvassing support for policies lacking popular appeal, many OECD governments have sought to `sell' their policies of retrenchment to the electorate as being somehow `forced' on them by `global economic trends' over which they have no control". ⁷

The logic is undoubtedly expedient, convenient and widely utilised. Under the fixed exchange-rate regime of the Bretton Woods system, the relative closure of the advanced industrial economies facilitated expansionary, interventionist and even dirigiste macroeconomic policies and active industrial strategies. However, with the demise of Bretton Woods, the removal of the gold standard and the attendant liberalisation of exchange controls from 1971, we have witnessed the financial integration of the global economy, or so the story goes. In this context, interventionism (whether on the demand or supply-side) is no longer feasible nor for that matter desirable; an expansionary macroeconomic stance, economic and political suicide...

In this qualitatively new, integrated, open and competitive environment, nation-states must seek to position themselves as competitive economic spaces by virtue of the enticements and stability they might offer potential investors. Capital (both industrial and financial) and, in some accounts even labour, may move freely across the boundaries that once demarcated national economic spaces, radically curtailing the parameters of what was previously possible. If national, regional and local economies are to prove themselves competitive in the market for inward investment, and indeed in maintaining indigenous investors now liberated from the shackles imposed by capital controls, they must out-compete one another in offering stability, investment incentives, a flexible and cheap supply of docile labour and a low tax environment. Fiscal austerity, welfare retrenchment and the removal of supply-side rigidities (like trade union rights) thus delimit the full extent of legitimate state intervention. Moreover, were the state, by whatever perverse logic, allured by the prospects of a unilateral and expansionary macroeconomic stance, the integration of financial markets ensures that such irresponsibility and in-competence can only precipitate a flurry of disinvestment and speculation against the currency, reimposing a strict deflationary bias. As the IMF's report on the `opportunities and challenges' presented by globalisation recently noted, "international financial markets ... serve to `discipline' governments ... encouraging the adoption of appropriate  policies, and ultimately rewarding good  policies". ⁸ What need then, one might ask, for the IMF? The casualty in all of this is the welfare state, social democracy and full employment -- in short, the prospect of an alternative to fiscal austerity, macroeconomic conservatism and staged welfare retrenchment. These are now revealed as indulgent luxuries of a bygone era, which must now all be sacrificed on the altar of competitiveness. Globalisation, thus understood, announces the global diffusion of neo-liberalism; there is simply no alternative.

This is perhaps the public face of the globalisation thesis, reflected in the editorial columns, financial and business pages of the tabloid and broadsheet media alike. Yet it is by no means the only path to the conclusion that financial liberalisation, heightened capital mobility and a more integrated and competitive global economic environment serves to summon a logic of no alternative on whose altar the social munificence of a welfare society must be sacrificed. No less significant, indeed perhaps rather closer to New Labour's own largely implicit narrative of globalisation, is the modified structural dependence thesis advanced by Przeworski and Wallerstein and further updated and revised by Mark Wickham-Jones. ⁹

The thesis is a simple one; it concerns the state's supposed structural dependence upon capital and, in particular, the consequences of heightened capital mobility in an era of globalisation for this relationship. As Przeworski and Wallerstein themselves note, drawing upon a long tradition of Marxist reflections on the state's dependence upon capital, "politicians seeking re-election must anticipate the impact of their policies on the decisions of firms because these decisions affect employment, inflation, and the personal income of voters: vote-seeking politicians are dependent on owners of capital because voters are". ¹⁰ The state, so the argument goes, is thus dependent upon capital in the sense that its very continuity as a political entity is reliant upon its ability to secure conditions conducive to continuing investment and capital accumulation. In an era of enhanced exit options, capital mobility and potential flight, this places considerable constraints on the political latitude of parties vying for state power. For, if we can assume that capital is likely to associate the election of a social democratic administration with higher levels of domestic taxation and, in an integrated global economy, enjoys near perfect mobility (the assumptions that make the model possible), then the merest whiff of a hint of the election of a social democratic government is likely to be accompanied by a rapid and destabilising exodus of capital. Quite simply then, this means that social democratic parties (and parties such as Labour that retain even residual social democratic associations), must effectively abandon their remaining social democratic credentials, and accommodate themselves to the perceived interest of capital (for low taxation, labour-market deregulation, welfare retrenchment and fiscal austerity) if the very suggestion of their election is not to precipitate disinvestment, currency speculation, and subsequent economic crisis. Once again, within the parameters of such a thesis, there is simply no alternative to neo-liberalism within contemporary capitalism.

What is so remarkable about such a thesis is the extent to which it seems to capture New Labour's strategic assessment of the context within which it finds itself -- an assessment it seems to share with its Antipodean namesakes and former social democratic allies across Western Europe. New Labour has behaved in a manner entirely consistent with how a utility-maximising (former) social democratic party would  act were  the structural dependence thesis valid. This, as Wickham-Jones' careful and important analysis makes clear, can be seen in its studious courting, since 1992, of domestic industry, the City (`prawn-cocktail offensive' and all) and, eventually, international investors from Wall Street to Singapore. ¹¹ Of course, that Labour acts as if this were so is not in any sense confirmation of such a thesis, as Wickham-Jones at times seems to imply. ¹² What is does suggest, however, is that Labour does indeed accept and embrace the logic of structural dependence and the logic of no alternative that it conjures. This, we suggest, makes a more dispassionate analysis of the structural dependence thesis all the more pressing. ¹³ Before embarking upon such an exercise, a few preliminaries are perhaps first in order.

The affinities of new classical economics and the structural dependence thesis 

The structural dependence thesis, respecified in the context of arguments about globalisation, concentrates essentially upon the process of `exit' and the supposedly `fluid' production relations that such a concept implies. In this respect, there is a perhaps surprising conjunction of analytical assumptions between the Marxist-inspired theory of the state's structural dependence on capital and the distinctively non-Marxist theory of new classical economics. Indeed, arguably it is in the very assumptions that these rather different perspectives share that the logic of no alternative seemingly summoned by globalisation is conjured. These assumptions -- those on which new classical economics is premised on the one hand, and those which make possible the parsimonious modelling of the state's dependence upon capital advanced by the analytical Marxists on the other -- are fivefold. They are: (i) that capital will invest where it receives the greatest return on its investment; (ii) that capital is blessed with perfect information of the conditions likely to prove most conducive in maximising returns on that investment; (iii) that capital has a singular and homogeneous interest which only it can best perceive; (iv) that this interest is undifferentiated with respect to sector (there being no distinction drawn between financial and industrial capital, for instance) and over time (there being no conflict envisioned between the short-term interest of individual capitals and the long-term collective interest of capital per se ,); and (v) that capital mobility is perfect, instantaneous and without cost. ¹⁴ At best these assumptions are crude and simplistic, as indeed they must be if they are not to exclude altogether the possibility of the parsimonious and predictive model-building that is the very raison d'être  of new classical economics and analytical Marxism alike. At worst they are demonstrably false, as we go on to demonstrate in later sections of this paper. For the time being, it is merely important to reiterate that it is in such premises, particularly the assumption that disinvestment and exit is without cost to both financial and industrial capital, that globalisation's logic of inevitability resides. Soften and render more complex the assumptions and the predictive power of the model may have gone, but so too the political fatalism that such a model implies.

Yet this does not exhaust the similarities between these unlikely bedfellows. For in both accounts, attention is focused upon the premise that economic relations are now regulated by a qualitatively new form of capitalist command. The processes of class domination and class struggle are now thought to emerge within an economic environment which is defined by increasingly flexible production relations. Somewhat paradoxically, such flexibility is further assumed to be both a cause and an effect of globalisation. This apparent paradox is resolved, however, on the realisation that it is the increase in the range of strategic options being exploited by capital  which is held to be driving globalisation; and, in the face of such tendencies, labour  has to be made more accommodating by being moved towards ever more flexible forms of work.

Not only, therefore, does `globalisation' threaten to render the structural dependence thesis `true', "in the sense that people ... now experience the world in a way that confirms the ideology". ¹⁵ Is also threatens to make new classical economic theory `true'. Whilst one might presume that economists would be concerned to devise theoretical models proximate to real-world situations, it now appears as though the world is being refashioned in the image of the models used by economists to interrogate it. Those state actors responsible for authoring the globalisation process are now actively re-defining real-world relationships so that they more closely approximate the textbook world of new classical economics.

The pressures to further liberalise the financial environment derives from a desire to create a global capital market which places no restrictions (either geographical or statutory) on the activities of capital. Yet it is just such an assumption of perfect capital mobility (at zero cost) which has underpinned orthodox liberal economic theory -- whether in its new classical or neo-classical guise -- since the `marginal revolution' of the 1870s. As we later argue, however, this assumption cannot be corroborated by empirical observation. This is true even today, in circumstances in which concerted political interventions are being effected in order to facilitate financial globalisation. <sup>16</sup> Nonetheless, the assumption of perfect capital mobility remains integral to political projects which, like New Labour's, seek to place `the market' at the heart of their economic policies. For this assumption is functional to the notion of a self-adjusting `market' equilibrium. Set in this context, temporary disturbances within the economic environment are thought to have no long-term effects on equilibrium levels of output and employment so long as there are no institutionalised market distortions which subvert the automatic adjustment mechanisms. Consequently, Tony Blair's frequently reiterated commitment that there the new Labour government will aim to "work with the grain of global change" initiated by the `market' suggests a commitment to supply-side reforms focused on removing market rigidities. In arguing that his administration will "accept, and indeed embrace, the global market", he has stressed that New Labour does not view the processes of globalisation as systematic forces which will impose long-term disequilibrating effects on the British economy. ¹⁷ In fact, the economic rhetoric deployed by New Labour opens up the possibility that in power it will actively attempt to harness the globalisation process in order to facilitate smoother adjustments between short-term market equilibria.

Arguably, the most significant aspect of the Labour Party's ideational transformation during its self-styled `modernisation' has been its acceptance of the legitimacy of market solutions. Nowhere is this more apparent than in its attitude towards globalisation. Moreover, New Labour displays a distinctive understanding of `the market', which subsequently informs its interpretation of the supposed structural necessities of `the global market'. <sup>18</sup> The very idea of the `market' is itself far more than a value-neutral description of an exogenous economic reality. It is, by contrast, a normative statement as to how economic relations should be regulated. As Mark Blyth argues, economic ideas "facilitate collective action by agents who wish to restructure the distributional relationships between capital, labour and the state". ¹⁹ The idea of `the market' has historically been appropriated by those seeking to institutionalise a shift in the distributional status quo  away from labour. Moreover, the idea of `the global market' has been used to legitimate an acceleration of such a trend.

In light of the perceived need to make wage relations ever more fluid, the politics of globalisation and the economics of new classical theory are then mutually reinforcing. By contrast, the neo-classical economists from Marshall onwards accepted that both wages and prices were `sticky', thus preventing markets from clearing in the short-run in response to demand shocks. ²⁰ For the neo-classicists though, governments were required to treat aggregate demand with benign neglect, even in the face of such shocks, concentrating instead on supply constraints. The role of an active  government, however, was made explicit, famously, in the Keynesian synthesis. For Keynes, adjustments to demand shocks were to be managed by removing the demand constraints associated with price stickiness. This was to be achieved by using an active monetary policy in order to undermine the existing value of money and hence restore a market equilibrium through manipulation of the price level. Yet even the most cursory glance reveals that this is clearly not the market economics that New Labour has chosen to learn. Instead, the intellectual lineage of the government's economic policy (both rhetorically and in practice) can be traced to the new classicists.

Whereas in neo-classical theory, macroeconomic analysis tends to revolve around the notion of wage/price stickiness , in new classical theory, the notion of wage/price flexibility  is placed centre-stage. Viewed through this latter perspective, active economic governance is understood in terms of enforcing new flexibility norms. Furthermore, given the current financial context, flexibilisation impacts in a systematically asymmetric manner to the detriment of labour. As such, in repeatedly using the language of `flexibility', the Labour Party has internalised not only a dominant economic idea but also a dominant political project. The financial system in which we live has become increasingly inelastic in response to demand shocks; vast sums of capital are now prepared for the sole purpose of defending real monetary values. With monetary prices being policed by short-term flows in this way, they have become progressively more in flexible. As a result the burden of flexibility has increasing fallen on labour. The market economics which the new government is implementing, then, requires for adjustments between short-term equilibria to be administered by an ever more coercive regulation of wage relations. ²¹

The policy prescriptions implied by such a strategy are contingent upon the particular ideas on which they are grounded. However, New Labour has cloaked these policies in the language of inevitability, by re-inflecting them with the rhetoric of globalisation. As we show later, New Labour's understanding of globalisation tends to be couched in terms of structural economic necessities. Set in this context, globalisation is assumed to announce the end of discretionary macroeconomic management. Driven by its perception of inexorable globalising tendencies, the Labour Party renounced its former commitment to a discretion-based policy before it came to power. Moreover, since assuming power, it has demonstrated repeatedly its new commitment to a rules-based policy. ²² Whilst discretionary policies concentrated historically on demand-side interventions, the policy stance of the new orthodoxy mirrors the theoretical stance of the new classicists in its focus on supply constraints. In this respect, potential supply constraints emanating from two distinct sources are thought to be particularly important. First, Labour market constraints have been increasingly eradicated to ease the move to a new market equilibrium, as the price level is no longer being used as a means of adjustment. Second, and relatedly, price stability has been ensured in order to counteract the most likely reactions in the foreign exchange markets to the emergence of inflationary tendencies. Given the seemingly instantaneous nature of global financial transactions, it now appears to be possible to move vast sums of money out of any national economy at a moment's notice on the formation of market expectations about imminent inflation. In such circumstances, supply constraints emerge in the form of liquidity crises. Hence, in an era of global financial relations, the state's structural dependence on capital appears to be most acute in financial, rather than productive sectors. For, as Geoffrey Garrett notes,

"..the easier it is for asset holders to move their capital offshore, the stronger the incentives for governments to pursue policies that will increase rates of return on domestic investment. Given that it is more difficult for entrepreneurs with fixed investments in physical plant and equipment to redeploy their assets than it is for those investing in stocks, bonds or currencies, the expected reaction of the financial markets is likely to be the primary constraint on government policy in a world of mobile capital". ²³

This assumption lies at the heart of the new government's decision, taken within a week of its election victory, to depoliticise monetary policy relations by ceding operational responsibility for interest rates to the Bank of England. As we see quite clearly by the observed pattern of currency speculation, foreign exchange traders consistently indicate a preference for currencies backed by anti-inflationary policies. Liquidity crises in domestic banking sectors are consequently triggered by speculators moving out of domestic currencies en masse  on the expectation of imminent inflationary tendencies. Accordingly, the search for counter-inflationary credibility has become a cornerstone of New Labour's economic management. Its `tough on inflation, tough on the causes of inflation' stance was the key consideration behind the decision to absolve the government of any further responsibility for interest rate policy.

Whilst, in this respect, the Labour government has acted  tough, its anti-inflationary credibility has been built primarily by talking  tough; that is, by sending the correct signals to those in the international financial markets who effectively serve as the guardians of national liquidity. Speculative flows of short-term financial assets are now triggered almost entirely by expectations of likely future government policy. To a significant extent, then, the execution of a `successful' macroeconomic policy relies upon the execution of a `successful' discursive strategy. As such, macroeconomic policy has increasingly entered the realm of symbolic politics. Within this symbolic realm, far from witnessing the emergence of any real logic of no alternative, it would seem possible to demonstrate an anti-inflationary credibility in any number of ways. For example, inflation has definite demand-side characteristics. Consequently, a hypothetical government might conceivably announce its commitment to price stability by focusing on alleviating capacity shortfalls which lead to demand exceeding supply in goods markets. However, taking its lead from the now dominant new classical economics, the inflation which New Labour is fighting has been discursively pre-constituted as a purely supply-side phenomenon. In particular, this is seen to be `wage-push' inflation, to be dealt with by removing institutionalised supply constraints within the labour market. This is a dynamic which New Labour has been quick to set in motion: first, by attacking the real wage (nominal levels of pay have been held down in the public sector to allow spending to be kept within inflation-sensitive limits, <sup>24</sup> with similar `restraint' subsequently having been urged on the private sector) ²⁵ ; and second, by attacking the social wage (benefit entitlements have been progressively down-graded amidst a general re-definition of welfare as workfare). ²⁶ .

Globalisation's logic of no alternative therefore re-emerges. Here, however, the `inevitability' of welfare retrenchment is conjured rather differently: now articulated in the `necessity' of satisfying the inflation demands of the global foreign exchange markets. Once again, we witness a broad congruence of propositions and claims. It would indeed seem as though all intellectual routes, or at least all those that New Labour is currently willing to entertain, convergence on a similar diagnosis. That is, like it or not, New Labour (whether in opposition or in government) exists in a hostile and unfriendly environment defined, as it is circumscribed, by a set of `harsh economic realities'. This is the `new political economy' in which we live. In such a context, governments simply have no choice but to announce the end of punitive tax regimes on business, to promote aggressively inward investment (whatever the costs in terms of subsidies and labour market deregulation), and to render the welfare state both residual and increasingly functional in terms of national competitiveness. ²⁷

New Labour's `New Times' 

"

The economy is becoming ever more global. Trade is growing at twice the speed of production. British Airways does it backroom work in Bombay, while a baker in South Yorkshire is taking on fifty new staff because his baguettes are selling so well in France. Yesterday's solutions will not work for tomorow". ²⁸

In the following section, we present a number of statistical measures which show fairly unequivocally that claims for globalisation (at least those congruent with New Labour's macroeconomic and revised industrial policy stance), however pervasive and superficially attractive, cannot be substantiated. Yet to engage with the empirical arguments and nothing else may well be to miss the most important aspect of the globalisation debate. New Labour clearly acts as if  the globalisation hypothesis were an accurate description of reality. This in turn has very real effects. Thus, as Frances Fox Piven suggests, "the explanation [of globalisation] itself has become a political force helping to create the institutional realities it purportedly merely describes". ²⁹ The rhetoric of globalisation is being used to identify the `harsh economic realities' which now supposedly necessitate the dissolution of the post-war social compromise constructed at the national level between capital and labour. Moreover, this is intended as a process of creative  destruction, whereby the post-war welfare state will be re-invented as a competition state for `new times' if not quite as yet the `end of history'. ³⁰

The intrinsic link between the material and the ideational is, in this instance, perhaps particularly significant. It is not globalisation per se  which is driving change in contemporary Britain. Given that production relations have yet to be globalised, how could it be? ³¹ Rather, change is a function of the distinctive and dominant political understanding  of globalisation now internalised by New Labour. The meaning and significance attached to `globalising' trends, tendencies and processes may be as significant in accounting for outcomes as those trends, tendencies and processes themselves (as, and when, they exist). ³² Thus, globalisation acts as so pronounced a constraint upon the autonomy of government precisely because the government believes that it does; the merely contingent is rendered necessary only through the discourse and politics of globalisation. ³³

An image of inexorable economic forces is often summoned in order to explain the emergence of globalisation's logic of inevitability. Once a more dialectical understanding of the relationship between the material and the ideational is emphasised, however, a rather different picture emerges. ³⁴ Political outcomes are not structurally-determined by a globalisation process for which there is, in any case, only superficial evidence. The political is far more than merely residual to a determining economic essence. Indeed, in the absence of decisive, facilitating political interventions, the material process(es) of globalisation would be unsustainable. ³⁵ Consequently, we argue that it is necessary to focus not only on empirical measures of the extent to which economic relations have, or have not, been globalised. Just as crucial, we suggest, is the way in which New Labour conceives of such relations. For ideas are far more than mere post hoc  rationalisations of pre-existing structural logics. ³⁶ An understanding of the government's discursive construction of globalisation is a necessary (though clearly insufficient) condition of an adequate understanding of the processes of change visible in contemporary Britain.

That New Labour chooses to deploy the rhetoric of globalisation is undeniable. It is crucial, then, that we establish on what terms  it chooses to do so. The dominant suggestion, rhetorically, is one of a qualitative break with the past. The economic logic of the latest phase of capitalist development is assumed by New Labour to mark a clear transition with the post-war years. Moreover, as this logic has diffused and penetrated political structures, it is further assumed to have swept away the sedimented institutions and dominant conventions of a now bygone era. Even the now irritatingly familiar addition of the prefix `new' to the party's name (and much else besides) -- emphasised most deliberately in the Prime Minister's post-election invocation: "We have been elected as New Labour; we will govern as New Labour" ³⁷ -- is testament to such an assumption. The implicit suggestion is that we have witnessed a paradigm shift in the organisation of economic relations, requiring a similarly dramatic shift in the politics of economic regulation. "In a global economy", Tony Blair argued in a speech to the Singapore Business Community, "the old ways won't do ... In reality, in a modern economy, we [do not] need old style dirigisme ". ³⁸ In a similar vein, Gordon Brown argued at the CBI Annual Conference, "we understand that in a global market place, traditional national economic policies -- corporatism from the old left -- no longer have any relevance". ³⁹ As such,

"The key to new Labour economics is the recognition that Britain .. [has] .. to compete in an increasingly international market place... Today's Labour Party, new Labour, is the political embodiment of the changed world -- the new challenges, the new policies and the new politics". ⁴⁰

However else New Labour subsequently markets itself, the first image which is wishes to convey is that it is qualitatively distinct from its former self. The `newness' of New Labour is juxtaposed to Old Labour, just as the supposedly unique attributes of globalisation are emphasised in order to differentiate the logic of the current phase of capitalist development from the logic of capitalism per se . A dialectic of change is thus suggested. Yet within such a characterisation, the predominant line of causation runs unequivocally from the economic to the political. It is political actors that have had to `respond' to the `challenges' posed by the `new realities' of changed economic circumstance. In this respect, Blair's warning to party supporters with reservations about the pace of New Labour's political transformation "to stop living in the past and move with the times" is typical. ⁴¹ So too his similarly phrased invocations to Lionel Jospin at the Congress of Socialist Parties in Malmo, after the latter was naive and nostalgic enough to suggest a more aggressive and interventionist European stance on unemployment. ⁴² The `new times' of which Blair speaks are primarily new economic times and, as such, we should be aware that a residual economic determinism remains in New Labour's own accounts of its own `modernisation'.

According to Blair, "there are three obvious changes in the post-war world" which are driving contemporary political change, the first and most important of which is that "the economy is global". ⁴³ Moreover, the new structure of the international economy is seen to act to constrain, in particular, those parties most traditionally associated with the ethos of active government (however misplaced that association). Whilst, in the academic literature, this tends to be stated bluntly as the assumption that globalisation sounds the death knell for social democracy, New Labour's articulation of such an assumption is expressed in rather more moderate language. "In the complex and increasingly integrated world economy", Gordon Brown told the Party's influential Finance and Industry Group whilst still in opposition, "we need a clear appreciation of the role -- and the limits  -- of government". ⁴⁴ To highlight that an acceptance of the fallibility of government was a distinctly New  Labour policy, this notion was introduced under the section of the speech headed, "No return to past failures". In contrast to the `failed' world of Old Labour, the `future' world of New Labour is to be one in which there is no places for an over-active government. `Good government' of the economy is assumed to equate with `minimal government' of the economy, because the processes of globalisation have been thought to ensure that "choices are constrained; there are no panaceas; and [consequently] the solutions adopted by left and right may often overlap". ⁴⁵ Thus the rhetoric of Anthony Giddens' `future of radical politics,' -- a politics beyond the old binary oppositions of `left' and `right'" -- is summoned by New Labour. ⁴⁶ Moreover, this is a rhetoric which is deployed across the whole of the ideological spectrum of New Labour, from Robin Cook -- "Because the world is changing fast [and] the economy is becoming ever more global ... yesterday's solutions will not work for tomorrow"; ⁴⁷ to Peter Mandelson and Roger Liddle -- "New Labour does not accept the classic view of the left-right divide in which both sides are locked in permanent conflict". ⁴⁸ This latter assumption is captured even more vividly in the Prime Minister's insistence that "[New Labour] means a politics no longer scarred by the irrelevant ideological battles of much of the 20th century [because] most of the old left/right tags today are nothing but obstacles to good thinking". ⁴⁹

In an analysis which represents little more than a subtle re-inflection of the arguments of Kenichi Ohmae and Francis Fukuyama, the economic rhetoric of New Labour conflates the `era of globalisation' and the `end of history'. In all three accounts, the traditional tensions between the state and the market as the most efficient means of organising economic activity have been resolved irrevocably in favour of the latter. As a result, the Labour Party's discursive positioning in relation to the market has shifted from outright hostility to general scepticism, and from there to grudging acceptance and finally open embrace. "Modern government has a strategic role", the Labour Party declared in its 1992 election manifesto "not to replace the market but to ensure the market works property". ⁵⁰ This is a theme which Tony Blair in particular has since picked up on with some vigour. "The modern function of government," he has argued, "is not to second-guess the market". ⁵¹ In this respect, New Labour's understanding of the imperatives of economic governance endorses the move away from a discretionary policy; a move made explicit in new classical economic theory. Instead of adopting a discretionary policy which seeks to actively shape market outcomes, the limits of acceptable government intervention in macroeconomic relations are now assumed to be the implementation of a rules-based policy. Here, the government feeds the market with information about its intentions, by publicising a series of medium-term targets for the economy. In its desire to foster market expectations that it has created -- in Gordon Brown's words, "a credible framework for monetary discipline" ⁵² -- the "first goal of policy" has become the perceived need to "set an explicit target for low inflation". ⁵³ In turn, the supprssion of inflationary tendencies is assumed to entail a commitment to "lay down rules" for being "fierce in controlling public spending". ⁵⁴ To this end, the Chancellor 'has published explicit spending targets, in order that "nobody should doubt [his] iron resolve for stability and fiscal prudence". ⁵⁵

Once again, the rhetoric of globalisation is deployed by New Labour in order to explain the shift in macroeconomic focus from employment to inflation imperatives. Thus, as Blair himself suggested, in the new economic environment, "low inflation is not simply a goal in itself, it is the essential prerequisite both of ensuring that business cna invest and that supply-side measures can work to raise the capacity of the economy to grow". ⁵⁶ Those operating within global foreign exchange markets are now assumed to be able to exercise considerable restraint over the policy autonomy of individual national governments who do not appear to be as inflation-sensitive as they are. As the Chancellor has argued, financial capitalists now have "more choice and freedom then ever before, and day to day flows of capital are greater and faster than ever before ... Today, the judgement of the markets -- whether to punish or to reward government policies -- is as swift as it is powerful". ⁵⁷

To a large extent, therefore, the Labour Party's rapprochement  with the market is a reaction to the assumptions about global market relations. Viewed through this perspective, any outward display of diffidence towards the market -- or, more accurately, towards the concerns for price stability of those operating within the currency markets -- is thought, quite simply, to force financial activity offshore. For investment to be retained onshore, governments "must convince the markets" of their reputation for being tough on inflation. ⁵⁸ As such,

"

Credibility has become the keystone of policy-making in the nineties. A credible government is a government that pursues a policy that is `market friendly'; that is, a policy that is in accordance with what the markets believe to be sound". ⁵⁹

By delegating operational control of interest policy to the Bank of England, the new Labour government has effectively externalised the responsibility for anti-inflationary credibility. This deliberate attempt to depoliticise domestic monetary policy relations was guided by the assumption that "the City ... believes that the Bank will be a lot less tolerant about inflation than any government could be". ⁶⁰ It would appear as though Geoffrey Ingham's `City-Bank-Treasury nexus' is alive, reinvigorated and kicking under a New Labour government. ⁶¹ Indeed, on the day that the reforms were announced, John Sheppard, then chief economist at the ill-fated Japanese securities house, Yamaichi International, commented that "the government's credibility has been vastly improved by this bold step". Similarly, Andrew Roberts, bond analyst at the Swiss Bank, UBS, remarked, "it is unbelievable to gain so much financial market credibility with such a simple move". ⁶²

The government explained the new institutional arrangements for the conduct of monetary policy as a necessary condition for remaining internationally competitive within the global economy. ⁶³ National competitiveness has increasingly become a central preoccupation of governance strategies, to the point at which it has ceased to be a means to a wider economic end. It now appears to be a political end in itself. As Riccardo Petrella observes, "competition has acquired the status of a universal credo, an ideology". ⁶⁴ In Bob Jessop's terms, competitiveness has now been constituted as the  national economic interest; ⁶⁵ and, in Tony Blair's, "economically, the challenge [of globalisation] can be summed up in a single word: competitiveness". ⁶⁶ As such, Labour's economic policy proposals are now almost exclusively "aimed at increasing the competitiveness of British companies in increasingly competitive markets". ⁶⁷ In this respect, there is little difference between the government's aims and its predecessor's attempts to generate "the right climate ... to help business to help itself". ⁶⁸ The basis of successive governments' competitiveness strategies has been to foster an economic context which is looked upon favourably by the managers of both national and multinational capital. At the macroeconomic level, New Labour assumes that such a strategy is facilitated by its "determination to create a modern monetary framework that [can] command confidence and credibility"; ⁶⁹ a "stable low inflation environment" is further assumed to act as a "platform of stability from which we can build our industrial strength". ⁷⁰

The stated goal of the Labour government is to construct this new `industrial strength' via strategic microeconomic interventions. The new administration talks openly of `the limits of government'. Yet this does not translate into the end of active government per se . It is certainly true that New Labour respects the demands of its own `limits of government' rhetoric in terms of macro economic policy. However, the same cannot be said of its attempts to forcibly insert itself into labour market relations. We still are witness to an active government in terms of micro economic policy. Indeed, arguably the most common misunderstanding in the whole of the globalisation debate is that globalisation spells the end of the political competence of an individual national state. In practice, what we are seeing is not the withering of the state so much as the wholesale redefinition of its form and function. ⁷¹ New Labour's interpretation of the new economic functions of the state is articulated most frequently in the perceived need to enhance economic competitiveness. Moreover, its response to perceptions of the competitive imperative has been to turn its attention to supply-side constraints operating in the labour market.

In this respect, British workers are being coerced by new legislation into becoming ever more `flexible'. The aim of the new government's policy has been to integrate an increasing proportion of the workforce into the low-skill, low-wage sectors which, in terms of job creation at least, are currently the most dynamic in the `global' economy. The dominant discourse of globalisation suggests that, as a reflection of processes of Asian proletarianisation, British workers in relatively unskilled sectors now face direct wage competition from workers in newly industrialising economies. New Labour's politics of flexibilisation are a reaction to just such an assumption. In the words of the `Road to the Manifesto' documents, under a New Labour government

"What there will be is a new deal for people at work ... [The] world is changing ... Companies need both the capability and the flexibility to success in this new world ... We must avoid rigidity in labour market regulation and promote the flexibility we require". ⁷²

Similarly, Robin Cook has recently argued that,

"Britain is a global player ... companies must be able to adapt to a fast-changing market. Otherwise, they stop being competitive and cannot create jobs ... We must guarantee [that government legislation does not] over-burden business and destroy jobs". ⁷³

As such the rhetoric of globalisation is being used to justify the redistribution of the burden of market forces from productive capital to labour in the name of national competitiveness. ⁷⁴ Moreover, this is a strategy in which New Labour has felt sufficiently confident to attempt to export it to its European partners,

"We have shown that alongside low inflation and sound public finances, Europe needs a new approach to employment and growth, based on British ideas for competitiveness, including more flexible labour markets and employability". ⁷⁵

Once again, the overall message is a simple one. Globalisation, financial liberalisation, the imperatives of competitiveness in a more open international market place, and the exhaustion of the `golden age' of Keynesian-welfarist-fordist capitalism leave no room for the distinctly `old' politics of social provision, the correction of market failures and of a positive agenda for welfare reform. If we accept that the parameters of the possible have been circumscribed in this way, we can once again interpret New Labour as exhibiting radicalism -- albeit a radicalism carefully fashioned for `new times'.

At this point it is perhaps worth recalling that the notion of `new times' does, of course, have a long and very distinct pedigree in debates on the need for, nature and extent of the `modernisation' required if Labour were to overturn the ascendancy of the new right established in the 1980s. The term was first coined in the pages of Marxism Today . What is perhaps interesting here is the extent to which, in the face of consistent criticism, those previously most committed to the notion of a qualitative shift in the contours of contemporary capitalism necessitating a new accommodation with the changed realities of a new epoch, have qualified significantly such claims in recent years and in the light of Labour's modernising zeal. Thus Stuart Hall, intellectual guru of Marxism Today  and the neo-Gramscian revival in Britain more generally, admitted in a recent interview:

".. I feel a peculiar responsibility for the Blair phenomenon. Blair was quite close to Marxism Today  at one stage as a reader. We launched the modernisation programme which Blair took up. We mean different things by it but we are implicated in some of the shifts because we've always argued that Labour could not just go back to its old stamping ground and reaffirm the past. In a funny way, then, we're responsible for launching some of these new ideas which have then been appropriated cosmetically and installed in a different kind of project". ⁷⁶

Though Hall is by no means committed to the idea that Labour could simply revamp the Keynesian social democracy of the post-war years, he does nonetheless regard Labour's modernisation as resting on a fundamental misconception and, in particular, a conflation of the necessities of new times with the contingencies of neo-liberalism. ⁷⁷ Invigorated perhaps by the suggestion of a new epoch, Labour has mistaken the politics of welfare retrenchment, labour market deregulation and fiscal austerity for the only game in town in a post-Keynesian, post-corporatist and post-social democratic context. This is an exceedingly dangerous, however well-intentioned, move, restricting the limits of the possible, the feasible and the desirable to that imaginable within the ascendant neo-liberal worldview.

The mythology of globalisation 

The economic globalisation hypothesis, at least in the form in which it has been deployed by New Labour, represents little more than argument by assertion, victory of argument by reassertion. When attempts are made to reduce this hypothesis (more accurately a collection of reinforcing and related hypotheses) to a series of empirical statements, it becomes immediately apparent that the rhetoric of globalisation is only tangentially related to the realities (however harsh they may be) of the international political economy. As Nikolas Rose suggests, "the truth effects of discourses of economic globalisation are somewhat independent of the veracity of the analysis". ⁷⁸ New Labour has systematically recast its social and economic policies, therefore, in the face of `imperatives' which appear to have little basis in fact. Consequently, Will Hutton advises us that every time we hear talk of such `imperatives', we should "blow a big raspberry". ⁷⁹ Yet this, we suggest, may not be sufficient. For globalisation continues to dominate the political rhetoric which is being used to construct Britain's economic future. Moreover, until now, where this rhetoric has led, the politics of neo-liberalism have seemingly always followed. So perhaps it is time to move beyond mere raspberry blowing, to start telling some altogether different stories about globalisation.

Crucially, such stories must start to bear a rather closer relation to empirical realities. The most common assumption of the more extreme variants of the globalisation thesis is that `capital' now enjoys unlimited exit options, roaming freely around the globe in narrow and diligent pursuit of utility-maximising (for which read profit-maximising) self-interest. It is capital's new `hyper-mobility' which effectively disempowers those clinging to a nostalgic if touching desire to impart social democratic dynamics (however diluted) onto the structures of the capitalist state. For the successful re-drawing of the distributional norms implied by such dynamics rely upon the tax revenues raised from essentially fixed national capital formations. In the new global era, though, `capital' is no longer thought to have a distinct national identity as it is assumed to be able to locate wherever it chooses. As such, these mobility options enable it to avoid footing the bill for potentially costly domestic welfare regimes. Hence, we see globalisation's logic of no alternative made manifest in the form of `inevitable' welfare state retrenchment. ⁸⁰

However, we should be immediately suspicious (whilst perhaps resisting the temptation for still further raspberries) of the analytical virtues of arguments which talk about `capital' in the singular. It is surely misleading to think of capital in these terms. Capital is clearly not a homogeneous entity that might display a static and undifferentiated interest whilst deporting itself as a similarly static and undifferentiated structural power. We know from (bitter) experience, not least that of Britain's antediluvian capitalism, that there are many capitals. In such circumstances, we can reasonably expect that there will be no simple homogeneity of interest between these different class fractions, as the (however `exceptional') economic history of British capitalism again attests peculiarly well. ⁸¹ For example, the liquidity ratios associated with capital investments in productive capacity are very different to those associated with capital investments in financial assets. This difference is reflected in the contrasting time horizons over which returns accrue to these investments. The short-term nature of financial investments allows capital to be retained in the money markets in essentially `fluid' form. The speed with which financial assets can consequently be traded suggests that the depiction of capital as `hyper-mobile' does, in this instance, more closely approximate the reality.

The same cannot be said, though, of capital which is invested in new productive capacity. The longer-term nature of industrial investments requires (the structural weakenesses of the British economy not withstanding) `dedicated' rather than `fluid' capital. As such, productive capital is locked into distinct social and economic spaces. Indeed, it is a condition for the success of such investments that firms seek to build a stock of good will with the local community which acts as their host economy. ⁸² This they tend to do by sealing off many of their own future exit options; the sunk costs incurred by the initial investment making it significantly less rational for industrial capital to play the mobility card (as distinct, say, from threatening  to play the mobility card) ⁸³ at any time in the future. In seeming confirmation of this, there is precious little evidence of productive capital utilising it much-vaunted mobility (as distinct, once again, from utilising its much less highly vaunted capacity to threaten  exit). In no sense, then, should we understand productive capital as essentially rootless, restless, footloose and fancy-free, forever on the move in search of lower unit costs, leaving an ever widening track of devastation and unemployment in its wake. As suggested elsewhere, "although capital may have a strategic stake in emphasising its mobility and in playing up the likelihood of its imminent departure in the run-up to an election in which a genuine social democratic alternative is perceived to exist, this hardly guarantees a mass exodus of capital in the post-election period". ⁸⁴

We should thus be alert to a quite fundamental difference between financial and productive capital. Financial transactions can now easily be varied both in form and in geographical location. ⁸⁵ Such flexibility and mutability has resulted in a substantial erosion of transaction costs. In turn, the ever more `costless' nature of financial trading has triggered a massive increase in the volume of trade. Moreover, over two-thirds of the flows of financial funds are now considered to be "so-called stateless money". <sup>86</sup> Financial capital thus appears to operate within a spatial context from which the concept of territory has been abstracted. <sup>87</sup> Purely national regulatory measures are therefore likely to be ineffective in the face of financial capital's ability to transcend specific geographical and jurisdictional frameworks such as the national state. <sup>88</sup> Should New Labour consequently choose to continue to understand financial capital's supposed `statelessness' as a structural constraint on its monetary policy, as seems likely, then (in the absence of multilateral moves towards currency controls) the available evidence would suggest that it may well be wise to do so. However, it also appears to have accepted the assumption, made most explicit in Kenichi Ohmae's `borderless world' thesis, that production relations are now also played out on a `supraterritorial plane'. ⁸⁹

This is a claim which it is necessary to reject. Production relations continue to be territorially-specific. As such, in terms of production at least, it would be premature to write off the concept of a discrete national economic space. Yet this is not what the globalisation thesis tells us; nor the rhetorical claims made by governments in relation to the strategic significance of foreign direct investment (FDI). Indeed, current inward investment flows are often held up as the clearest indication that genuine economic globalisation and attendant global economic convergence is already underway (and, in some variants, complete). A note of cautious realism can, however, quickly be sounded, when it is recalled that domestic consumption demands continue overwhelmingly to be satisfied via the domestic circuit of capital. ⁹⁰ Furthermore, these domestic producers remain predominantly domestically owned. Thus, for instance, in 1993, 95 per cent of US investments on Wall Street -- the most `open' stock exchange in the world -- were in US stocks of bonds. ⁹¹ Far from inhabiting a world defined purely by global economic relations, then, productive capitals continue to act primarily within the more familiar confines of national economic spaces. As Linda Weiss argues, the post-war trend towards greater trade integration has slowed significantly throughout the 1980s and 1990s. World trade growth remains stronger than world output growth, yet the ratio has declined from 1.65 in 1965-1980 to 1.34 in 1980-1990. ⁹² Irrespective of the claims embodied in the globalisation hypothesis, therefore, the physical barriers of territorial geography are still of intrinsic importance in terms of the location of productive investment, as even the briefest of glances at international flows of FDI reveals. ⁹³

To put this another way, despite the importance which the new Labour government attaches to the attraction of supposedly `stateless' flows of inward investment, the concept of a discrete national economic space remains relevant. Although such a view rests uneasily alongside the economic rhetoric habitually deployed by New Labour, it is, nonetheless, supported by the available empirical evidence. When expressed as a proportion of GDP, for example, today's flow of FDI are merely comparable with those of 1913. <sup>94</sup> Moreover, in situating such figures in a more recent context, the growth of FDI flows in the `pre-globalisation' era of 1967-1980 was higher than that for the following ten years -- a decade most commonly caricatured as the `take-off' stage of globalisation. ⁹⁵ Given these figures, it should come as no great surprise that inward investment remains of only peripheral importance in relation to the overall functioning of the British economy. A disproportionate number of high profile inward investors coming to Britain in recent years have chosen to locate in Wales. Yet, the manufacturing employment generated by this transfusion of FDI accounted for only one per cent of the Welsh workforce in 1991. Moreover, this transplant sector paid below average Welsh wage rates. Accordingly, the principal beneficiaries of such a transfusion received what amounted to less than 0.7 per cent of Welsh consumption potential. ⁹⁶

Such statistics hardly point to productive capitals taking advantage of a supposedly unlimited number of exit options to locate wherever competitive advantage dictates. Indeed, the assumption that productive capital now seeks out the lowest unit labour costs anywhere in the world is flatly contradicted by the fact that inward investors rarely look outside the Triad for their adopted homes. Almost 90 per cent of FDI flows since 1981 have been conducted within and between the relatively high-wage, high-cost regions of North America, Western Europe and South-East Asia. ⁹⁷ The mobility of productive capital is routinely over-stated in popular debates on globalisation, therefore: consequently, so too is the extent to which such mobility options discipline government activity.

Whilst the new Labour government still perceives increasingly fluid production relations to be a constraint on its policy autonomy, it appears to be ever more fearful of prompting mass capital flight within the financial markets. Interestingly, and perhaps counter-intuitively, however, empirical evidence tends to suggest that financial capital's `hyper-mobility' is also somewhat exaggerated. In the conventional wisdom of globalisation, financial assets are moved instantaneously around the world via a series of electronic impulses in order to depress existing interest rare differentials. As such, we should expect to see a rapid convergence of international interest rates. Such a dynamic has failed to materialise, however. Indeed, Robert Zevin has demonstrated that the correlation between short-term interest rates in the world's major financial centres is no greater in our `virtual' age than it was in the Victorian age. ⁹⁸ That is, international investors have tended to limit their exposure to international markets, preferring instead to concentrate their activities within domestic markets. This can be seen by the fact that, contrary to the predictions of the financial globalisation hypothesis, a statistically significant correlation remains between the rate of domestic investment and the rate of domestic saving. ⁹⁹ Far from long-term financial assets moving freely across borders on a supra-territorial plane throughout all markets, globalising tendencies are only evident in the short-term speculative flows which typify the currency markets. Unless globalisation is to be a term reserved solely to describe behaviour on the foreign exchanges, then the mobility of financial assets has shown itself to be far more limited than the dominant understanding of the global economy presumes. In the words of The Economist,  "despite all the hyperbole, a global capital market does not yet exist ... capital markets do not fully transcend national boundaries". ¹⁰⁰

Rendering the necessary contingent: The logic of alternatives 

"While globalisation does make it harder for states to exercise economic initiative, it also increases both the potential returns from effective state action and the costs of incompetence". ¹⁰¹

When even The Economist  is prepared to concede that capital markets, far less markets for goods, services and foreign direct investment, do not yet fully transcend national boundaries, the space for political and economic alternatives may be somewhat less restricted than those who subscribe to a crude globalisation thesis contend (whether as self-serving advocates or reluctant converts). Phenomenal conceptual, theoretical and empirical confusion nonetheless continues to surround the concept of globalisation. For present purposes, and in an attempt to inject some much-needed analytical precision, we will here follow John Allen and Grahame Thompson in suggesting that "although the precise meaning of a global economy is a matter of some conceptual slippage, the stress placed upon the erosion of national regulatory barriers and the free movement of economic activities across national boundaries is what distinguishes a global from an international economy". ¹⁰² On the evidence of the previous section, then, New Labour inhabits an environment whose parameters may indeed be circumscribed by an international, but not as yet, a global economy. Accordingly, the fatalistic, profoundly pessimistic and essentially anti-political conclusions of those anxious to capitulate to rampant and inexorable globalising tendencies -- laying waste the possibilities of national (or, for that matter, international) economic governance, the welfare state, a regulated labour-market and any alternative to global neo-liberalism -- may be in need of some revision. This, at any rate, is our contention. The alternative (for want of a better term), is to accept, that within the confines of `new times', there is quite simply nothing that the state can do to restore a competitive, investment-driven growth dynamic to an ailing manufacturing economy such as Britain's. Such a conception, as Leo Panitch and Colin Leys explain all too well, is rather difficult to reconcile with New Labour's seemingly rather disingenuous vision of `national renewal' which it presented to the electorate. Labour's manifesto, they suggest, "could not help giving the impression of insubstantiality ... it is difficult to appear weighty and forceful if what you propose is essentially to do better with less". As they go on to argue,

"The magnitude of the goal envisaged in Blair's rhetoric of 'national renewal' and the scale of the means proposed ... were just too disproportionate. Staying within the constraints that Labour's modernisers accepted ruled out radical proposals, but without radical measures, there could hardly be a radical improvement in the performance of Britain's economy". ¹⁰³

It has been the argument of this paper, however, that the discourse of globalisation by which New Labour has policed, disciplined and ultimately downsized its expectations for government (whilst nonetheless clinging precariously to a rather older rhetoric of `national renewal') is based upon a series of profound misconceptions of the international political economy. Once one attempts to reconcile the claims made by Labour about globalisation with the empirical evidence, the disparity is starkly exposed. Accordingly, the constraints imposed by financial liberalisation, international economic integration and heightened capital mobility, however considerable, are far less restrictive than Labour consistently implies (an understanding, it should be noted, equally consistently reflected in its actions to date).

If there is to be a future for social democracy in Britain, as indeed in Western Europe, North American and the Antipodes, then this is just as well. For within the conceptual universe that New Labour now inhabits there is simply no alternative to neo-liberalism within the contours of contemporary capitalism. On the basis of the revised reading of the `globalisation phenomenon' (rhetorical and substantive) presented in this paper, there are indeed alternatives to the party's capitulation to neo-liberalism. Moreover, it is only if Labour can break the spell of the discourse of globalisation, and hence the self-imposed shackles of neo-liberal economics, that a stable and long-term growth trajectory can be restored to British capitalism. Neo-liberalism, quite simply, is not neutral with respect to the domestic economy, but profoundly debilitating; all the more so, given the persistent, deep-seated and widely-identified structural weaknesses of Britain's `capital-market based' financial system and the increasingly antiquated institutional architecture of its capitalism. ¹⁰⁴ Arguably the Conservatives' seeming pathological incompetence since Black Wednesday owed less to their lack of charismatic leadership, `statecraft' or internal party governance than it did to the inherent difficulties and contradictions of its neo-liberal accumulation strategy. What reason is there for thinking that Labour is likely to prove any more adept at wielding the very limited economic policy armoury that it has chosen to inherit from an outgoing Conservative administration seemingly no longer capable of governing competently within the parameters of the existing paradigm?

The analytical case for alternatives to New Labour's capitulation to neo-liberalism is, we think, largely unanswerable. ¹⁰⁵ Indeed, to suggest that the international political economy can sustain only one governance strategy -- neo-liberalism -- is only to reveal, we think, a remarkable paucity of political and economic imagination. Nonetheless, it is not an analytical  case for an alternative that New Labour requires if it is to rediscover its former social democratic sensitivies or to remain true to its rhetoric of `national renewal'; what it requires is a substantive  alternative.

It is not the purpose of this paper to present such a vision. ¹⁰⁶ Yet it is perhaps important that we conclude by pointing to what we regard as various fruitful lines of further enquiry. Two preliminary remarks are, however, perhaps first in order. First, New Labour's search for alternatives to the now ascendant paradigm of neo-liberal economics has been less than exhaustive. This is not so much because such alternatives do not exist, but because the space within which such alternatives might be framed is simply not perceived  to exist. Once again, the rhetorical force of globalisation's `logic of no alternative' becomes a self-fulfilling prophecy. Indeed, New Labour's accelerated process of economic policy revision in the two years prior to the 1997 general election has been characterised by a progressive dilution and eventual rejection altogether of policies and strategies (such as those relating to industrial investment and regional economic development) that relied for their very appeal upon the idea of an alternative to the inexorable logic of welfare retrenchment, deregulation and fiscal austerity. ¹⁰⁷

Second, if Labour's search for projects of national renewal has indeed been less than exhaustive, then it should nevertheless be noted that, had it been looking, it would have found little in the way of coherently and consistently developed alternative policy frameworks. Reflective perhaps, once again, of a certain sense of fatalism born of the perceived narrowing of the space for social democratic governance strategies, the left has systematically failed (with few rare exceptions) to engage in the type of experimental thought that characterised the rise of the new right in the late 1970s.

Nonetheless, in recent years, and particularly in response to a growing frustration with the crude logic of globalisation often conjured to absolve the state of economic responsibility and political culpability, a range of alternatives have begun to emerge. It is not our aim in this paper to review these developments. Suffice it to say that two complementary strands can be identified: the former concerned principally with domestic measures to restore an indigenous investment ethic to British capitalism; the latter with multilateral strategies to re-regulate the global financial markets through the imposition of capital controls. ¹⁰⁸

The first literature is diverse, ranging widely from Will Hutton and the New Cambridge economists, via institutionalist variants of comparative political economy to Marxist-inspired accounts of British `exceptionalism'. ¹⁰⁹ Its authors nonetheless converge on very similar conclusions. Refusing to accept a necessary trade-off between unemployment and inflation, they argue that in a more interdependent international economic environment, any persistent failure by the state to intervene in a concerted fashion (on both the demand and supply side) to alleviate market failures, rectify long-term structural weaknesses and secure conditions conducive to high levels of productive investment is likely to be penalised very severely. Pointing to the specificities of the British economy they identify persistently low levels of dedicated productive investment and a sadly depleted capital stock. Accordingly, they prioritise the creation of additional industrial capacity and the expansion of the capital stock, measures which they (perhaps rather optimistically) argue might restore a high-wage, high-skill yet full employment growth dynamic to the British economy. Specific proposals concentrate on reform of the traditional, and now profoundly pathological, relationship between the City of London, the Bank of England and the Treasury that has seen economic policy consistently favouring financial over industrial interests. In particular, its advocates favour systematic reform of the law governing institutional investors (such as pension funds) to secure a dedicated supply of long-term productive indigenous investment, as well as a complex repertoire of national and regional investment banks and development agencies. ¹¹⁰

It is a profound and depressing irony that such ideas were, until recently, highly influential amongst Labour's shadow Trade and Industry Team (under, first, Brian Gould and, subsequently, Robin Cook) and within the party's Industry Forum. Indeed, policy proposals to back Labour's continuing commitment (however rhetorical) to the promotion of indigenous investment have been the most recent casualty of Labour's accelerating and now wholesale capitulation to neo-liberalism. As Mark Wickham-Jones notes, since Robin Cook's `promotion' to a non-economic role in the Foreign Office, "successive holders of the trade and industry portfolio, Jack Cunningham and Margaret Beckett have contributed little to the party's proposals". ¹¹¹ As the Financial Times  noted as early as October 1995,

"the essence of the DTI brief .. is a mission to explain the broad themes of the party's economic and industrial approach. The policies themselves, however, are mainly formulated elsewhere by Mr Gordon Brown, the Shadow Chancellor". ¹¹²

Sadly, any last vestiges of a coherent approach to industrial policy have long since been extinguished to make way for a yet more resolute commitment to neo-liberal orthodoxy. While Labour remains wedded to a drastically overblown variant of the globalisation thesis, it would appear as though there is no likelihood of such an alternative strategy animating its increasingly hollow rhetoric of `national restoration'.

The second strand of literature is rather different in its emphasis, concentrating on multilateral strategies to re-regulate the financial markets through the imposition of capital controls. Advocates of such a response to a politically -engendered financial liberalisation, draw upon and develop proposals for a Tobin tax designed to throw `sand in the wheels of international finance'. ¹¹³ Amongst those who regard such a transfer tax as desirable, there is considerable controversy about the feasibility and practicality of such a measure. In particular, sceptics argue that the effectiveness of a regime of extensive cooperative controls (even if the political will for such controls could be established) is, in a context of very rapid financial innovation, at best likely to be partial and temporary. ¹¹⁴ Nonetheless, as Eric Helleiner notes, "the objective is not to stop every international financial transfer but rather to limit the bulk of them ... the globalisation trend would certainly not be nearly as extensive nor would it have proceeded so rapidly if a regime of either cooperative controls ... or tight unilateral exchange controls had been in place during the previous three decades". ¹¹⁵

Our own view is that such measures are indeed feasible, and likely to become more feasible as ever-intensifying speculation threatens yet further currencies and as the US becomes increasingly aware of its growing vulnerability, as the world's largest debtor, to the global financial markets. Moreover, such measures are necessary if the deflationary pressures of the 1980s and early 1990s are to be reversed.

Ultimately, then, these are political rather than technical issues. ¹¹⁶ We are confronted then, with a clear political  choice; there is no logic of economic necessity here. As Helen Thompson argues,

"as the twenty-first century dawns, citizens have what they believe to be the legitimate expectations that states will do far more ... If the political elites of the oldest, and previously most capable, nation-states can in present circumstances no longer oblige, they will either have systematically to destroy those expectations at the same time as finding a new statecraft ... or find a way of collectively reregulating some international capital flows so as to allow for cross-border investment and borrowing but not speculative currency movements". ¹¹⁷

A continued and unquestioned belief in globalisation's `logic of no alternative' can only threaten to make what is now contingent -- the suppression of citizenship rights and expectations and the invention of a new more repressive statecraft -- a future necessity. As Peter Evans notes, "the danger is not that states will end up as marginal institutions but that meaner, more repressive ways of organising the state's role will be accepted as the only way of avoiding the collapse of public institutions". ¹¹⁸ The stakes of the globalisation debate could scarcely then be higher.

---

Note *: An earlier version of this paper was presented at the Annual Conference of the Political Studies Association, University of Keele, Keele, April 1998. Back.

Note 1: Paul Krugman, `Dutch Tulips and Emerging Markets', Foreign Affairs , 74 (4), (1995), 28-44, cited in Ajit Singh, `Liberalisation and Globalisation: An Unhealthy Euphoria', in Jonathan Michie and John Grieve Smith (eds.), Employment and Economic Performance: Jobs, Inflation and Growth  (Oxford: Oxford University Press, 1997), p. 28. Back.

Note 2: For emblematic statements of this `business globalisation' literature see Theodore Levitt, `The Globalisation of Markets', Harvard Business Review  (May-June 1983), 101; Kenichi Ohmae, The Borderless World: Power and Strategy in the Interlinked Economy  (London: Collins, 1990); The End of the Nation State: The Rise of Regional Economies  (New York: Free Press, 1996); Robert Reich, The Work of Nations  (New York: Vintage Books, 1992); and Lester Thurow, Head to Head  (London: Nicholas Brealey, 1994). For representative and thorough critiques of this literature see in particular, Suzanne Berger and Ronald Dore (eds.), National Diversity and Global Capitalism  (Ithaca, NY: Cornell University Press, 1996); Robert Boyer and Daniel Drache (eds.), States Against Markets: The Limits of Globalisation  (London: Routledge, 1996); Paul Hirst and Grahame Thompson, Globalisation in Question  (Cambridge: Polity, 1996); Robert O. Keohane and Helen V. Milner (eds.), Internationalisation and Domestic Politics  (Cambridge: Cambridge University Press, 1996); and James H. Mittelman (ed.), Globalisation: Critical Reflections  (Boulder, Co: Lynne Rienner, 1997). On the discourse of globalisation see Ian R. Douglas, `Globalisation and the End of the State?', New Political Economy,  2 (1), (1997), 165-79; Colin Hay, `Globalisation, Welfare Retrenchment and the Logic of No Alternative: Why Second-Best Won't Do', Journal of Social Policy , 27, (1998, forthcoming); and Matthew Watson, `Globalisation and the Development of the British Political Economy', in David Marsh et al., Postwar British Politics in Perspective  (Cambridge: Polity, 1999, forthcoming). Back.

Note 3: Especially in its qualified and modified form. For the `modified structural dependence thesis' see Adam Przeworski and Michael Wallerstein, `Structural Dependence of the State on Capital', American Political Science Review , 82 (1), (1988), 11-29. For the further qualified variant see Mark Wickham-Jones, `Anticipating Social Democracy, Preempting Anticipations: Economic Policy-Making in the British Labour Party, 1987-1992', Politics and Society , 23 (4), (1995), 465-94. For a critique of both, see Colin Hay, `Anticipating Accommodations, Accommodating Anticipations: The Appeasement of Capital in the Modernisation of the British Labour Party, 1987-1992', Politics and Society , 25 (2), (1997), 234-56. Back.

Note 4: For a meticulous and perceptive account of which see Mark Wichkam-Jones, `The Ties That Bind: Blair's Search for Business Credibility', Department of Politics, University of Bristol, unpublished manuscript (1996). For a similar interpretation see also, Colin Hay, `That Was Then, This is Now: The Revision of Policy in the Modernisation of the British Labour Party, 1992-1997', New Political Science , 20 (1), (1998), 7-33. Back.

Note 5: As well as the literature cited in footnote 1 above, see also Peter Evans, `The Eclipse of the State? Reflections on Stateness in an Era of Globalisation', World Politics , 50, (1997), 62-87; Frances Fox Piven, `Is It Global Economics or Neo-Laissez Faire?', New Left Review , 213, (1995), 107-14; Helen Thompson, `The Nation-State and International Capital Flows in Historical Perspective', Government and Opposition , 32 (1), (1997), 84-114; Linda Weiss, `Globalisation and the Myth of a Powerless State', New Left Review , 225, (1997), 3-27; John Zysman, `TheMyth of a "Global" Economy: Enduring National Foundations and Emerging Regional Realities', New Political Economy , 1 (1), (1996), 157-84; and Colin Hay and David Marsh (eds.), Demystifying Globalisation  (London: Macmillan, 1998, forthcoming). Back.

Note 6: Piven, `Is it Global Economics of Neo-Laissez-Faire?', p. 108. Back.

Note 7: Weiss, `Globalisation and the Myth of the Powerless State', p. 16. Back.

Note 8: IMF, Globalisation: Opportunities and Challenges , special issue of World Economic Outlook  (May 1997), p. 66, emphasis added; for a somewhat less gleeful analysis see Evans, `The Eclipse of the State?', p. 67. Back.

Note 9: See footnote 3 above. Back.

Note 10: Przeworski and Wallerstein, `Structural Dependence of the State on Capital', p. 12. Back.

Note 11: See Wickham-Jones, `Anticipating Social Democracy...'; `The Ties That Bind'. Back.

Note 12: Colin Hay, `Labouring Misperceptions: Further Comments on Structural Dependence', University of Birmingham, unpublished manuscript (1997). Back.

Note 13: See also Hay, `Anticipating Accommodations..'. Back.

Note 14: For a statement of the explicit assumptions upon which the structural dependence thesis is premised see Przeworski and Wallerstein, `Structural Dependence of the State on Capital', pp. 14-5, 20-1. For an attempt to reveal some of the implicit assumptions underlying this model and for a critique of the assumptions, both implicit and explicit, see Hay, `Anticipating Accommodations...', esp. pp, 235-6. Back.

Note 15: Piven, `Is is Global Economics...', p. 112. Back.

Note 16: Eric Helleiner, `Explaining the Globalisation of Financial Markets: Bringing States Back In', Review of International Political Economy , 2 (2), (1995), 315-41; `Post-Globalisation: Is the Financial Liberalisation Trend Ever Likely to be Reversed?', in Boyer and Drache (eds.), States Against Markets . Back.

Note 17: Tony Blair, speech to the Singapore Business Community, 8 January 1996. Back.

Note 18: On this point see, Matthew Watson, `"Chicago" ... Blair's Kinda Town? Ideational Factors in Contemporary British Economic Policy Making', in Alan Dobson and Jeffrey Stanyer (eds.), Contemporary Political Science 1998  (Oxford: Blackwell, 1998). Back.

Note 19: Mark Blyth, `Moving the Political Middle: Redefining the Boundaries of State Action', Political Quarterly , 68 (3), (1997), 231-40, p. 233. Back.

Note 20: Two hundred and fifty years of economic debate in relation to the concept of wage-price stickiness is captured in, D. Laidler, `Wage and Price Stickiness: Historical Perspective', in F. Capie and G. Wood (eds.), Monetary Economics in the 1990s  (London: Macmillan, 1996). Back.

Note 21: There is plenty of evidence to back such a claim. For example, by agreeing to remain within the public spending limits set by the previous govenment, New Labour has commited itself to increases in expenditure below the rate of inflation. As such, public sector pay rises have also had to be kept below the rate of inflaiton, constituting a real cut in wages. Moreover, in his November 1997 `pre-budget', the Chancellor of the Exchequer, Gordon Brown, urged similar restraint on the private sector, asking for wage settlements to be kept below the rate of inflation. Back.

Note 22: The most evident example of this was the decision to cede responsibility for the setting of interest rates to the Bank of England. Back.

Note 23: Geoffrey Garrett, `Capital Mobility, Trade and the Domestic Politics of Economic Policy', International Organisation , 49 (4), (1995), 657-87, pp. 667-8. Back.

Note 24: See the Chancellor's first budget speech, July 1997. Back.

Note 25: See the Chancellor's `pre-budget' speech, November 1997. Back.

Note 26: This trend was illustrated most emphatically by the debate in the House of Commons concerning the reductions of lone parent benefit, 10 December, 1997. Back.

Note 27: This aspect of contemporary welfare reform is well-captured in Bob Jessop's account of the transition from the Keynesian Welfare State of the post-war years to the Schumpeterian Workfare State of the 1980s and 1990s. See Jessop, `The Transition to Post-Fordism and the Schumpeterian Workfare State', in Roger Burrows and Brian Loader (eds.), Towards a Post-Fordist Welfare State?  (London: Routledge, 1994). Back.

Note 28: Robin Cook, speech to the Institute of European Affairs, Dublin, 3 November 1997. Back.

Note 29: Piven, `Is It Global Economics...', p. 108. Back.

Note 30: On the nature of the competition state see Philip G. Cerny, The Changing Architecture of Politics: Structure, Agency and the Future of the State  (London: Sage, 1990); `Paradoxes of the Competition State: The Dynamics of Political Globalisation', Government and Opposition , 32 (2), (1997), 251-74. Back.

Note 31: See for instance Robert Wade, `Globalisation and its Limits: Reports of the Death of the National Economy are Greatly Exaggerated', in Berger and Dore (eds.), National Diversity and Global Capitalism,  esp. pp. 66-7; Weiss, `Globalisation and the Myth of the Powerless State', pp. 11-2. Back.

Note 32: And clearly far more so where they don't. Back.

Note 33: See also Evans, `The Eclipse of the State?'. Back.

Note 34: For such an ontological position see Colin Hay, `The Tangled Webs We Weave: The Discourse, Strategy and Practice of Networking', in David Marsh (ed.) Comparing  Policy Networks  (Buckingham: Open University Press, 1998); Colin Hay and Daniel Wincott, `Structure, Agency and Historical Institutionalism', Political Studies , 46 (5), (1998, forthcoming). Back.

Note 35: See for instance, Evans, `The Eclipse of the State?'; Helleiner, `Explaining the Globalisation of Financial Markets'; Piven, `Is It Global Economics..'; Weiss, `Globalisation and the Myth of the Powerless State', esp. pps. 20, 23. Back.

Note 36: Mark Blyth, `"Any More Bright Ideas?" The Ideational Turn of Comparative Political Economy', Comparative Politics , 29 (1), (1997), 229-50. Back.

Note 37: Tony Blair, speech to Labour Party workers, Royal Festival Hall, London, 2 May 1997; cited in the Daily Mirror , 3 May 1997. Back.

Note 38: Tony Blair, speech to the Singapore Business Community, 8 January 1997. Back.

Note 39: Gordon Brown, speech to the CBI Annual Conference, Harrogate, 11 November 1996. Back.

Note 40: Tony Blair, speech to the BDI Annual Conference, Bonn, Germany, 18 June 1996. Back.

Note 41: `The End of Socialism', interview with Tony Blair, Sunday Times , 1 September 1996. Back.

Note 42: Tony Blair, speech to the Congress of Socialist Parties, Malmo, Sweden, 6 June 1997. Back.

Note 43: Tony Blair, `Socialism', Fabian Pamphlet , 565, (1994), p. 5. Back.

Note 44: Gordon Brown, `Labour' s Macroeconomic Framework', speech to the Labour Party Finance and Industry Group, 17 May 1995, emphasis added. Back.

Note 45: Tony Blair, speech to the BDI Annual Conference, Bonn, Germany, 18 June 1996. Back.

Note 46: Anthony Giddens, Beyond Left and Right: The Future of Radical Politics  (Cambridge: Polity, 1994). Back.

Note 47: Robon Cook, speech to the Institute of European Affairs, Dublin, 3 November 1997. Back.

Note 48: Peter Mandelson and Richard Liddle, The Blair Revolution: Can New Labour Deliver?  (London: Faber, 1996), p. 17. Back.

Note 49: Tony Blair, speech at the Lord Mayor's Banquet, Guildhall, London, 10 November 1997. Back.

Note 50: Labour Party, It's Time to Get Britain Working Again , 1992 General Election Manifesto (London: Labour Party, 1992), p. 11. Back.

Note 51: Tony Blair, speech to the BDI Annual Conference, Bonn, 18 June 1996. Back.

Note 52: Gordon Brown, speech to Labour Party Finance and Industry Group, 17 May 1995. Back.

Note 53: Tony Blair, speech to the BDI Annual Conference, Bonn, 18 June 1996. Back.

Note 54: Gordon Brown, speech to the CBI Annual Conference, Harrogate, 11 November 1996; Tony Blair, speech to the BDI Annual Conference, Bonn, 18 June 1996. Back.

Note 55: Gordon Brown, Press Conference, as reported on BBC TV, 28 April 97. Back.

Note 56: Tony Blair, Mais Lecture, 22 May 1995. Back.

Note 57: Gordon Brown, cited in Eric Shaw, `The Trajectory of New Labout: Some Preliminary Thoughts', paper presented at the American Political Science Association, Washington, August 28-31, 1997. Back.

Note 58: Tony Blair, speech to the Singapore Business Community, 8 January 1996. Back.

Note 59: John Eatwell, cited in Mark Wickham-Jones, `Blair and Business: New Labour's Economic and Electoral Strategy', paper presented to the American Political Science Association, San Francisco, August 29-September 1, 1996. Back.

Note 60: Daily Telegraph , 7 May 1997. Back.

Note 61: On the `City-Bank-Treasury nexus' see Geoffrey Ingham, Capitalism Divided: The City and Industry in British Social Development  (London: Macmillan, 1984). Back.

Note 62: Both cited in the Financial Times , 7 May 1995. Back.

Note 63: See Gordon Brown's letter to the Governor of the Bank of England, Eddie George, explaining the decision to depoliticise interest rate policy, transcribed in full, Financial Times , 7 May 1997. Back.

Note 64: Riccardo Petrella, `Globalisation and Internationalisation: The Dynamics of the Emerging World Order', in Boyer and Drache (eds.), States Against Markets , p. 62. Back.

Note 65: Bob Jessop, `The Future of the National State: Erosion or Reorganisation? General Reflections on the West European Case', in Colin Hay and David Marsh (eds.) Globalisation, Welfare Retrenchment and the State  (London: Macmillan, 1998, forthcoming). Back.

Note 66: Tony Blair, speech to the BDI Annual Conference, 18 June 1996. Back.

Note 67: Labour Industry Forum, Winning for Britain  (London: Labour Party, 1996), p. 2. Back.

Note 68: White Paper, Competitiveness: Forging Ahead , Cm 2867, (london: HMSO, 1996). Back.

Note 69: Gordon Brown, interview with the Financial Times , 7 May 1997. Back.

Note 70: Gordon Brown, speech to the Labour Party Finance and Industry Group, 17 May 1995. Back.

Note 71: See Watson, `Globalisation and the Development of the British Political Economy'; Evans, `The Eclipse of the State?'; Bob Jessop, `Changing Forms and Functions of the State in an Era of Globalisation and Regionalisation', in Robert Delorme and Franz Dopfer (eds.), The Political Economy of Diversity: Evolutionary Perspectives on Economic Order and Disorder  (London: Edward Elgar, 1994). Back.

Note 72: Labour Party, Building Prosperity -- Flexibility, Efficiency and Fairness at Work, Road to the Manifesto  (London: Labour Party, 1996), p. 1. Back.

Note 73: Robin Cook, speech to the Institute for European Affairs, Dublin, 3 November 1997. Back.

Note 74: Matthew Watson, `The New Malthusian Economics: Globalisation, Inward Investment and the Discursive Construction of the Competitive Imperative', in Hay and Marsh (eds.), Globalisation, Welfare Retrenchment and the State.  Back.

Note 75: Tony Blair, statement to the House of Commons on the European Council meeting, Amsterdam. 18 June 1997. Back.

Note 76: Stuart Hall, in Les Terry, `Travelling the Hard Road to Renewal: A Continuing Conversation with Stuart Hall', Arena Journal , 8, (1997). 39-58., p. 55. Back.

Note 77: See for instance Stuart Hall, `Son of Margarat', New Statesman and Society , 6 October 1995. Back.

Note 78: Nikolas Rose, `The Death of the Social? Re-Figuring the Territory of Government', Economy and Society , 25 (3), (1996), 327-56, p. 354. Back.

Note 79: Will Hutton, The Observer , 17 November 1996. Back.

Note 80: For sceptical reviews of such a logic see Andrew Martin, `What Does Globalisation Have to do With the Erosion of Welfare States? Sorting Out the Issues', Center for European Studies, Working Paper #7.5 (Cambridge, MA: Harvard University, 1996); Hay, `Globalisation, Welfare Retrenchment and the Logic of No Alternative'. Back.

Note 81: On this point see Matthew Watson, `Speculative Booms, European Busts and the Subordination of Labour: Could a European Single Currency be Used to Realign the Existing Balance of Class Forces?', paper presented to the 11th International Conference of the Council for European Studies, Baltimore, February 26-28, 1998; see also Perry Anderson, English Questions  (London: Verso, 1992); Ingham, Capitalism Divided?  Back.

Note 82: Daniel Drache, `From Keynes to K-Mart: Competitiveness in a Corporate Age', in Boyer and Drache (eds.), States Against Markets . Back.

Note 83: Hay, `Anticipating Accommodations..', p. 243; Wade `Globalisation and its Limits', pp. 80-1. Back.

Note 84: Hay, `Anticipating Accommodations..', p. 243. Back.

Note 85: See, for example, R. Harrington, `Financial Innovation and International Banking', in H. Cavanna (ed.), Financial Innovation  (London: Routledge, 1992); S. Bonetti and D. Cobham, `Financial Markets and the City of London', in D. Cobham (ed.), Markets and Dealers: The Economics of the London Financial Markets  (Harlow: Longman, 1992). Back.

Note 86: G. Cardechi, `Financial Crisis, Recessions and Value Theory', Review of International Political Economy , 3 (3), (1996), 528-37, p. 529. Back.

Note 87: Matthew Watson, `Rethinking Capital Mobility: Putting a Different Kind of "P" into Financial Market Regulation', Putting the `P' Back into IPE , special issue of New Political Economy , 5, (1998, forthcoming). Back.

Note 88: Richard O'Brien, Global Financial Integration: The End of Geography  (London: Pinter, 1992), p. 1; see also Gerald Epstein, `International Capital Mobility and the Scope for National Economic Management', in Boyer and Drache (eds.), States Against Markets ; Garrett, `Capital Mobility, Trade and the Domestic Politics of Economic Policy'. Back.

Note 89: The latter term is in fact Jan Aart Scholte's. See Scholte, `Beyond the Buzzword: Towards a Critical Theory of Globalisation', in E. Eleonore Kofman and Gillian Youngs (eds.), Globalisation: Theory and Practice  (London: Pinter, 1996). For Ohmae's extremely (indeed worryingly) influential argument see Ohmae, The Bordeless World.  Back.

Note 90: Watson, `The New Malthusian Economics..'. Back.

Note 91: Piven, `Is It Global Economics...', p. 111. Moreover, in December 1989, "US investors held 94 per cent of their stock-market wealth in their home country stocks, Japanese investors 98 per cent in home stocks, and UK investors 82 per cent". Epstein, `International Capital Mobility', p. 213. The figures are taken from Maurice Obstfeld, `International Capital Mobility in the 1990s', in Peter Kenen (ed.), Understanding Interdependence: The Macroeconomics of the Open Economy  (Princeton, NJ: Princeton University Press, 1995), p. 35. Back.

Note 92: Weiss, `Globalisation and the Myth of the Powerless State', p. 7. Back.

Note 93: See in particular, Hirst and Thompson, Globalisation in Question , pp. 51-75; John Allen and Grahame Thompson, `Think Globally, Then Think Again -- Economic Globalisation in Context', Area , 29 (3), (1997), 213-27. Back.

Note 94: Paul Bairoch, `Globalisation Myths and Realities: One Century of External Trade and Foreign Investment', in Boyer and Drache (eds.), States Against Markets , p. 188. Back.

Note 95: Andreas Busch, `Globalisation: Approaches, Data and Evidence', in Hay and Marsh (eds.), Demystifying Globalisation . Back.

Note 96: Matthew Watson, `The Changing Face of Macroeconomic Stabilisation: From Growth Through Indigenous Investment to Growth Through Inward Investment?', in Jeffrey Stanyer and Gerry Stoker (eds.), Contemporary Political Studies 1997  (Oxford: Blackwell/PSA, 1997). Back.

Note 97: Paul Hirst, `The Global Market and the Possibilities of Governance', paper presented to the conference on Globalisation: Critical Perspectives , University of Birmingham, March 14-16 1997. Back.

Note 98: Robert Zevin, `Are Financial Markets More Open? If So, Why and With What Effects?', in Tariq Banuri and Juliet B. Schor (eds.), Financial Openness and National Autonomy  (Oxford: Clarendon Press, 1992). Back.

Note 99: Martin Feldstein and Charles Horioka, `Domestic Saving and International Capital Flows', The Economic Journal , 90, (1980), 314-29; Obstfeld, `International Capital Mobility Mobility in the 1990s', in Kenen (ed.), Understanding Interdependence ; see also Garrett, `Capital Mobility, Trade and the Domestic Politics of Economic Policy'; Jeffrey A. Frankel, `Quantifying International Capital Mobility in the 1980s', in On Exchange Rates  (Cambridge, MA: MIT Press, 1993). Back.

Note 100: The Economist , `Capital Goes Global', 25 October 1997, p. 139. Back.

Note 101: Evans, `The Eclipse of the State?', p. 74. Back.

Note 102: Allen and Thompson, `Think Globally, Then Think Again', p. 214. Back.

Note 103: Leo Panitch and Colin Leys, The End of Parliamentary Socialism  (London: Verso, 1997), pp. 259-60. Back.

Note 104: For a further elaboration of this argument see Colin Hay and Matthew Watson, `In the Dedicated Pursuit of Dedicated Capitalism: Restoring an Indigenous Investment Ethic to British Capialism', New Political Economy , 4, (1998, forthcoming); `Necessity is the Mother of Invention: Restoring an Indigenous Investment Ethic to British Capitalism', Department of Political Science and Inernational Studies, University of Birmingham, unpublished paper (1997); Colin Hay, `A Sorry State? Diagnosing the British Affliction', Socialism and Democracy , 11 (1), (1997), 87-104; see also Perry Anderson, English Questions ; Will Hutton, The State We're In  (London: Viking, 1996); Robert Pollin, `Financial Structures and Egalitarian Economic Policy', New Left Review , 214, (1995), 26-61; John Zysman, Governments, Markets and Growth: Financial Systems and the Politics of Industrial Change  (Ithaca, NY: Cornell University Press, 1983). Back.

Note 105: See Hay, `Anticipating Accommodations'; Panitch and Leys, The End of Parliamentary Socialism , esp. pp. 262-71. Back.

Note 106: Though see for instance Hay and Watson, `In the Dedicated Pursuit of Dedicated Capitalism'; `Necessity is the Mother of Invention'. Back.

Note 107: For detailed examination of this most recent process of policy reform see Hay, `That Was Then, This is Now'; Wickham-Jones, `The Ties That Bind'. Back.

Note 108: The former literature is reviewed and developed with respect to the British case in Hay and Watson, `In the Dedicated Pursuit of Dedicated Capital'; the latter in Watson, `Rethinking Capital Mobility: Putting a Different Kind of "P" into Financial Market Regulation'. Back.

Note 109: For emblematic statements see Hutton, The State We're In ; Keith Cowling and Roger Sugden (eds.), A New Economic Policy for Britain: Essays on the Development of Industry  (Manchester: Manchester University Press, 1990); Jonathan Michie and John Grieve Smith (eds.), Creating Industrial Capacity: Towards Full Employment (Oxford: Oxford University Press, 1996); Employment and Economic Performance: Jobs, Inflation and Growth  (Oxford: Oxford University Press, 1997); Barry Eichengreen, `Explaining Britain's Economic Performance: A Critical Note', The Economic Journal , 106 (1), (1996), 213-18; Pollin, `Financial Structures and Egalitarian Economic Policy'; and Anderson, English Questions . Back.

Note 110: See Hay and Watson, `Necessity is the Mother of Invention'. Back.

Note 111: Wickham-Jones, `The Ties That Bind', p. 34. Back.

Note 112: Financial Times , 20 October 1995. Back.

Note 113: Barry Eichengreen, James Tobin and Charles Wyplosz, `Two Cases for Sand in the Wheels of International Finance', The Economic Journal , 105 (1), (1995), 162-72; James Tobin, `A Proposal for International Monetary Reform', The Eastern Economic Journal , 4 (1978), 153-9; see also Yilmaz Akyüz and Andrew Cornford, `International Capital Movements: Some Proposals for Reform', in Jonathan Michie and John Grieve Smith (eds.), Managing the Global Economy  (Oxford: Oxford University Press, 1995); James Crotty and Gerald Epstein, `In Defence of Capital Controls', in Leo Panitch (ed.), Socialist Register 1996  (London: Merlin, 1996); Andrew Glyn, `Capital Flight and Exchange Controls', New Left Review , 155 (1986), 37-49; Barry Eichengreen, `The Unstable EMS', in European Monetary Union: Theory, Practice and Analysis  (Cambridge, MA: MIT Presss, 1997); Helleiner, `Post-Globalisation'; see also John Maynard Keynes, The Collected Writings of J.M. Keynes, Vol. 26: Activities 1940-56: Shaping the Postwar World, The Clearing Union  (Cambridge: Cambridge University Press, 1980), pp. 148-9). Back.

Note 114: See for instance, P. Garber and M.P. Taylor, `Sand in the Wheels of Foriegn Exchange Markets: A Sceptical Note', The Economic Journal,  105 (1), 173-80; Greg Albo, `A World Market of Opportunities? Capitalist Obstacles and Left Economic Policy', in Leo Panitch (ed.), Socialist Register 1997  (London: Merlin, 1997); John Goodman and Louis Pauly, `The Obsolescence of Capital Controls? Economic Management in an Age of Global Markets', World Politics, 46 (1), 50-82; Susan Strange, Casino Capitalism , second edition (Manchester: Manchester University Press, 1997), pp. 152, 189-93. Back.

Note 115: Helleiner, `Globalisation of Financial Markets', p. 338. Back.

Note 116: Hirst and Thompson, Globalisation in Question,  p. 135. Back.

Note 117: Hirst and Thompson, Globalisation in Question,  p. 135. Back.

Note 118: Evans, `The Eclipse of the State?', p. 64. Back.