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Editorial

February 3rd 2007

Blair's moment of truth

For a few minutes yesterday morning, it was possible to feel an unaccustomed moment of sympathy for Tony Blair.

It was not when he had to dodge questions about his role in the cash-for-honours scandal, producing his disarming Hugh Grant-style stammer as he refused to beg for his character or plead for his integrity. But when our prime minister declared his pride in some of the improvements in Britain’s National Health Service (NHS) over the last ten years, John Humphrys of the BBC Today Programme accused him of acting in an “old Labour” way, by throwing money at the health service, some of which has ended up in the salaries of the staff, for instance our General Practitioner doctors who have had large pay increases.

Blair did not deny that his government has thrown money at the NHS. Instead he countered by talking about the reduction in waiting times for urgent hospital treatments. It is no longer usual for patients to die while waiting many months for cardiac or cancer operations, or for people to wait years for a cataract operation. It is now rare for someone needing emergency treatment to be left on a trolley for days until a bed in a ward becomes available.  And he even added:

“I think it's great that we are paying our health workers more.”

Our PM admitted in the interview that he “likes to be liked”. As he approaches retirement, he wishes to be remembered not just for the nightmare of Iraq or for selling medals and peerages in return for loans to the Labour Party. He wants his career as leader to be judged on the basis of what he regards as the successful social and economic policies which have been implemented in Britain since 1997.

Blair’s actions and alliances have invited unhelpful comparisons and distracted attention from the nature of his domestic policies. His most important international relationship has been his subservient alliance with George W. Bush, exposed to our national humiliation at last year’s G8 summit as he grovelled in vain for the Commander-in-Chief to give him permission to visit the Middle East. The political leader of recent history whose drive and tenacity he most admires and seeks to emulate is Margaret Thatcher. His most significant relationship within the British Government is with his rival and man of detail Gordon Brown, who has quietly taken the credit for the improved performance of the UK’s economy. His showmanship and mastery of his PR machine have overshadowed the substance of his practical programme. 

Yet Blair has had a socio-economic programme, a programme which is not identical to that of Bush or Thatcher; and by and large he has been able to implement it. Since the retirement of Bill Clinton, he has been the world’s greatest practitioner of a school of policy which calls itself the ‘third way’. Unlike Clinton he has been an executive in almost full control of his legislative assembly. 

The third way, as distinct from pure free-market ideas, accepts that raw capitalism does not deliver a trickle-down to the ‘losers’ (ie, the vast majority). In third way ideology, the capitalist market and its ‘wealth creators’ are supposedly regarded as the source of economic dynamism, and the state should hand over to the private sector everything which can conceivably be made to turn a profit. But without substantial state investment, expenditure and re-distribution, while the rich get much richer, the rest descend into abject poverty, public services deteriorate, and the social and material infrastructure on which profit-making businesses depend begins to fall apart. The third way is an admission that capitalism needs society in order to work in the long term; and that without the state, capitalism will destroy society.

Thus while privatising even the parts that Margaret Thatcher could not reach, and making schools and hospitals behave like private-sector businesses - even to the point where many of them now face bankruptcy – Tony Blair has presided over a huge increase in state spending. Public expenditure has enlarged not only in real terms, but also as a proportion of Britain’s GDP, rising from 37.4% in 1999-2000 to 43.1% in 2006-2007.

Further, disguised under the title of ‘tax credits’, new state benefits have been introduced, which have not only raised the incomes of pensioners and poorer families but have also made it worthwhile for people to accept very low-waged jobs.

There is no miracle about the reduction in hospital waiting-lists, or the amelioration of absolute poverty, or even the UK’s relatively low unemployment rate of 5.5% (although the latter is statistically assisted by the 2.7 million who have been invalided-out of the unemployment figures and are living on state disability benefits). The government has thrown money at these problems, and it has worked.

New Labour has re-distributed income, not merely among the population, but among capitalist firms. Working tax credits provide an indirect subsidy to low-paying employers. The Private Finance Initiatives (PFI), Public-Private Partnerships (PPP) and other semi-privatisation schemes provide billions in direct subsidies to firms in construction, engineering and IT.

And our entrepreneurial ‘wealth creators’ are duly grateful for this state largesse. As Stephen Ratcliffe, Chief Executive of the Construction Confederation, said touchingly after the share of construction in UK GDP rose to 10% in 2005:

“The [Construction Industry Trade] Surveys’ results once again demonstrate the importance of sustained public sector investment. It is vital that the Government maintains its stated commitments to invest in public services in order to improve UK competitiveness and the quality of life of the nation as a whole. The stability provided by sustained Government investment will also enable the industry to recruit, train and develop its people and more cost effectively deliver the Government’s plans.”

The BBC’s John Humphrys suggested to Tony Blair that he could have avoided allowing doctors’ pay to increase if he had gone about the rise in NHS spending in a different way, for instance by doing it stealthily rather than announcing it in advance, or by introducing the ‘reforms’ to the system before beginning to spend more money.  Such speculations have little purchase on reality. The effect of supply and demand on price, including the price of labour, is a ubiquitous feature of capitalism. There was no way, even were it a good thing, for the NHS to have taken on scores of thousands more workers (a rise of 23% in the number of NHS staff between 1999-2000 and 2004-2005) without facing irresistible pressure for pay increases.

As for the ‘reforms'- these are not cost-cutting measures, and in fact are very expensive. The PFI schemes involve a transfer of approximately £23 billion from the NHS in profits and interest payments to private firms. The introduction of market competition between health service units has raised administration and transaction costs from 6% of the overall cost of the service to 12% and rising. In the USA, administration and transaction costs consume over a quarter of all health sector spending.

Money talks in English

This does of course raise the question of where all this money has come from. The standard answer, as given by The Times’ associate editor Anatole Kaletsky, is that Britain is still benefiting from:

“…the trade union reform, deregulation and privatisation of the Thatcher era.  Thatcherism created a truly competitive market economy in Britain for the first time in the 20^th Century, at a time when most continental nations embarked on exactly the opposite course.”

There is some truth to this. In a globalised capitalist world economy, capital will tend to move to countries where costs are lower because trade unions are weak and regulation is lax.  Partly for this reason, Britain is a top destination for inward investment. This provides no evidence for neo-liberal ideas of the efficiency of the market – rather the reverse: for the increased inward investment has been accompanied by a steep and almost uninterrupted slump in the UK’s ability to manufacture goods which can compete in the world market.

But, as lower-waged countries, particularly China, have driven down the price of manufactured products, our industrial decline has become a virtue. We import increasingly cheap material goods, and we now have a healthy export surplus in what Kaletsky calls ‘knowledge-based services’: financial services, science, education and entertainment, which have risen in price. This factor has huge economic significance; according to Kaletsky:

“Judging by recent national-accounts revisions, the shift in the relative prices of British exports and imports and the strength of Sterling have added as much as 5% annually to Britain's GDP since 1995 - more than the peak value of North Sea Oil.”  

And why are we performing so strongly in knowledge-based services? Are we so much better educated, cleverer and more entertaining than the French, Germans and Japanese? Putting ones nationalistic arrogance aside, there is a far more prosaic reason. The knowledge-based services are also the English language-based services. English is the dominant language of global finance, the internet, science and entertainment. For this reason, the GDPs of the Anglophone countries as a group have increased faster than those of other advanced economies in the last decade; and India, whose professional class speaks English, is rising even faster although from a much lower base.

A recent article in The Economist suggested that this linguistic competitive advantage will diminish in time, as it becomes the global norm for people to be competently bilingual in English.

But meanwhile, for all the many very grievous evils for which he is responsible, Tony Blair has been channelling some of the fruits of that advantage into reduced waiting times in the British health service.  Whether that will earn him the credit he desperately desires is another matter.

 

Sources:

Home Page image: Prime Minister Tony Blair meets staff at Wythenshawe Hospital. From South Manchester University Hospitals Trust News www.smuht.nwest.nhs.uk/news/articles/131.jpg

The Today Programme, BBC Radio 4, 2^nd February 2007

Anthony Giddens (ed): The Global Third Way Debate, Blackwell, 2001

Paul Wallace: ‘After the Feast’, The Economist- The World in 2007,

‘Construction Hopes for a Good First Quarter’, http://www.constprod.org.uk/download/pr/Trade%20Surveys%20-%20Feb%2005.pdf.

‘Value for Money in the English NHS’, The Health Foundation
http://www.health.org.uk/aboutus/publications/research/Value-for-money-report-web.pdf

‘The patchwork privatisation of our health service: a user’s guide'. Report by Keep our NHS Public http://www.keepournhspublic.com/pdf/Patchwork%20privatisation.pdf

Anatole Kaletsky: ‘End of the Economic Golden Age?’ The Economist- The World in 2005

Ruth Lea: ‘Britain: Better than the Eurozone but worse than other Anglophone economies’, Perspective, Centre for Policy Studies 2005, http://www.cps.org.uk/pdf/art/37.pdf

‘They all Speak English’, The Economist, 16^th December 2006