Neoliberalism: A Very Short Introduction (Very Short Introductions) by Steger Manfred B. & Roy Ravi K

Author:Steger, Manfred B. & Roy, Ravi K. [Steger, Manfred B.]
Language: eng
Format: mobi, epub
Publisher: Oxford University Press
Published: 2010-01-20T16:00:00+00:00

• A nation’s public debt has to be less than 60% of GDP (the public debt is the cumulative total of annual budget deficits).

• A nation should have an inflation rate within 1.5% of the three EU countries with the lowest rate.

• Long-term interest rates must be within 2% of the three lowest interest rates in the EU.

• Exchange rates must be kept within moderate fluctuation margins of Europe’s exchange-rate mechanism.

Source: BBC News, Monday, 30 April 2001

Again taking his cues from Bill Clinton (who had won the support of both the business community and the middle class by pinning the blame for the 1991–2 economic recession on the failed policies of the Reagan/Bush era), Blair linked the volatile ‘boom-bust’ cycles of the Thatcher/Major years to their ‘ineffective fiscal and monetary strategies’. Thus, in an effort to encourage investment and growth, the Prime Minister’s first major economic initiative following his election victory was to grant the Monetary Policy Committee full operational independence in setting short-term interest rates while retaining the government’s prerogative to set an ambitious inflation target of 2.5%. Seeking to win the confidence of investors, Chancellor of the Exchequer Gordon Brown would eventually grant policy independence to the Bank of England after consulting with US Federal Reserve Chairman Alan Greenspan. Strongly endorsing Brown’s decision, both the Confederation of British Industry and the British Chambers of Commerce was even more delighted when Blair denounced aggressive union wage bargaining practices allegedly ‘threatening economic growth’.

New Labour’s fiscal strategies were consciously designed to reduce government borrowing while at the same time bolstering opportunities for business and the middle class. Blair’s entrepreneurial sympathies lay especially with individuals and companies capable of generating new venture capital, investing in new technologies, and fuelling research and development. Thus, the government’s neoliberal reforms succeeded in broadening the tax base while cutting top income and business tax rates in order to provide incentives for investors. To prevent ‘excessive borrowing’ for social programmes, Blair adopted what he called the ‘Golden Rule’ – a measure directing the Treasury to keep public debt from exceeding 40% of the GDP. Moreover, he proclaimed that he would not to seek additional spending for health, education, or social security. Asserting that welfare reform could be implemented without increasing public expenditure or raising taxes – except for a one-time ‘windfall tax’ on privatized utilities – the Prime Minister endorsed a new welfare-to-work programme modelled on Clinton’s ‘workfare’ model. Given Blair’s public commitment to ‘social justice’, his neoliberal social policy agenda came as a shock to many of his working-class supporters. And yet, while still in opposition, both Blair and Brown had already emphasized that the government’s guarantee of welfare provisions also required ‘accountability’ and ‘responsibility’ from those drawing on these resources.

Overall, then, New Labour social policy focused on reconfiguring three basic services: assistance to the unemployed, assistance to the working poor, and reform of the National Health Service (NHS). Ironically, in pursuing these objectives, Blair was largely inspired by Thatcher’s bold, albeit largely unsuccessful, attempts to reform the welfare state by making its administrative functions and procedures more efficient.

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