Power and Political Economy from Thatcher to Blair

The Great Enemy of Democracy?

Robert Ledger

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000352320
• Edition: 1
• Topic: Historia
• Subtopic: Historia del siglo XX

This book investigates the policies of the Thatcher, Major and Blair governments and their approaches towards concentration of economic and political power.

The 1979–2007 British governments have variously been described as liberal or, to use a political insult and a favourite academic label, neoliberal. One of the stated objectives of the Thatcher, Major and Blair governments—albeit with differing focal points—was to disperse power and to empower the individual. This was also a consistent theme of the first generation of neoliberals, who saw monopolies, vested interests and concentration more generally as the 'great enemy of democracy'. Under Thatcher and Major, Conservatives sought to liberalize the economy and spread ownership through policies like Right to Buy and privatisation. New Labour dispersed political power with its devolution agenda, granted operational independence to the Bank of England and put in place a seemingly robust antitrust framework. All governments during the 1979–2007 period pursued choice in public services. Yet our modern discourse characterises Britain as beset by endemic power concentration, in markets and politics. What went wrong? How did so-called neoliberal governments, which invoked liberty and empowerment, fail to disperse power and allow concentration to continue, recur or arise?

The book will be of interest to students and scholars of contemporary British history, political economy and politics, as well as specific areas of study such as Thatcherism and New Labour.

1 The ideological perspective

How power is concentrated and dispersed in Britain—and other democratic states—may sound like a rather abstract subject, something to animate academics, and even then, only a few political scientists. Yet the principle of power concentration, both economic and political, is at the heart of politics and political discourse. The subject is intertwined with political and economic rhetoric, campaign promises and day-to-day policymaking. Hardly any British political leader fails to promise greater opportunity, freedom or fairness than existed previously. But these terms can stimulate, in practice, vastly different policies. Equality of opportunity or outcome, freedom of choice or from the state, reducing inequality or increasing the possibilities to improve one’s circumstances. How these apparently benign questions are broached can lead political practitioners in vastly different directions. In the December 2019 UK General Election, the Conservatives pledged that a “Shared Prosperity Fund will be used to bind together the whole of the United Kingdom, tackling inequality and deprivation in each of our four nations” and that, “We as Conservatives want to give you freedom—low taxes, opportunity, the chance to realise your dreams”.¹ The Labour Party, meanwhile, bemoaned “regional inequality” and pledged that, if it was elected, “Sectoral collective bargaining will increase wages and reduce inequality”, and it would “create a National Education Service to provide support and opportunity throughout your life”.² In short, Britain’s political parties—even in these brief examples—offer vastly different measures to address issues of inequality, opportunity and the differentials in power. Looked at generically, we may expect parties of the left to legislate to spread power and opportunity, and the right to deregulate for similar ends. Yet, as authors such as Jamie Peck have outlined, even apparently liberalising and deregulatory reforms are a form of intervention and create their own consequences.³ Likewise, the highly interventionist post-war Labour governments, during a period where it has been widely considered that economic inequality declined,⁴ were heavily criticised for allowing too much power to reside with trade unions.⁵

In fact, there has been lively debate on some of these issues. With the passing of several years—and, in the case of the Thatcher and Major governments, decades—there is distance to evaluate the records of the 1979–2007 governments, invariably described as more economically liberal than their immediate predecessors. Historians have been prone to group together these governments as ‘neoliberal’ or somehow contiguous. New Labour has been derided by many on left and right as sanitised neoliberalism, while the Major government has been dubbed “Thatcherism with a human face”.⁶ The ‘Thatcher & Sons’ approach,⁷ although having some cogency, fails to capture the differing priorities of each government, particularly that of New Labour. Nevertheless, the arguments over how similar British policymaking has been since the late 1970s encapsulates one dimension of the current debate: how and if liberal democracy can be reformed or ‘fixed’ rather than overhauled. Second, and related to the first, is the notion that underperforming economies such as Britain and its contemporaries have created the conditions for the populist surge of the 2010s. Although this book primarily explores the 1979–2007 period, with some discussion of the 2007–08 financial crash, it seeks, implicitly and tentatively, to examine the trends that have led to later events.

The issue regarding concentration of power that has most gained traction in recent years is that we are living through an era of rising inequality. A rare example of an economist who cuts through to the mainstream is Thomas Piketty, whose bestseller, Capital in the Twenty-First Century, accompanied by extensive data published online, demonstrates broad trends in income and wealth inequality.⁸ To generalise a dense work, inequality in Britain—as well as its contemporaries—broadly declined between the early 1930s and the late 1970s, before rising, concentrating ever more capital in the wealthiest 1% of society. This narrative was seized on by the left, as well as by parts of the mainstream political parties, during the 2010s. For the purposes of this book, Piketty’s trend conveniently starts to change, in the mid to late 1970s, around the start of the first Thatcher government. That inequality increased under Conservative governments was perhaps unsurprising. More interesting is how the sharp increase in inequality marked a change from the post-war period and how it has persisted after Thatcherism, with some minor periods of exception.

After growing inequality, the second economic theme that has increased in salience—even if it has not necessarily had much impact on the policymaking agenda—and is relevant to this book is economic competition and monopolies. Issues that more easily cut across the political spectrum such as monopolies, cartels and economic competition—perhaps better summarised as problems of market power—can seem somewhat technocratic but, similarly to inequality, were prevalent in the 2020 Democratic primary campaign in the US, in particular in the rhetoric of Massachusetts Senator Elizabeth Warren. Apart from left-wing critiques of market power, there are a number of concurrent, often similar, diagnoses made by what we would consider keepers of the liberal economic flame. For instance, The Economist newspaper has railed for much of the 2010s against growing market power, including in Britain, predicting dire consequences if Western countries cannot reverse the trend.⁹ That favourite target of the anti-capitalist left, the International Monetary Fund (IMF), even articulated its concerns over the rise of corporate power in its April 2019 World Economic Outlook.¹⁰ Meanwhile, market power and economic concentration are regular themes of more centrist writers and think-tanks, for instance the British-based Resolution Foundation¹¹ and the Social Market Foundation.¹²

Some questions of market power will be addressed in this book, such as the broad trends put in motion between 1979 and 2007—the shifting approach to antitrust regulation and certain sectors including finance and banking, energy and other privatised utilities and broadcasting. Others, highly relevant for the 2010s and 2020s such as the big tech companies of a 21st-century ‘Gilded Age’, will only be lightly touched upon owing to the location of these industries as predominantly post-2007 issues. Nevertheless, some of the themes posited in the 1979–2007 period will be extrapolated into the post-2008 crash era, which has seen its own particular trends.

Both inequality and market power play into ideas that, in many countries, including the UK, politics and economics are not played on a level playing field, that power is concentrated and becoming increasingly so. The final trend that can be linked with this book is the rise of populism. Whereas income inequality and lack of economic competition can seem academic and relatively dry themes, populism and its practitioners seek emotional targets. Populists—defined as claiming to represent the (ordinary) ‘people’ in opposition to an elite establishment that attempts to block the will of said people—of both left and right, as well as their many variants, loudly complain how the economic “game is rigged”, and that political corridors of power are “closed to outsiders”.¹³ Many of these arguments, insofar as they are coherent, are linked to ever greater concentration of economic power. This book will tentatively attempt to analyse the link between accumulated power and the concurrent rise of populist politics.

This chapter will look at a number of theoretical interpretations of power concentration and distribution by examining several key philosophical paradigms. It will begin with neoliberalism, a term used to broadly describe the resurgence of economic liberal thought in the mid-20th century and sometimes to describe British governments from Margaret Thatcher’s administration onwards. We will then move on to look at a range of other positions, from socialism to corporatism. Many of these theoretical views contain contradictory positions regarding power, seeming to offer both liberating and accumulating elements.

Defining market power

Before we move on to how theory views concentration of power, it is worth first defining what is meant by the terms frequently used in this book. Market power incorporates a number of principles that impede economic competition, including economic ‘rents’, formation of cartels and monopolies, as well as state aid.

In practice, market power is gauged slightly differently from country to country, as well as in a particular period. These variations are a recurring theme in this book. Nevertheless, one of the arbiters of market power and economic competition in the 1979–2007 period, Britain’s Office of Fair Trading (OFT), broadly defined market power in 2004:

Market power is not an absolute term but a matter of degree, and the degree of market power will depend on the circumstances of each case. In assessing whether an undertaking has substantial market power, it is helpful to consider whether and the extent to which an undertaking faces competitive constraints. Those constraints might be existing competitors, potential competitors and other factors such as strong buyer power from the undertaking’s customers.¹⁴

For economic theorists, debates around market power and competition often start with a preferred view of an ideal market. A broad estimation of a hypothetical ‘perfect’ free market might be the presence of a large number of producers and consumers, ‘perfect’ information for market participants and no barriers to entry. Of course, a situation such as this is never likely to be achieved in practice, yet most instances of market power, indeed of accumulation of economic power itself, involve impeding one of these pillars of an ideal market.¹⁵ In addition, anti-competitive behaviour can also be linked to another economics concept, that of ‘rent-seeking’. The topic of rent-seeking was popularised in economics and politics debates from the 1960s by public choice theorists, often associated with the University of Virginia, such as James Buchanan and Gordon Tullock. For instance, these theorists defined rent-seeking as seeking payment “over and above that which resources could command in any alternative use” and a “diversion of value from consumers generally to the favoured rent seeker”.¹⁶ Whereas this school of thought primarily directed its energies towards state bureaucracy, becoming somewhat of a ‘New Right’ political favourite in the process, rent-seeking is perhaps better employed in the analysis of companies and market power.¹⁷ Indeed, as we shall see, many of the case studies examined in this book demonstrate rent-seeking to one extent or another.

Market power, unlike concentration of political power, is a concept that can be quantified. A number of measu...

Table of contents

• Cover
• Half-Title
• Series
• Title
• Copyright
• Contents
• Acknowledgements
• Introduction
• 1 The ideological perspective
• 2 History and development of competition policy in Britain
• 3 Structural shifts in the British economy
• 4 Concentration and regulation
• 5 Devolution, nationalism and the British state
• 6 Politics and power
• 7 A legacy of concentration
• Conclusion
• Bibliography
• Index