The man at the top had tough words to say. The shortfall of more than £1 billion (US$1.84 billion) was unacceptable and there would need to be changes to ensure greater productivity, smarter procurement and greater workforce efficiency. A leading company under pressure from a gaggle of restless shareholders? No, this was the boss of the UK's state-funded National Health Service (NHS) Ian Carruthers, arguing in his chief executive's report last week that the NHS had to reform in order to provide better value for money.
Carruthers' remarks are important. Don't imagine for a moment that this is just about hospitals losing control of their budgets: The comments reflect a change in the nature and role of the state driven by the dictates of globalization and individualism.
Governments that accept, as the one in the UK does, that globalization should be embraced have no choice but to accept that the state must change as well. As far as British Prime Minister Tony Blair is concerned, the flipside of welcoming the takeover of the British Airports Authority (BAA) by a Spanish company is that the NHS has to look at its bottom line; the same pressures apply to both the public and the private sector. Make no mistake, this has big political consequences.
Philip Bobbitt, in his book The Shield of Achilles, talks about globalization leading to the replacement of the nation state by a "market state," characterized by a dependency on "the international capital markets and, to a lesser degree, on the modern multinational business network to create stability in the world economy, in preference to management by national or transnational political bodies."
The nation state saw its job (even though it didn't always do it terribly well) as looking after the welfare of the people and ensuring full employment; the market state seeks to maximize opportunity and sees employment as simply another economic variable.
Bobbitt is right to see a clash between these two visions of the state. French President Jacques Chirac would block any foreign bid for Charles de Gaulle airport, not just because he would rightly have doubts about whether France would benefit in terms of higher growth or greater efficiency as a result of the change of ownership, but also because he believes in a model of the state that intervenes to defend the national interest. Chirac's vision comes from an age (and a successful age it was) when politicians thought it was their duty to tame capitalism, because only by regulating capital flows and maintaining demand could they achieve the economic and social goals they had set for themselves.
This model had a different language. It talked about security from cradle to grave, about protection, about people being safe. The language of the market state, predictably, is the language of the market. It is about bottom line, throughput, innovation, opportunity and competition.
The left in Britain was comfortable with the old nation-state model, not least because the left was instrumental in creating it.
Between 1850 and 1950 there was a gradual erosion of free-market capitalism through a variety of policy reforms (factory acts, education bills, old-age pensions, unemployment insurance, progressive taxation), and that culminated in Labour's post World War II settlement.
The market-state model is far harder for the left to swallow: quite simply, it means that the hands of the state are tied. Instead of regulating capital, the state regulates the people. Once you accept globalization as a given -- as Blair certainly does -- logical consequences flow. There are a number of reasons, for example, to be wary of foreign takeovers -- there is little evidence of improved performance, the government loses the ability to build up strategic sectors of the economy, the workforce is made vulnerable to redundancy decisions made elsewhere -- but the government's view is that "going with the flow" is both inevitable and beneficial to the economy.
Britain, it is said, is better able to withstand the heat of global competition because it has fully embraced the liberalization of labor, product and capital markets eschewed by countries such as France. It has to be said, though, that you would be hard pressed to detect these benefits from the UK's manufacturing performance or its trade deficit.
But if Blair's Labour Party is having trouble convincing Peugeot workers in central England, who have been told their jobs are to go, of the virtues of the market state, that is nothing compared with the difficulties involved in persuading its own supporters of the need to reform the welfare state. It's not just that the two models use mutually exclusive language.
One is a big state model, the other a small-state model, since if you are treating individuals as consumers of "welfare," you have to provide them with the resources to make good that choice. Logically, that means the state spends less and the individual spends more.
Blair seems to have few problems with the market-state model and recognizes that there is an anomaly in spending billions extra on the old welfare state while simultaneously making the case for a new, consumer-driven model. He gives the impression now that he regrets allowing British Chancellor of the Exchequer Gordon Brown to increase spending on "unreformed" public services over the past five years.
Brown, for his part, oscillates between the austere rationalism of the market state and the warm embrace of the traditional welfare-state model.
The differences between prime minister and finance minister are, however, relatively insignificant when set against the bigger picture. There are three issues. The first is whether globalization is really the force of nature Blair's New Labour assumes it to be. In reality, the changes to the global economy of the past three decades have come about as a result of the exercise of political power by those who favour free movement of capital, free-trade agreements, lower taxes for the rich and curbs on labor power.
The second is whether the liberal model is any more sustainable than it was when it was first tried in the 19th century. Blair and Brown are right when they argue that life now is different from 1945.
The global economy is more integrated. Chirac may indeed prove to be a Canute-like figure, vainly trying to turn back the globalization tide. But it remains to be seen whether it is really different this time. That was what all the experts said in 1929 on the eve of the Wall Street crash.
Finally, even if Blair and Brown are right and globalization is the only game in town, the move from a welfare to a market state makes politics a lot more interesting.
Why? Because, in the UK, there is only one party that is really at ease with the slimmed-down, consumer-driven, free-market model of the state. And that's the current UK opposition Conservative Party.
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