Neoliberalism In Britain: The Fracturing Of The Social Contract
There is a vast, petrifying hollowness to the British economy.
In everyday life, the reassuring facade of the state is still there - the schools, and hospitals, the police and emergency workers. And yet, if you dig below the surface, if you take a minute to look around, you are immediately struck by the eerie feeling that there’s not much left behind that facade. Like the crumbling mansion in Giuseppe Tomasi die Lampedusa’s The Leopard, Britain spends its time in just a few rooms, cordoning off whole wings once thriving with life, dust sheets draped over the armchairs, curtains drawn tight.
No other city embodies this national decline better than Liverpool. Before WW2 and the dissolution of the British Empire, the city prided itself on its grand imperial port - a place of extraordinary wealth and prestige, which served as one of the main transit hubs between the workshop of the world and the ever-expanding colonial possessions overseas. Thousands of men found employment in its dockyards and there was a spirit of local pride in the unique identity Liverpool held.
It was obviously not all like that. While Liverpool was a heaving metropolis by the sea, it was also a city of appalling squalor and exploitation; an English Belfast, where Catholics and Protestants crammed into teeming tenements sealed off from each other. Today, thankfully, life in the city is immeasurably better. The slums have all been cleared, and the sectarian division is all but gone.
However, in the absence of the Empire and the northern workshops whose goods the city once transported, Liverpool lost its character. Due to the ever-changing currents of world trade and geopolitics, England’s focus shifted towards Europe, and Liverpool’s geographical location on the west coast became its undoing. Now Felixstowe and Harwich are England’s main ports, not Liverpool. Bereaved of its defining identity, the city was forced to adapt, prostituting itself to global capital and becoming just another service hub. No new wealth is created. Nothing physically tangible lasts. It just serves as another artery pumping wealth, talent and skills back into the ever-bloated London.
This phenomenon is not just limited to Liverpool, unfortunately. It haunts every major English city. Birmingham, Manchester, Sheffield, Newcastle - all the great cities of the union outside London’s orbit. All were once major, thriving industrial heartlands that have now fallen into destitution and abandonment.
Everywhere you go in this country - be it the rolling hills of Dorest, the cobblestone streets of York, or the highways of Birmingham - you are greeted by a scene of civic failure. Not only does it manifest itself in low-level littering or graffiti-stained walls, but startling homelessness - beggars slumped outside hotels, lying in tents, pizza boxes slung from their roofs with pleas for help sprawled over them. You don’t need to study the latest GDP figures to know something is wrong with Britain; there is a sickness seeping through the land, a breakdown in our society.
But, why is this so? Why aren’t we more angry? And what can we do to fix this? For conservatives, this decline is a question of waste, inefficiency and spending priorities. To them, local councils are too obsessed with frittering money on diversity training programmes or bloated government contracts that fall into an endless sea of bureaucracy. For Labour, meanwhile, it is the opposite. The declining state of the public realm is due to a harsh austerity regime imposed on it by the central government. Paradoxically, both of these proscriptions are right and wrong.
The Conservatives are right to claim that inefficiency lies at the heart of our government services, but that’s only because accomplishing infrastructure projects like HS2 or Hornsea 3 is now structurally expensive. And cancelling HS2 doesn’t alter this. In fact, it rehabilitates it. It is an admission of gross government failure and ineptitude.
Labour is also right to claim that better funding would solve or reverse some of the decline, but the effectiveness of such a policy can only be guaranteed by addressing Liverpool and other regions’ structural depravity. Central government can alleviate some of the worst excesses of austerity, but it does not change the fact that all British regions, aside from the South East and London, are net drains on the economy - they depend on money being transferred from other parts of the country. That’s not a sustainable economic model.
The malaise is steeped in economic issues, from energy-price inflation and low investment to the weakening of flagship industries. But it has a more fundamental cause: citizens’ declining faith in the state. The much-vaunted British social model, a product of the postwar decades that combined state-led investment, welfare protections and labor rights, is foundering. Its slow capsizing has cast Britain into a deep hole from which there is no easy exit.
As our society grew more complex, more and more of the government’s function took the form of social insurance, with each of us chipping in through our taxes to protect ourselves collectively - for unemployment benefits if we lost a job; pensions to lessen the indignities of old age; reliable electricity and phone services for those who lived in rural areas where utility services otherwise make a profit; public schools and universities to make education more egalitarian.
It worked, more or less. In the span of a generation and for a majority of people, life got better, safer, more prosperous, and more just. A broad middle class flourished. The rich remained rich, if maybe not quite as rich as they would have liked and the poor were fewer in number and not as poor as they would otherwise have been. And if we sometimes debated whether taxes were too high or certain regulations were discouraging innovation, whether the so-called ‘nanny state’ was sapping individual initiative or a certain programme was wasteful, we generally understood the advantages of a society that at least tried to offer a fair shake to everyone and built a floor beneath which nobody could sink.
Maintaining this social compact, though, required trust. It required that we see ourselves as bound together, if not as a family then at least as a community, each member worthy of concern and able to make claims on the whole. It required us to believe that whatever actions the government might take to help those in need that nobody was gaming the system and that the misfortunes or stumbles or circumstances that caused others to suffer were ones to which you at some point in your life might fall prey.
Over the years, that trust proved difficult to sustain. Harder economic times strained civic trust. As the British growth rate started to slow in the 1970s - as incomes stagnated and good quality, high-paying jobs for those without university degrees declined - the scope of people’s concerns narrowed. We became more sensitive to the possibility that someone else was getting something we weren’t and more receptive to the notion that the government couldn’t be trusted to be fair. Promoting that story, a story that fed not trust but resentment, had come to define the modern Conservative movement. With varying degrees of subtlety and varying degrees of success, conservatives adopted it as their central theme. It became the template for right-wing newspapers, the foundational text of every think tank. The government was taking money and jobs away from hardworking people and giving it away to leeches, social parasites.
And maybe there was a sliver of truth to some of those assessments. Maybe the government had swelled to an overwhelming, bloated size and needed trimming and reforming in certain areas. Maybe the scope of some services could be reduced and replaced with more streamlined, cost-effective measures. But the anecdote to this social malaise from the Right never offered a credible, detailed plan. It was just unfettered austerity, cutting services and reducing taxes for the benefit of their wealthy lobbyists, not society and the vulnerable. The idea was to starve the beast - make all public services so unproductive to the point where selling them out and privatising services was the only option left.
The intensity of these convictions put liberals and leftists on the defensive, making leaders less bold about proposing new initiatives, limiting the boundaries of political debate. A deep and suffocating cynicism took hold. Indeed, it became axiomatic among political consultants of both parties that restoring trust in the government or in any of our major institutions was a lost cause and that the battle between the two main parties each election cycle now came down to whether Britain’s squeezed middle class was more likely to identify the wealthy or poor as the reason they weren’t doing better.
Yet, if most people believe hard work should pay, poor wage growth and longer working lives have put that aspiration out of reach. This frustrated promise of meritocracy catalyzes all sorts of other grievances, from anti-government sentiment to protests against fuel-tax rises. All of this has led to where we are now - a society falling apart at the seams, one where predatory corporations thrive on the backs of the misery and anguish of the workers.
If this wasn’t demoralising enough, there is an absence of a broad debate in national politics of where to go next, how to fix or reverse these structural weaknesses. Both of the establishment parties appear too exhausted to offer a convincing vision that will navigate through these uncharted times and lead us to a future where most of the issues are restrained or fixed.
The policies McDonnell offered in the 2017 Labour Party manifesto (broadly) made sense to me, although the New Left radicalism of 2019 was drastically over-ambitious in scope and scale. But Corbynism was an ideology for an era of ~0% interest rates. Borrowing an extra £500bn for public investment is now far less affordable without very large increases in revenues, either via growth, or via tax hikes that can induce capital flight or dampen investment. It’s a delicate line to straddle, one no party seems willing to tackle. Trouble in the bond markets under Reeves would be amplified 10x with a McDonnell-style reformer, and the latter never had a convincing answer on how to react to a run on the pound or sell-offs etc.
I think today there are ways to broaden the tax base, build a more social-democratic model, and ease fiscal pressures in a way that also placates/encourages the private sector with some pro-market policies AND doesn't cause a financial deluge à la Mitterand/Syriza/Truss because ultimately all 3 were brought to heel in similarly ignominious circumstances.
A few of the ways this could be achieved include: the BoE curtailing QT and lowering rates; lower taxes on private investments in domestic, productive assets (stemming capital outflows into foreign assets); introduce fully-liberalised, zonal planning and expedite approvals on critical infrastructure, over-ruling vetoes from local authorities; sustained public capital investment in housing/transport/energy via publicly owned enterprises/a sovereign wealth fund, 'crowding in' private; use public procurement as lever to support private domestic industry; increase top rate on higher incomes and capital gains but expand full expensing/100% capital allowances for private investment in plant/tech/R&D/training etc.; and deregulate/liberalise in some areas (e.g. planning, or allowing AI/MedTech access to anonymized health records), but ALSO re-regulate in others (e.g. strengthen workers' rights/min. wage/sectoral collective bargaining).
This is by no means an exhaustive list. It will not magically fix or reverse all of the macroeconomic problems plaguing the British economy, but it will fundamentally halt the decline and provide a stable foundation to build from.
What is missing is the political capital to put these ideas into action. The irony is that, as a nation, we do have able people who could start turning the ship of state around. There is, however, given the current nature of the political parties, no means of getting them anywhere near the levers of power. Social mobility in the echelons of power is very much predicated on favours and loyalty. Politicians are awarded on their loyalty, not merit, which makes it incredibly difficult, if not outright possible to purge the old guard with new technocrats because the predecessors often make sure their successors adhere to the same orthodoxy.
Democracy as it exists in this country is simply not functioning. It is failing to play one of its most crucial roles: recruiting and giving power to competent leaders, policy-makers and administrators. The transmission belt for this - the political parties - is broken. It might take pressure from another immense event to catalyse any of this into action. Until then, us noble citizens can only wait and and watch as the country continues to slip into the abyss.