[PEN-L:28067] UK expands state sector!

[Chris Burford <cburford@xxxxxxxxxx>]

On a day when the London Stock Exchange had its third worst fall in
percentage points (in response to Wall Street fluctuations) the UK
Chancellor of the Exchequer announced a further move in actually expanding
the state sector.

His "Comprehensive Spending Review" gave details of how Brown would
increase state expenditure on a range of services over the next three
years, most prominently education. Earlier this year he had announded even
bigger increases over three years in health.

This news may have escaped attention on the other side of the Atlantic
where everyone waits on Greenspan to reassure the volatile markets, but it
is remarkable in many ways, and I commend it for the interest of PEN-L
subscribers.

It marks a high point in Brown's authority as a politician of New Labour.
Having been strict about public expenditure in the early years to the point
of meanness, he is clearly doing several things. He is using the relative
authority he won in the international capital markets by cutting the
national debt substantially in earlier years, now to increase the
proportion of the economy going to the state to just under 42%. This is
midway between the figure in the US and that of Germany and France. There
is also an element of quiet Keynesian counter-cyclical intervention in
announcing increases in government spending at a time when the inflation
figure in the UK is sinking near to the level when the now "independent"
Bank of England is required to take note of it.

Essentially New Labour has won the campaign started last spring to announce
a small increase in taxation, carefully delayed in its commencement, with
the announcements at the time, and yesterday, about the ways it is going to
be spent. This is quite a different politics to those of Bush cutting taxes
massively during the recession and pressurising the Democrats to agree. In
the UK the Conservative Party did not dare to oppose the tax increase
outright, and instead questioned whether "we" would get value for money. It
remains well behind in the opinion polls.

Part of this is expert marketing of the announcement yesterday. The
government ensured it had the support of business, with favourable
interviews trailing the statement by the head of the Confederation of
British Industry, stressing "we are all on the same side": how well the
government has done with primary school investment and how everyone now
wants it to improve secondary schools (11-16)  - not least because this is
good for British companies [in extracting higher value surplus labour of
course].  The spokesperson emphasised they just wanted public good will
that if the economy turned bad, people would not expect the government to
turn to that voteless milch cow, British business, for a tax rise.

Well positioned, after the statement, this morning there were also positive
interviews with the head of small business in the UK, welcoming the range
of tit-bits Brown had prepared for them and saying how they want a level
playing field with big business.

Commentators note that this is a "defining moment" for the government and
the whole idea of the state sector. While the nes management appears to be
expert, what is also remarkable is how Brown has bargained that in return
for this extra money, all the other departments must agree to a series of
performance targets with his department, the Treasury. There is virtually a
contract in which for example the Home Secretary is specified as being
ultimately responsible if the Home Office does not reach its performance
target. In the case of schools it is being robustly said that failing
schools will be taken over.

We are therefore revisiting the fundamental questions of how there can be
state direction for an economy.

There is already a lot of debate that in the national health service,
setting just one or two targets, like reducing admission times, creates
distorted incentives, which just obliges the bureaucrats to cut back on
certain activities to reach the chosen target, with occasional excesses,
like a few managers accused of massaging the waiting list figures, and the
odd patient being invited to come in a day early for her operation to meet
a sixth month deadline.

On the other hand there is debate that trying to monitor a dozen variables
is confusing, and the information systems are not up to it.

This is similar in some ways to the problems of Gosplan in the former USSR
when there was no ready access to computers, and a state directive could
ensure millions of extra nails all of one size in order to reach the plan,
rather than a variety of nails, which would increase the productivity of
all the productive units in the country to use creatively.

The difference is that New Labour is absolutely assuming a diversified
economic environment in which finance capital or its equivalent in the
state sector, does the ultimate sums, but the consumer is supposed to be
king, and services are marketed like commodities, including for
satisfaction with quality.

All this is being accepted as a serious option in a country in which we
already have more competerised CCTV cameras monitoring us than the whole of
the USA.

Brown's stategy will fail if unemployment begins to rise again from its
lows, and that increases government costs, while a downturn in expenditure
decreases tax revenue. For some reason Brown is prepared to trade in his
reputation for prudence for an economic policy that assumes that British
Finance Capital Inc. can ride out the present recession more smoothly than
expected. With major finance capital companies close to the government, it
may be that New Labour knows what approaches they employ to sail over the
highs and lows of the capitalist cycle. The highly socialised forms of
finance capital may therefore be helpful to a highly reformist centrist
administration. The close cohabitation is rational.

Without a hint of overt class anatagonism, we are seeing some remarkable
things. Government becoming technical administration, and a highly complex
consumerised economy being brought under centralised guidance by a series
of process controls, rather than state directives.

And by the way, Brown made a disproportionately large increase in the
overseas aid budget. There is no doubt that he thinks, and he is not noted
for modesty, that his model of enlightened capitalism has a relevance for
the whole of the world, and is far more competitive in the longer term than
that of Bush.

This is therefore also part of the coded battle of global imperialisms. But
the world is really at stake. And the question of whether the means of
production can be controlled by social foresight. And what private
ownership means in practice.

Chris Burford

London