The Labour election victory in 1997 took place at a moment of great political opportunity. Thatcherism had been rejected by the electorate. But 18 years of Thatcherite rule had radically altered the social, economic and political terrain in British society. There was, therefore, a fundamental choice of direction for the incoming government.
One was to offer an alternative radical strategy to Thatcherism, attuned to the shifts that had occurred in the 1970s and 1980s; with equal social and political depth, but based on radically different principles. What Thatcherism seemed to have ruled out was another bout of Keynesian welfare-state social democracy. More significantly, Thatcherism had evolved a broad hegemonic basis for its authority, deep philosophical foundations, as well as an effective popular strategy. It was grounded in a radical remodelling of state and economy and a new neo-liberal common sense.
This was not likely to be reversed by a mere rotation of the electoral wheel of fortune. The historic opportunities for the left required imaginative thinking and decisive action in the early stages of taking power, signalling a new direction. The other choice was, of course, to adapt to the Thatcherite, neo-liberal terrain. There were plenty of indications that this would be New Labour's preferred direction. And so it turned out. In a profound sense, New Labour has adapted to neo-liberal terrain - but in a distinctive way.
It took only a few weeks for the basic direction to become clear: the fatal decision to follow Conservative spending commitments, the sneering renunciation of redistribution ("tax and spend!"), the demonisation of its critics ("Old Labour!"), the new ethos of managerial authoritarianism, the quasi-religious air of righteous conviction, the reversal of the historic commitment to equality, universality and collective social provision.
The welfare state had been Labour's greatest achievement, then savaged and weakened under Thatcher. Its deconstruction was to be New Labour's historic mission. The two-tier society, corporate greed and the privatisation of need were inevitable corollaries. This was glossed as "modernisation". Who could possibly be against it? The linguistic operation - generating a veritable flowering of Third Way waffle, double-talk, evasions and spin - was critical to the whole venture.
New Labour has a long-term strategy, a "project": the transformation of social democracy into a particular variant of free market neo-liberalism. Thus New Labour has worked - both domestically and globally - to set the corporate economy free. It has renounced the attempts to graft wider social goals on to the corporate world. It has deregulated labour and other markets, maintained restrictive trade union legislation, and established weak and compliant regulatory regimes. It has "cosied up to business", favouring its interests in multiple ways. It has pursued a splendidly variable range of privatisations - sustaining the sell-off of critical public assets and stealthily opening doors for the corporate penetration of the public sector.
However, New Labour has adapted the fundamental neo-liberal programme to suit its conditions of governance - that of a social democratic government trying to govern in a neo-liberal direction, while maintaining its traditional working-class and public sector middle-class support. It has modified the anti-statist stance of American-style neo-liberalism by a "reinvention of active government". "Entrepreneurial governance", its advocates advise, promotes competition between service providers, favours the shift from bureaucracy to "community", focuses not on inputs but on outcomes, redefines clients as consumers and prefers market mechanisms to administrative ones.
Far from breaking with neo-liberalism, "entrepreneurial governance" constitutes its continuation - but in a transformed way. The New Labour orthodoxy is that only the private sector is "efficient" in a measurable way. The public sector is, by definition, "inefficient" and out-of-date, partly because it has social objectives beyond economic efficiency and value-for-money. It can only save itself by becoming more like the market. This is the true meaning of "modernisation". Marketisation is now installed in every sphere of government. This silent revolution in "governance" seamlessly connects Thatcherism to New Labour.
The passing-off of market fundamentalism as the new common sense has helped to drive home the critical lesson which underpins the "reform" of the welfare state: the role of the state "nowadays" is not to support the less fortunate or powerful, but to help individuals themselves to provide for all their social needs. Those who can must. The rest are to be targeted, means-tested and kept to a minimum of provision, lest the burden threaten "wealth creation".
New Labour is therefore difficult to characterise. It combines economic neo-liberalism with a commitment to "active government". More significantly, its grim alignment with corporate capital and power is paralleled by another, subaltern programme, of a more social-democratic kind, running alongside. This is what people invoke when they insist, defensively, that New Labour is not, after all, neo-liberal. The fact is that New Labour is a hybrid regime, composed of two strands. However, one strand - the neo-liberal - is in the dominant position. The other strand - the social democratic - is subordinate.
This subordinate part of the New Labour programme involves a certain measure of indirect taxation and redistribution, reforms like the minimum wage, family tax credits, inducements to return to work. To this we also owe, in the second term, the build-up of concern about the delivery of public services, including a substantial injection of public funds into health and education. But every change in the public sector must be accompanied by a further tightening of the "modernising" screw.
At the moment, the resistance to the New Labour project is coming mainly from the backwash of the invasion of Iraq, and Blair's decision to commit Britain as an ancillary support to the US drive to global hegemony. Now that there are serious forces wishing to distance themselves from the overall goals, we need to build the different, particular points of opposition (the war, the US alliance, foundation hospitals, selectivity in education, private-public initiatives, trade union opposition to privatisation) into a more substantive and integrated critique, in order that a more concerted and coherent vision - and the political forces to make it popular and put it into effect - can emerge. The two years between now and the next election are just enough time to construct an alternative political project from the left. Failing this, beyond the election awaits a third installation of New Labour's double shuffle, or - heaven forefend - Iain Duncan Smith.
Stuart Hall has been a leading figure of the British left over the past thirty years and a visionary race theorist, making profound contributions to the field of cultural studies. He is now Emeritus Professor at the Open University. This article was originally published in the Guardian on 6 August 2003, and is reproduced with the author's kind permission. A longer version of the article, which is recommended for the fuller analysis, will be published in Soundings (number 24, Lawrence & Wishart).