End of Blair's affair with big business?
By Alex Callinicos
SOMETHING very strange is happening to Tony Blair's government. It is undeniably a slavishly pro-business government. One small example of this was provided by a Financial Times headline on Monday last week: "Multinationals In Line To Run School Services". Among the firms set to enter this "rapidly expanding market" is Group 4.
This case illustrates as well as anything else the extent to which New Labour has betrayed the aspirations that brought it to office in May 1997. Yet this doesn't mean that big business is grateful to the government. On the contrary, the bosses' attitude was summed up by another Financial Times headline back in March: "Honeymoon Is Over, Business Leaders Warn Labour". Chris Humphries of the British Chambers of Commerce told the paper, "There is growing disillusionment with this government's pro-business credentials."
Blair responded last week in a speech at the Confederation of British Industry's annual dinner that was supposed to represent the government "getting tough" with the bosses. In fact all he did was boast about how lightly regulated British labour markets are, and insist that his policies had nevertheless to benefit "ordinary working families".
This cut no ice with big business. CBI president Sir Clive Thompson said that "business leaders would not bow to pressure from ministers to tone down their criticism of the government". By the end of the week Tory peers in the House of Lords, egged on by the City, were tearing apart government legislation designed to tighten regulation of financial markets.
There are two factors behind this apparent crisis in relations between New Labour and big business. The first is that the bosses were thoroughly spoiled during 18 years of Tory rule, when many of the protections built by workers over the previous century were systematically dismantled. New Labour broadly accepts the Tory free market agenda, but it still depends on the votes and financial support of ordinary working people. It therefore has to offer them something.
Promised reforms such as the minimum wage and easier trade union recognition were thoroughly watered down under business pressure. Nevertheless, they represented more restrictions on the bosses' freedom to exploit than they would like. Gordon Brown's efforts to raise more public money without increasing income tax have closed off the odd business perk, and this has annoyed the City.
There is probably also an element of pre-emptive strike about the bosses' campaign. They know that New Labour's poor performance in mid-term elections is putting Blair under greater pressure to offer more to "core"-that is, working class-Labour voters. So they are mounting counter-pressure to scare the government off from going too far in an Old Labour direction.
There is a second factor in the deteriorating relationship between New Labour and big business-the economy. Brown's Thatcherite economic policies have been dictated by the aim of keeping the City happy. In so far as they have been successful, they have helped to keep the pound high and exports expensive.
The result is the crisis in manufacturing industry, as plant after plant finds itself priced out of international markets by the strength of the pound. Now that the dot.com bubble has burst, there are signs of a slowing economy. Yet the government response is to deny that there is a crisis. According to Chris Humphries, business leaders were infuriated by the fact that Brown barely mentioned manufacturing in his budget.
Last week Blair insisted that there was nothing the government could do to reduce the value of the pound. In fact the real danger may be a sudden devaluation. On one measure, at its peak in early May sterling was at its highest level against the deutschmark for nearly 20 years.
In particular because the German economy is beginning to pick up speed, financial speculators on the currency markets may decide the time has come to get out of sterling. Since speculators behave like a herd, this change will probably come in a mad rush leading to a sharp fall in the pound.
A weaker currency means that imports become more expensive. Blair and Brown will, like past Labour governments, then come under pressure from the City to fend off higher inflation with cuts in public spending. Would they then stand firm in defence of "ordinary working families"? I wouldn't hold your breath.