The state and local government

¹⁵¹ Civil society, as used by Gramsci, is therefore conceived of as a domain comprising ideological institutions that consolidate the existing hegemonic arrangements. It also contains spaces, often within the ideological institutions themselves (they are not to be regarded as monolithic), where these arrangements can be contested and renegotiated. In view of his conception of the state and civil society, Gramsci felt that a frontal attack could not lead to a seizure of power in Western societies. For such a seizure to occur, one would first have to engage in a "war of position," which involves social organisation and the development of cultural predominance. Moreover, as Peter Mayo points out, Gramsci's educational activities – with the factory councils (and in prisons while awaiting his trial during the Fascist period) – indicate his willingness to work within existing state and bourgeois institutions: and in ‘his work in industrial Italy, therefore, Gramsci adopted an attitude of working "in and against the state" and other systems of domination’.¹⁵²

For Gramsci, according to Brown – whatever the class – there are certain common stages of development that they must go through before they can become hegemonic. And Gramsci then goes on to state that there are three levels of political development that a class must pass through in order to develop the movement that will allow change to be initiated. The first of these stages is referred to as “economic-corporate’’:

The corporatist is what we might understand as the self-interested individual. People become affiliated at the economic-corporate stage as a function of this self-interest, recognising that they need the support of others to retain their own security. Trade unionism is probably the clearest example of this, at least in the case of people joining a union for fear of pay cuts, retrenchment etc. One can also speak of short-term co-operation between otherwise competing capitalists in these terms. The point to emphasise is that at this stage of a group’s historical development there is no real sense of solidarity between members.¹⁵³
In the second stage
group members become aware that there is a wider field of interests and that there are others who share certain interests with them and will continue to share those interests into the foreseeable future. It is at this stage that a sense of solidarity develops, but this solidarity is still only on the basis of shared economic interests. There is no common worldview or anything of that nature. This kind of solidarity can lead to attempts to promote legal reform to improve the group’s position within the current system, but consciousness of how they, and others, might benefit through the creation of a new system is lacking.¹⁵⁴
But it is only by passing through the third stage that hegemony really becomes possible:
In this stage…members become aware that their interests need to be extended beyond what they can do within the context of their own particular class. What is required is that their interests are taken up by other subordinate groups as their own. This was what Lenin and the Bolsheviks were thinking in forming an alliance with the peasants – that it was only through making the Bolshevik revolution also a peasants’ revolution, which peasants could see as being their own, that the urban proletariat could maintain its leading position.¹⁵⁵
Similarly, Gramsci maintained that in the historical context that he was working in, the passage of a class
from self-interested reformism to national hegemony could occur most effectively via the political party….and through a process of debate and struggle, one ideology, or a unified combination thereof, will emerge representing the allied classes….At this stage, the party has reached maturity, having a unity of both economic and political goals as well as a moral and intellectual unity - one might say a shared worldview.¹⁵⁶
The party then
sets about transforming society….The state becomes the mechanism by which this is done….these goals…need to be experienced by the populace as being in the interests of everybody.¹⁵⁷
Gramsci’s notes on politics begin with an analysis of Machiavelli’s The Prince (1515); and he gives the title “The Modern Prince” to his longest series of notes on politics to emphasise the crucial importance of the revolutionary party, which he calls ‘the first cell in which there come together the germs of a collective will tending to become universal’.¹⁵⁸ Similarly, Richard Brosio – who argues that ‘Marx's ideas and actions…as well as the Marxists and others who have understood his work well, provide not only some of the best ways to understand our conditions, but also to organise in ways to make possible a resolution of the historical human crisis’¹⁵⁹ – follows John Sanbonmatsu whose The Postmodern Prince provides a historically-grounded critique of postmodernism¹⁶⁰ and
seeks to convince his readers that the work of Gramsci, specifically…the latter's development of the prince concept, is as necessary as it was in Machiavelli and Gramsci's lifetimes. The latter realised the necessity for a ‘party’ that could lead in the redevelopment of Italian civil society, through struggle against developing capitalist hegemony that was assisted and enforced by the class-state.¹⁶¹
Historically, the capitalist class has retained its hegemony primarily through various forms of coercion such as the direct deployment of the military (for example in Oldham in the nineteenth century when the unenfranchised working class was illegally conducting union activities and preventing the implementation of the 1834 Poor Law Amendment Act).¹⁶² However, as Brown also emphasises:

It would…be a great mistake to think that capitalism does not also rely heavily upon building consent. Indeed, it could be argued that it is capitalism’s consent-building that we, from a strategic point of view, need to pay more attention to, as it is on this level that we compete with them. The nature and strength of this consent varies. There are ways in which capitalism succeeds in actively selling its vision to subordinate classes. This means not only selling the distorted vision of a society of liberty, freedom, innovation, etc., but also deploying the ideas of bourgeois economics to convince working people, for example, that although capitalist policy is in the ultimate interests of the capitalist class, they too gain some of the benefits via trickle-down effects. Capitalism can also win consent among those who perhaps don’t buy the idea that the system is in their interests, but who have been convinced that there is no alternative or that the alternatives would be worse – in other words, through the promotion of the belief that the system is a necessary evil.¹⁶³

Of course, when the interests of state monopoly capitalism are directly threatened, the ruling hegemonic forces will inevitably resort to coercion. For example, legislation to prevent workers taking industrial action, who threaten profits, as in the case of the December 2009 injunction granted to British Airways against Unite cabin staff members.¹⁶⁴ But a far bigger threat to the capitalists is the development of a hegemonic alternative within civil society. This requires
rigorous work on the ground laying the moral and intellectual terrain upon which these historical developments can occur. One develops the unity, self-awareness and maturity of the movement, making it a powerful and cohesive force, and then patiently, with careful attention to the contextual conditions, waits for the opportune moment for this force to be exerted.¹⁶⁵
For example, the campaign to win a million signatures in support of the People’s Charter.¹⁶⁶

Therefore, as Anderson concluded in 1976

the central problematic of the United Front – the final strategic advice of Lenin to the Western working-class movement before his death, the first concern of Gramsci in prison – retains all its validity today. It has never been historically surpassed. The imperative need remains to win the working class, before there can be any talk of winning power. The means of achieving this conquest – not of the institutions of the State, but of the convictions of workers, although in the end there will be no separation of the two – are the prime agenda of any real socialist strategy today.¹⁶⁷
Gramsci’s theory of the historic bloc – and his concepts of hegemony, civil society, the integral state, national popular, ethico-political, organic intellectuals, the wars of movement and position – enabled him to accurately detail the balance of class forces in the society of his time: and they are still relevant, as shown in Chapter 14, when devising political strategies to defeat the New Labour and Tory project for big business control of local government under conditions of state monopoly capitalism.

British State Monopoly Capitalism since the late 1950s

Paul Bocarra and other French Communist Party theorists in 1971 provided the major and most sophisticated analysis of state monopoly capitalism in the second half of the last century. They saw economic crises as the outcome of over accumulation; and the state’s modern role, as in the present financial crisis, as attempting to overcome crises by the ‘devalorisation’ of capital.¹⁶⁸ Ben Fine and Laurence Harris used previous work on the British economy to emphasise a dual periodisation between monopoly and state monopoly capitalism.¹⁶⁹ This section therefore reviews trends in British state monopoly capitalism since the late 1950s; and also discusses how they relate to local government.

The late 1950s to 1979

From the late 1950s, as the Marxist historian John Foster shows, Britain had a dependent alliance with the United States that began when Harold Macmillan announced the final withdrawal from formal empire:

In place of empire the focus was on the modernisation of Britain’s manufacturing base. This was to be done through the attraction of a new generation of US branch plants into Britain and the introduction of a National Plan and state-aid for the creation of giant British firms such as GEC and BMC.¹⁷⁰
Meanwhile finance capital¹⁷¹ – was only willing to commit money to Britain’s industrial modernisation if new powers were taken to control the trade union movement. After Labour won the 1974 General Election:
Fierce conflict then erupted within both the Conservative Party and the state apparatus about how to maintain capitalist rule. The previous government was accused of allowing the country to become ungovernable. Calls were made for a decisive break with Keynesianism.¹⁷²
The Conservative establishment led by Edward Heath, James Prior, Michael Heseltine and Chris Pattern had the backing of the CBI, Financial Times and the Economist. Their opponents, led by Keith Joseph and Margaret Thatcher were supported by the Institute of Directors, the Daily Telegraph and think tanks such as the Institute of Economic Affairs which promoted theorists from the American monetarist New Right. The most notable of these, Milton Friedman, advocated economic ‘shock treatment’ as the only solution to labour militancy – by drastic deflation, mass unemployment and the selling off of all public assets.¹⁷³ Friedman also argued that the availability of oil revenues provided an ideal opportunity to re-establish the City of London as a world banking centre. The election of Thatcher in 1975 as leader indicated this faction’s hegemony. In 1976 intervention by the IMF, the enforced adoption of monetarist policies leading to cuts in services and wages led to the defeat of the Labour government in 1979.
1979-1990

Between 1979 and 1990 the Thatcher group succeeded in implementing its programme without the promised benefits for British finance capital because most of the institutions were US owned. Moreover, as Foster further notes:

In parallel to the switch to finance and services there was a sharp change in the economic functioning of state monopoly capitalism. It moved from being primarily based on an indirect ‘external’ Keynesian market redistribution of income to monopoly capital to a direct and internal income redistribution.¹⁷⁴
For example, as Mervyn King showed in 1975, the state steadily reduced corporate taxation to sustain profits in the post-war period.¹⁷⁵ The privatisation of local government services since 1979 is also an example of direct redistribution to monopoly capital.

In 1985, the Conservatives abolished the six Metropolitan County Councils and the Greater London Council, which were all labour-controlled. The GLC and South Yorkshire, in particular, had pioneered collective, ‘progressive-populist’ initiatives in the limited spheres of authority available to them. By 1988 the financial independence of local government was virtually eliminated. The 1988 Local Government Act replaced rates by a fixed ‘community service charge’ payable by every adult regardless of income, which came to be known as the ‘poll tax’. Even people on social security had to pay 20 per cent. The poll tax accounted for around 25 per cent of local government revenue, the rest coming from central government under various guises. If councils wanted to increase their total spending by one per cent, therefore, councils would have to raise the poll tax by at least four per cent. The introduction of the poll tax, however, had momentous unintended consequences. There were massive refusals to pay, riots, imprisonments and warrant sales for non-payment. The defeat of Thatcher in the 1990 leadership election was therefore in part due to the recognition within the Conservative Party that public hostility to Thatcherism was making them unelectable.

1990-1997

Michael Heseltine became Environment Secretary in 1990 and set up a review of the finance, structure and internal management of local government. The poll tax was replaced by the regressive council tax in 1992: but – following Heseltine becoming President of the Board of Trade in 1992 – Tory proposals for US-style elected mayors and the abolition of the committee system were not implemented until nearly a decade later by New Labour. Nevertheless, between 1995 and 1998 single-tier unitary authorities were introduced in England’s non-metropolitan areas, and in the whole of Wales and Scotland: which reduced the number of councils by 77 per cent, and the number of councillors by 31 per cent. Thus the two Major governments further reorganised the structure of local government in England, Wales and Scotland to meet the needs of big business and the privatisation of services. Meanwhile the immediate objective of Heseltine’s industrial policy – concentrating on energy and aerospace in particular – was membership of the euro-zone: which ended in September 1992 when the pound was forced out of the European exchange rate mechanism. Thereafter, Major’s administration was paralysed by divisions between supporters of EU integration (Heseltine and Kenneth Clarke) and those supporting a US alignment based on sterling and an ‘independent’ City of London (Michael Portillo, Michael Howard and John Redwood). Meanwhile, as John Foster states:

In parallel with the paralysis of the Conservatives, the Labour Party came under the administrative dominance of a strongly Atlanticist group led by Blair, Brown and Mandelson. This takeover was assisted by the weakened position of the trade union movement and active intervention in it by state agencies to marginalise the left.¹⁷⁶
New Labour

New Labour’s policies have been closely aligned to those of the United States. Initially New Labour became the EU champion for Clintonite free market globalisation. This sought a further opening of EU financial markets, banking system and company ownership to penetration by American and British financial institutions and pressed for the neo-liberal transformation of national labour markets, social security and pension systems (a programme pushed through by Blair at the 2000 Lisbon summit). Politically, this period saw a formal shift of powers away from the Westminster Parliament. And, as Foster also emphasises:

The mandatory opening of services to competition undermines Parliament’s ability to provide comprehensive public sector provision….the transfer of economic powers to the EU limits the scope for any parliamentary action to curb big business and places major barriers in the way of state interventions to protect industrial employment….Parliament loses the power to implement the type of alternative economic and political programme which mobilised opposition to state-monopoly capitalism in the 1970s….The timing of these changes is not accidental. They meet the common interests of finance capital in a period when monopoly capital in France, Germany and Britain is having to attack the post-war economic and political gains of working people….Hence…the transfer of powers from national parliaments to the EU directly strengthens the state power of monopoly capital in each.¹⁷⁷
Hence due to these developments, as Ian Hughes of the Local Government Association notes, 50 per cent of the domestic regulation concerning local government in Britain now originates in the neo-liberal EU; and the list of council services affected includes community cohesion, social services, regeneration, procurement, performance and environmental standards. In Furthermore, Brussels now has the second highest lobbying presence after Washington.¹⁷⁸ These years also saw a precipitate drop in manufacturing employment, far more than over the previous ten years, intensification of privatisation and of public subsidy to the private sector and a credit-fed boom in the service sector that led directly to the current crisis.
The current crisis

Britain’s banks were among the most over-lent and highly geared in the world and had become very dependent on short-term borrowing at low rates from other banks and investment companies to fund this debt. Such borrowings rose from nothing in 2000 to £500 billion in 2007.¹⁷⁹ The fall in the American housing market now radically devalued the debt-based securities and by August 2007 the most over-borrowed of the British banks, Northern Rock, was unable to meet its obligations and the government had to take it over. From September 2007 central banks in Europe, Britain and America had to step in as short-term cash providers. The banks themselves sharply reduced their own retail mortgage lending. From spring 2008 the British banks were urgently demanding that greater liquidity be made available by central banks. By May 2008 the Bank of England’s short-term lending facility had reached £50 billion. ‘Governments at this stage believed they could manage the financial crisis without major dislocation. They planned to cut back wages and public spending to pay for the bank subsidies but reckoned inflation would redistribute income to big business and keep the economy moving’.¹⁸⁰

These hopes were dashed by developments in August and September 2008. The Federal mortgage companies reached breaking point and major US investment banks and insurance companies were unable to pay institutional creditors. The United States government was confronted with the demand to bail them out and did so – with the exception of Lehman Brothers. Its crash on 15 September revealed the sheer scale of debt across the banking system and resulted in an immediate cessation of inter-bank lending. Over the following two weeks the governments of Greece, Ireland, Iceland, Belgium and the Netherlands had to rescue their national banks. In Britain Bradford and Bingley was nationalised on 29 September and a week later the government had to rescue three of the country’s major retail banks, the core of the British banking system. At this point the IMF estimated the indebtedness of American banks at $800 billion and its Director described the world banking system as on the brink of ‘systemic meltdown’. Only the Congressional announcement of a $3,400 billion banking guarantee and a parallel commitment of 1,000 billion euro by the German Chancellor prevented a total financial panic.¹⁸¹

The crisis was no longer seen as ultimately manageable but instead as totally unpredictable and threatening the fundamentals of the world capitalist economy. By October the contagion was spreading uncontrollably. Consumer spending slumped and the car industry in the United States, Britain and in Europe was put on short-time. Within a matter of weeks the boom in commodity prices collapsed devastating the hedge funds that had switched into commodity indexes earlier in the summer. At this point the crisis assumed a self-consuming character. The value of shares fell sharply in face of mounting company indebtedness – further reducing the asset base of the banks and ending any finance for capital expenditure in the real economy. In turn unemployment mounted and consumption fell further. Within weeks Hungary, Latvia and Iceland had to be provided with IMF/World Bank loans amid fears of defaults across Eastern Europe and in the emerging economies. As growth in China and India slowed sharply, governments in the United States, Britain, France and Germany became increasingly concerned that the broader decline in economic activity, reducing profits and depressing asset values, would provoke a still more serious banking crisis. On the weekend of 11/12 October 2008, Britain was within hours of a banking shutdown. There was an unprecedented taxpayer bailout of the Royal Bank of Scotland (£20 billion) and HBOS and Lloyds TSB (£17 billion). If this rescues plan had not succeeded Halifax and RBS would have ceased trading on 13 October 2008.¹⁸² By the beginning of November the international asset value of hedge funds had dropped by a quarter to $1,500 billion.¹⁸³ This was the background to the sharp reduction of interest rates in the US and Britain in October and the coordinated commitment to Keynesian-style reflationary packages at the end of November 2008: £20 billion in Britain; $650 billion in the United States and 200 billion euro in the EU.¹⁸⁴

Gordon Brown’s international interventions in October were given very positive media treatment. A reassessment had clearly taken place at the highest levels of the British financial establishment. Editorials in both the Financial Times and Times at the end of September reveal an unprecedented level of concern not just for the viability of the banking system but for the ideological credibility of capitalism as an economic system. Those at the heart of the crisis clearly knew that its origins lay precisely in the uncontrollable logic of capital accumulation in its monopoly phase. They also knew the destructive force of the outcome. Millions would lose their jobs, many more would face devalued pensions and tens of thousands of the small businesses would go bankrupt. ‘The financial system has now reached its point of maximum peril...after years of profligacy….Yet there is an even greater risk...that the politicians lose their faith in markets and draw the wrong conclusions’ wrote the Financial Times on 27 September 2008. Moreover, as Foster points out: ‘It did so, bizarrely in polemic against the Archbishops of Canterbury and York. For it was the bishops, and not the leaders of organised labour, who had criticised capitalism as such.