Contesting neoliberalism: public sector alternatives for service delivery

The crisis that erupted at the end of 2008 has cruelly exposed the limitations of the neo-liberal model in which the privatisation of public enterprise and provision has been a key component. Paradoxically, although still unmistakeably neo-liberal in many respects, the response has been for immediate extensive state intervention, including public ownership, to rescue the financial system and, soon after, similar intervention across industry as a response to potential bankruptcy and job loss. The paradox of state intervention with a neo-liberal flavour is, however, far from new and reflects three crucial features of the neo-liberal period that mark the slowdown over the past thirty years following the end of the post-war boom. First, neo-liberalism has been based upon an inconsistent and shifting configuration of ideology, scholarship, policy in practice and representation of reality, with changes within and across these over time, place and issue. Second, underpinning neo-liberalism has been the process of financialisation, not only the phenomenal growth of finance within traditional and new financial markets themselves, but the extension of finance into ever more areas of economic and social reproduction from which it was previously absent or excluded as a profit-making venture, as in pensions, health, education, housing, construction, and so on. Third, neo-liberalism has been through two phases, the first being appropriately termed “shock therapy” although of wider applicability than to the economies of eastern Europe. The state intervened to promote private capital in general and finance in particular without too much regard to the consequences. By contrast, the second phase has been concerned in part to respond to the dysfunction that this has created and, at the same time, and more important, to continue to sustain the process of financialisation. The current crisis signifies the failure of this second phase. But the heritage of neo-liberalism has been to undermine the institutional capacity in government and ethos to develop and implement policy that insulates public provision from financialisation. This signifies a systemic change that cannot simply be remedied by a change in policy or a stronger degree of regulation of the financial sector. The challenge for the future, then, is not only to secure alternative policies for public sector provision but also to restore the capacity to formulate and implement them, not least against what will continue to be the powerful influence of finance.