After neo-liberalism: back to Bell Labs?


In general I hate the term “neo-liberal” – as in the last decade it has become a fashionable way for some people on the left to say “things I don’t like” whilst giving their (often irrational) personal preferences a patina of intellectual credibility.

Glen O’Hara looks at the accusation that the last Labour government was “neoliberal” in some detail and I’m not going to reheat his arguments here, but as he says:

This rise in public spending was not only imagined in liberal terms—as a new contract between consumers and providers. For the emphasis on neoliberalism also misses the fact that the Blair agenda sought specifically to rebuild the public sphere around a new vision of a larger, more activist but more responsive and effective state. First through targets—and then, when they seemed not to deliver strong improvement, through decentralised commissioning and choice—the government sought to improve public-sector performance in a way that would be visible on the ground, and so maintain its relevance and political support.

But the term is not in itself meaningless – but personally I find it much more useful as a tool of analysis when applied to how governments across much of the western world have approached the private (and not the public) sector over the last forty years. For sure there has been privatisation too – expanding the role of the private sector, but certainly in the UK the long-term picture has not been a story of shrinking state, but of a state spending money in different ways. See the chart which plots the share of public spending as a proportion of GDP since the end of the 1950s – and notably this does not include the massive covid-19 driven spike of public spending in 2020 and 2021.

What has diminished is both state-ownership and (much more more importantly, I believe) state-partnership with key economic sectors that provide private goods and services – until, perhaps, that is, today (as I discuss below).

As my example (from the US but the argument applies more widely), let me look at AT&T in the United States. Today what was once the American Telephone and Telegraph Company is still the world’s largest telecommunications concern, but it’s a very different beast to the company of that name of forty years ago. Now it competes in a cut-throat global market, then it was a highly-regulated, privately-owned classical monopoly utility.

No doubt its break-up from 1984 onwards meant Americans got smaller phone bills (if they use land lines at all) but what has the overall balance for society been?

Reading Brian Kernighan’s UNIX: A History and a Memoir and the earlier The Idea Factory you get the impression that subjecting corporates to cut-throat competition has not all been about wins for the consumer. The “Bell System” monopoly paid for a massive research operation that delivered the transistors that made the digital age possible and the Unix that now dominates, and an awful lot else besides.

AT&Ts share holders didn’t repeat the massive windfalls seen by people who invested in Amazon twenty years ago but their stocks paid a consistent dividend and the economy in which they operated also generally grew steadily. Investors got a stable return and AT&T also had the ability to risk capital on long-term research and development.

The neoliberal revolution in the private sector has indeed given us Amazon (and Apple) and with it massive disruption that often is beneficial to humanity as a whole (think of the evaporation of poverty in much of east and south east Asia). But has it delivered fundamental advances in human knowledge of the scale and power that the older regulated capitalism did? I feel less than fully convinced.

The counter-case is, of course, in the field of bio-medicine. The enormous productive power that a globalised capitalism possesses is, even as I write this, churning out the product of the most spectacular scientific effort in all human history – vaccine against covid-19. No previous human generation has been able to do what we now believe we – for very good reasons – can: meet a newly emerged global epidemic in open combat and win.

But the story of the vaccine is also a story of partnership between state and capital. Governments have shared risk with the pharmaceutical companies but competition has also played its part – to me it suggests a future beyond a neo-liberal approach to the private sector in key industrial areas. The state should not be trying to pick winners but sharing risks and building an economic eco-structure where a balance of risks and rewards means that the aim is not to find the next 10000% return on investment but where good research can be allowed to thrive.

I know this is in danger of sounding very motherhood-and-apple-pie and we should be weary of just propping up existing market giants because they happen to be market giants. So let me also make a suggestion – imagine if the UK government decided that, instead of spending large amounts for ever on office suites from large software houses that are installed on million upon million of computers in schools, hospitals and police stations, it indicated it was willing to pay a premium price for a service contract, for say 5 – 7 years for someone who could turn one of the existing free software office suites into a world-class competitor and, more than that, it was willing to provide capital, as an active investor, in the two or three companies that could come forward with the best initial proposals?

The private sector would be shouldering much of the risk but would be aiming for a good reward (while free software’s built-in escrow mechanism would also mean that the private contractor couldn’t just take the money and ‘steal’ the outcome). Ultimately citizens (globally) could expect to see real benefits and, of course, we would hope any current monopolist would see competition coming and be incentivised to innovate further.