ADIER NOLASCO MARINA, Presidente Municipal Constitucional de Villa Corzo, Chiapas, en

Third Way consciously demarcates itself from the political economyxv associated with classical social democracy. The mixed economy as a strategy for governing the economic under classical social democracy is manifestly abandoned as being outmoded for contemporary times. Following the election defeat of 1987 the Labour Party under Neil Kinnock pushed forward a process of policy reform, initiating seven review groups. The outcome of this process, published under the title Meet the Challenge, Make the Changexvi, ended the party’s commitment to unilateral nuclear disarmament, high taxation and Keynesian inspired forms of nationalisation. Deeply significant in this policy review was the movement of the party’s outlook on the economic to one in which ‘the market had a vital role to play.’ This could be encapsulated in the idea of moving from the focus placed on the redistribution of wealth by Labour’s post-war thinkers to a concern for

wealth creation. This shift was to be a foundational aspect of New Labour’s approach to the economic domain, the market was to be enthusiastically embraced, but in conjunction with other imperatives focused on the successful conduct of the economic. This additional set of imperatives serves to set the new economics apart from the form of political economy adopted by the New Right. The restructuring of the economic sphere by the New Right, following 1979, can be thought of as operating in two simultaneous modes. There was a radical edge leading the rolling back of the institutional and regulatory

apparatus that had evolved to support the post-war Keynesian welfare

settlement, together with its replacement by a regulatory, infrastructural and cultural apparatus to support the normalisation of market forms. Influenced by the Chicago school of economics the Thatcher government was determined to advance individual and entrepreneurial freedom, free trade and free markets, and to overcome inflation by controlling the money supply. Ramsay (2002:40) lists reforms to the financial sector by the Thatcher government between 1979 and 1982 as including:

• The abolition of exchange rate controls

• Changes to the regulation of building societies, leading the way to their conversion to banks, and the credit boom of the 1980s

• A liberalisation of restrictions on bank lending

• A liberalisation of the regulations governing the ratio of bank lending to the possession of a range of liquid assets

New Labour’s understanding of what is to be governed, and to what end, within the economic sphere demonstrates a fundamental revision from the political economy associated with Old Labour, alongside a continuity with the

foundational form of economic rationality adopted by the New Right. In common with the New Right there is a reading of the economic in which the role of the State is to govern by maintaining the regulatory and institutional framework essential for the operation of the market. This posture of the State would provide business with the conditions to operate successfully in a climate of global competition and so produce the wealth and prosperity that was needed. However, an additional set of significant imperatives serves to mark the new economics as distinctive from the neoliberal tenets enthusiastically enacted by Conservative governments following 1979.

In governing the economic the Third Way programme of New Labour has been influenced by a set of essential concerns that have arisen from adaptations of endogenous growth theory (Dolowitz, 2004 and Wiggan, 2007). The fundamental idea driving endogenous growth theory (Romer, 1990) is that long run economic growth when considered in terms of income for each individual is dependent upon investment decisions. This is in contrast to more traditional explanations of growth resulting in exogenous (originating from outside the system, or due to external factors) changes in for example, technology. Endogenous growth theory supports a view that policy measures do in fact have an influence on the growth rate of an economy in the long-run. For example, State investment decisions on compulsory education, in higher education and research and development, and regulatory and supply-side policy, can provide incentives for innovation and increase growth rates. This form of knowledge has been

integrated into the rationality that has come to encompass New Labour’s understanding of how the economic domain should be governed. There is an active role for the State in an idealised Third Way schematic of governing the economic in pursuit of wealth creation. This is in contrast to a more passive role of maintaining an appropriate legal, regulatory and financial regime, the State being charged with the limited task of guaranteeing the conditions necessary for markets to operate, characteristic of the New Right’s form of neoliberal

The new economy - like the new politics – is radically different. Services, knowledge, skills and small enterprises are its cornerstones. Most of its output cannot be weighed, touched or measured. Its most valuable assets are knowledge and creativity. The successful

economies of the future will excel at generating and disseminating knowledge, and commercially exploiting it… as the Comprehensive Spending Review demonstrated with its significant shift of resources to education and health -£40bn over three years – within a disciplined overall spending total. Moreover, micro-policy- education, training, access to capital and labour markets, product market competition, investment in infrastructure and science and technology- holds the key to long-term prosperity… (Blair 1998:8)

Fundamentally the political economy of Third Way fits within the boundaries of advanced liberal forms of governmentality (outlined in chapter 2) focusing on the imperative of governing the economic space informed by an analysis of economic globalisation, a commitment to knowledge capitalism (Peters, 2006) in a climate of global competition and, in particular, a response informed by a rationality shaped by what seems to be on offer to the State through an endogenous growth strategy. This rationality of the ‘investment state’ has shaped the policy system under New Labour, influencing actions and conduct at the levels of initiation, formulation and implementation. What is noteworthy about this aspect of government rationality is its movement beyond the economic, its claims to order multiple areas of public policy, in particular education, employment and welfare, in pursuit of success in governing the economic domain.