Neoliberalism and Localism: A Reply to Gough

Neoliberalism and Localism: A Reply to GoughAuthor(s): Adam Tickell and Jamie A. PeckReviewed work(s):Source: Area, Vol. 28, No. 3 (Sep., 1996), pp. 398-404Published by: Wiley on behalf of The Royal Geographical Society (with the Institute of British Geographers)Stable URL: http://www.jstor.org/stable/20003719 .

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398 Comments

Gough J and Eisenchitz A (1996) 'The construction of mainstream local economic initiatives: mobility, socialisation and class relations ' Economic Geography, 72, 2

Habermas J (1976) The legitimation crisis (Heinemann, London) Harvey D (1982) The limits to capital (Blackwell, Oxford) Ichiyo M (1987) Class struggle and technological innovation in Japan since 1945 (International Institute for

Research and Education, Amsterdam) Mandel E (1978) Late capitalism (Verso, London) Moore C and Richardson J (1989) Local partnership and the unemployment crisis in Britain (Unwin Hyman,

London) Murray F (1987) 'Flexible specialisation in the " Third Italy" ' Capital and Class 33, 84-95

O'Connor J (1973) The fiscal crisis of the state (St Martins Press, New York)

Peck J and Tickell A (1994) 'Jungle law breaks out: neoliberalism and global-local disorder' Area, 26,

317-26 Tickell A and Peck J (1992) ' Accumulation, regulation and the geographies of post-Fordism: missing links

in regulationist research ' Progress in Human Geography 16, 2, 190-218

Neoliberalism and localism: a reply to Gough

Adam Tickell and Jamie A Peck*, School of Geography, University of Manchester, Manchester M13 9PL

*Jamie A Peck is currently a Harkness Fellow (1995-6) at the Department of Geography and Environmental Engineering, Johns Hopkins University, Baltimore, Maryland 21218, USA

Introduction

It is now over twenty years since the oil shocks and the collapse of the Bretton Woods system vividly and symbolically presaged the end of the Fordist-Keynesian long boom. In the intervening period, neoliberal ideologues have relentlessly argued that Keynesianism collapsed because it was a drag on profits and that the solution is to return to a situation where the iron laws of the market determine both the price and the value of everything. Although most capitalist countries are significantly economically wealthier than they were two decades ago, a sense of insecurity pervades the capitalist world, as economic growth has become more fitful, as social divisions have intensified, and as even powerhouse economies like Japan have encountered problems. Neoliberalism appears to have ushered in a Hobbesian state, as the Fordist-Keynesian leviathan has given way to global and local relations that increasingly appear to be solitary, poor, nasty, brutish and short. There is, however, little unanimity about how we should interpret the contemporary political-economy of (western) capitalism. Although some of the more intrepid analyses of ' Post Fordism ', ' flexible specialisation ', and ' flexible accumulation ' are already becom ing the future we never had, arguments that the local has become newly empowered continue to gain ground. It is in this context that we wrote our self-consciously, and openly, polemical paper about neoliberalism and the relationships between different spatial scales.

Jamie Gough quite properly takes us to task on three major areas of our argument: our analysis of neoliberalism, our interpretation of local economic initiatives, and our ' wish-list ' for the future. It was part of our objective in writing the paper to flush these issues out. Let us begin by affirming that there are substantial areas of agreement between our position and Gough's (see also Gough 1991, 1992;



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Eisenschitz and Gough 1993). For example, we fully concur that active local collaboration both results from, and is enhanced by, (neoliberally-induced) intensi fied world competition (page 394). However, there are also substantial areas where our analysis diverges from his. In particular, perhaps as a rhetorical foil against our polemic, Gough over-estimates the functionality of neoliberalism for capital and-in this case at least-overstresses the power of the local. In addition, at times he appears to mis-specify our original argument.

Our position is that no useful theoretical or political objectives are served by systematically exaggerating the strategic importance of the local level initiatives.

While there may have been tactical reasons for the left to do this during the 1980s (see Graham 1992), it would be a mistake to confuse what was often a tactical retreat to localism with the interpretation that the local level was, and is, the best point of political entry. Without doubt, progressive local economic initiatives (LEIs) have

made some important contributions over the last two decades (a point acknowledged in our paper), but what we tried to underline was the need to understand the context in which these have been formulated. We argued that it is this context-and local-local relations-which has been neoliberalised, not that all LEIs were by definition neoliberal.

This is not just hair-splitting because it was a point central to our paper, and to Gough's response. In order to realise the full benefits of progressive LEIs, action at the extra-local scale is required. This will of course be difficult-and in many ways our ' wish-list ' for collaborative rather than competitive local-local relations was a wish-list. But it was also a political conclusion which flowed from our reading of the situation, rather than a reading of what is more or less feasible in the present conjuncture. Progressive LEIs may be realisable even in these straitened times, but this does not mean that they necessarily address the wider problem in anything like an appropriate way. On the other hand, Gough is correct to point to the ' political barrier ' which obstructs our ' strongly interventionist strategy ', that it would be 'fiercely opposed by most sections of capital' (p 396). Well, of course, most

progressive strategies are, but this is no reason to abandon the political aspiration (or the underlying analysis of the problem). To toss our proposal into the ' too hard '

box and resort to local training schemes and their like seems to be a defeatist response.

Relocating neoliberalism

It is difficult to reconcile Gough's claim that we failed to recognise that ' neo liberalism in fact does embody regulation and a form of order: regulation by value' (p 392; original emphasis) with our argument that 'neoliberalism seeks to replace formalised legal regulation with regulation by the market' (Peck and Tickell, 1994: 318-9). Our argument was not that all forms of regulation had ceased to exist, but that neoliberal market regulation is incapable of providing the foundation for a period of sustained accumulation of the sort witnessed during the long boom. Semantics aside, this appears to be the basis of Gough's disagreement with us: while we remain deeply sceptical about the functionality of neoliberalism for capital (let alone frightened about its social and environmental consequences), Gough suggests that it has had ' considerable successes ' (p 393) and overcomes ' the problems of

Keynesianism ' (p 393). While the logic of our argument is that neoliberalism cannot lead to a renewed period of strong accumulation, Gough is more equivocal:



400 Comments

This form of regulation by value has powerful therapeutic effects for capitalism in a period of stagnation, even if it may not, by itself, lead to a renewed long wave of strong accumulation (p 392)

Yet neoliberalism is the therapy of the quack doctor: impressive results can be achieved in the short-term, but only at a long-term cost to the patient's health. Only the most hardened advocate of the free market (or, perhaps, the most functionalist of Marxists) could interpret neoliberalism as an effective solution to the crisis of Fordism-Keynesianism. Let us consider some of the evidence for the United Kingdom, where neoliberalism has failed in almost all of its stated goals. Take company profits, for example. Although some companies-particularly in the service sector-have seen their reported profits rise during the neoliberal years,

manufacturing was hit by a real profit fall of 38% in the 1980-81 recession, with another fall beginning in 1989; there was no net increase in real profits between 1979 and 1989 (Johnson, 1991: 198, emphasis added).

As for the rate of profit, for UK industrial and commercial companies the neoliberal miracle propagated by Thatcher proved to be a chimera: averaging 10 per cent in the 1960s, it was at 7-8 per cent in 1978, 4 8 per cent in 1981 and at its peak in 1988 it

managed 9 1 per cent-before falling again (Johnson 1991).1 During the apotheosis of neoliberal economics, in 1980 and 1981, gross domestic fixed capital formation fell by 3 0 per cent and 5 1 per cent respectively-each year setting a new post-war record low (Cairncross 1992, Tables 3 1, 4 1, 5 1, 6 1) and although it rose by 24 per cent between 1979 and 1989, it had since fallen by 13 per cent (calculated for CSO, 1995a, Table 1-8). At 2 1 per cent per year, the rate of growth of real output per employed person between 1979 and 1987 was significantly higher than the 1 2 per cent per year growth between 1973 and 1979, but this was against a backdrop

of massive structural unemployment and was still lower than the 2 6 per cent achieved during the period between 1964 and 1973 when Fordism-Keynesianism's contradictions began to pull it apart (Supple 1994; see also Glyn et al, 1991).

Similarly, the neoliberal solution to the Keynesian problems of high taxation (p 393) has been equally unsuccessful. Tax cuts across the capitalist world have resulted in extra social spending (as, to take but one example, crime levels have exploded in line with unemployment and job insecurity), leading to high levels of government debt (effectively tax increases of future generations) and subsequent increases in tax levels. In 1978, 33 5 per cent of UK GDP was taken in taxes and social security contributions; by 1988 it had risen to 36 7 per cent; it currently stands at 37 5 per cent and is estimated to rise to 38 5 per cent by 1998-9 (Cairncross 1992; calculated from CSO, 1995b Tables 1 and 12; and Keegan 1995). In 1981, 1 4 per cent of UK GDP was spent on unemployed benefit (Supple 1994) and, while for

married men unemployment benefit has fallen from around a quarter to a fifth of average earnings (cited in Hutton 1995), the cost of unemployment is now estimated at just over 5 per cent of GDP (Unemployment Unit 1995). This, to reiterate, is the kind of ' therapy ' that the UK economy-and UK companies who increasingly have to shoulder costs previously met through collective expenditure-can ill afford.

This is not to argue that Keynesianism's contradictions did not manifest themselves in the early 1970s (on which see Tickell and Peck, 1992), but that the neoliberal solution simply does not-and cannot-work. While Gough maintains that the problem with Keynesianism was labour's excessive bargaining power over



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capital, he fails to recognise that Europe's leading economy still maintains a strong labour movement with legally protected powers. In attacking our polemicised critique of neoliberalism, Gough over-emphasises the defeats of labour. He is, of course, correct in his assertion that the post-war boom was ' built, in part, on the defeats of the labour movement' (p 393, our emphasis), but it is as well to remember that the liberal economic policies of the 1930s resulted in prolonged stagnation and contributed to the growth of fascism. It was only when liberal economics were abandoned after the war and a social democratic consensus forged, which gave labour rising real incomes which underwrote demand, that the earlier defeats of the labour movement could be built upon. Furthermore,

Gough's statement that 'Labour power can be shaken out of low profitability production, reallocated to more profitable lines, and made more geographically

mobile' (p 393) reads like a statement from a human capital theorist's handbook. The reality is altogether messier and more complex. Labour is more than just another commodity: its reallocation to more profitable lines requires investment in training (and in neoliberal conditions systemic underinvestment prevents individ ual employers from training because of the dangers of poaching), while labour remains relatively geographically immobile as a result of its fundamentally social nature.

Gough concludes his assessment of neoliberal economic policy with a recognition that neoliberal value relations are contradictory and problematic. We never suggested that this was not the case. In presenting the downside of the neoliberal experiment, our aim was both to counter the assumption that neoliberalism may be a precursor to a post-Fordist regime and to expose the flaws in the neoliberal model. While neoliberalism may be able to release the growth described by Gough (and also by us, Peck and Tickell 1995b), we remain convinced that

it cannot secure the medium-term reproduction of that growth. The neoliberal programme is dangerously susceptible to cyclical imbalances and short-term plundering, while positively eschewing those policies, institutions and economic norms necessary for ensuring continuous reinvestment in skills, technologies and innovations (Peck and Tickell 1994, 322).

Local economic initiatives: the place of the local

There are substantial areas in which our argument is in accord with Gough's. For

example, we agree that there have been substantial and non-trivial achievements of local economic initiatives, particularly in the formation of local consensuses and in the ideology of the local (see our work on the political economy of Manchester:

Cochrane et al 1996; Peck and Tickell 1995a; Tickell and Peck 1996). Gough's criticism that we underemphasised the potential for collaboration between localities is also fair, but it should be seen in the context of other work highlighting the degree of competition and collaboration between local economic development bodies in northern England (Dicken and Tickell 1992; Tickell et al 1995). Furthermore, part of Gough's objection to our paper appears to be based on a misreading of our argument: we did not intend to claim, as he implies, that all local economic initiatives are necessarily neoliberal (see Peck and Tickell 1994, 322-3) but instead argued that such initiatives exist within a wide context which affects what they can achieve. They may attempt to intervene to correct market



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failure, but their capacity to do so is proscribed by the nationally and inter nationally prevailing neoliberal climates.2

The reality, of course, is that we were arguing that local economic initiatives should be understood as relatively weak local solutions to extra-local problems. As

Gough has himself written with Eisenschitz:

Non-local capital, labour and product markets ... deflect local initiatives from their aims. In some cases the policy then achieves nothing; in others its benefits are reaped elsewhere. The converse of these failures are false successes achieved through spatial mobilities . . .. Local economic initiatives are severely limited by the lack of local state powers. While national policy can create jobs through

monetary and fiscal means, local economic initiatives have to resort to spatial competition to achieve the same effect. The local modernisation of industry is constrained by lack of powers over capital flows, over company and investment taxation, for compulsion on firms to train, and so on (Eisenschitz and Gough 1993, 183).

Gough is also correct in pointing out that the state cooperates with capital to secure accumulation and we did not mean to imply otherwise. But the state is both more and less than an executive committee for managing the common affairs of the whole bourgeoisie. The state is not a unified entity: it is subject to both externally- and internally-derived contradictory pressures and ' expresses all social struggles, needs and truths (Marx 1977, 29). This means that the state is not necessarily on the side of ' capital' and-as capital is itself fragmented-the state must at times choose between the interests of different capitals (as in the case of British finance and industry, see Ingham 1984). Although we agree with Gough that local state actions have had an important effect in reconstructing class relations favourable to socialised accumulation strategies (see Tickell and Peck 1994, 322-3), we still maintain that these can easily be undermined by aggressive extra-local forces, as the cases of the

Third Italy or Scandinavian social democracy make clear.

The status of our alternative

Following on from his reservations about our analysis, it is hardly surprising that Gough finds our ' alternative ' unconvincing. This is, it seems to us, partly because he has misinterpreted our argument. We did not present a policy programme to constrain uneven development, control the global financial system or prevent environmental catastrophe. Instead, we argued that the restoration of long-run accumulation requires regional, national and supranational cooperation, which, among other things, has these effects (Dunford and Kafkalas 1992; Leborgne and Lipietz 1992). In short, Gough appears to be confusing outcomes with

mechanisms. For example, we did not claim, as he implies, that a strongly interventionist strategy is necessary to overcome uneven geographical development (although it is the case that when national governments have implemented such policies there does tend to be an amelioration of social and economic divisions at the regional scale).

However, Gough's objections are based on more than a misreading of our argument: he believes that any attempt to re-regulate capital would lead to a ' radical repoliticisation of economic and social questions ' (p 396) and, as night follows day, investment strikes. Leaving aside the quite appalling political implication that the



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threat of investment strikes should be enough to prevent us from attempting to create

a better society, Gough underestimates the necessity to capitalism of constructing a

new social order. Capitalism has proved to be so durable precisely because it has

achieved something unthinkable to nineteenth century observers of liberal capitalism: it is hugely adaptable, and, dare we say it, popular. The Keynesian era was

undoubtedly one in which the excesses of liberal capitalism were checked, while some measure of social (re)distribution occurred. For many fractions of capital, too, this provided ' good business '. Profit rates rose strongly (and to some extent predict ably), though under very different conditions to Gough's rendering of violent regulation by value. The (neo)liberal path is not an inevitable one.

A final comment, if we may, on paradigm. Gough is accurate in claiming that our arguments are informed by our use of the regulation approach, yet he perhaps underestimates the capacity of what Jessop (1991) has termed 'Third Generation Regulation Theory'. Correspondingly, it is important that regulation theory is used critically, not as some unbending template, an approach we have always advocated (Leyshon and Tickell 1994; Peck and Miyamachi 1994). It is simply untrue that regulation theory has downplayed the fundamental contradictions of capitalism (see Swyngedouw 1996). It does, however, help us to explain how, in spite of these contradictions, capitalism has survived and adapted. The regulation approach usefully directs attention to the so-called mode of social regulation (MSR), and those regulatory processes-societal norms, state forms, economic and institutional structures and social practices-which can

stabilise the accumulation process and which provide a temporary resolution to the crisis tendencies which are seen to be endemic in the accumulation process. While a central claim of the theory is that sustainable growth is achieved through the functional coupling of an accumulation system and an MSR, this marriage is never a completely harmonious one. MSRs represent temporary institutional ' fixes ', they do not neutralise crisis tendencies completely. Eventually, the capacity of the

MSR to mediate, accommodate and absorb these crisis tendencies is exceeded through a process which might be characterised as ' institutional exhaustion '

and the regime of accumulation will break down (Tickell and Peck 1995: 360).

Notes

1 These data differ somewhat to those Gough cites for two reasons. First, Gough refers to the G7

countries-not all of which pursued fully neoliberal strategies-and second because we have chosen to

highlight the peaks and troughs, rather than lumping together the end-period of Keynesianism with the early experiments with neoliberalism. If nothing else, the discrepancy between the data sets highlights

the validity of Disraeli's views about the (mis)use of statistics. 2 Incidentally, Gough's interpretation of our argument at this point appears to be a little mischievous.

While he quotes us as claiming that localities have ' surrendered themselves to the global ', the original text read that ' A consequence of vigorous place-based competition is that localities must first surrender

themselves to the global ' (323). The different interpretative and political implications of the two

statements are clear: one implies a willing surrender while the other sees it as structurally constrained.

Acknowledgements

We would like to thank Peter Dicken for comments on an earlier draft of this paper and lain Murray

of the Unemployment Unit for his help in obtaining data. Adam Tickell would like to thank ESRC for funding his research fellowship, ' Regulating finance: the political geography of financial services '

(award number H2427001394). Jamie Peck acknowledges the support of Harkness Fellowships, The

Commonwealth Fund (New York). The usual disclaimers apply.



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Neoliberalism and Localism: A Reply to Gough