Imagine you are an academic-the kind who writes widely-cited books and op-ed pieces. You have spent years thinking about the forces driving modern capitalism; the risks and opportunities it presents, and how a new kind of progressive politics should respond. Then imagine that an old friend wins the election, the first time the left has won since the 1970s. He asks you to join the cabinet to help put your ideas into practice.
Meet Bob Reich: former US Secretary of Labour. When Bill Clinton became president in 1992 Reich was the closest thing to the "guru behind the man," having done most to shape the ideas which took Clinton from Little Rock to Washington. Ten days after the election, Harvard students who had fought their way on to Reich's course on US government-business relations discovered they were getting a new teacher. Reich was off to Arkansas to lead the economic side of the transition for the president-elect. He was confirmed as labour secretary two months later.
By mid-1993, Reich had left the administration. Or at least, most of his ideas had left it. Reich himself had to stick it out another three and half years, one of the few in the cabinet tactless enough to remind Clinton of the promise to "put people first," and not the bond market. In his recently published account of his experiences, Locked in the Cabinet, he compares himself to Bishop Berkeley's tree that falls in the forest where there is no one to hear it. "Day after day I chatter on about public investment (which Clinton had promised to increase by $200bn over four years), but I'm not heard by anyone around the table. Words come out my mouth, but I make no sound." Discussion on reducing the budget deficit continues.
It seems a cruel punishment: like taking a thirsty man to water, then making him watch as the water is methodically drained away. But Reich's witty memoirs betray little bitterness. He is self-deprecating, exaggerating perhaps his na?vet? about the way Washington works. He revels in his battles and feels proud to have made some difference to the administration's policies at the margin: the increase in the minimum wage passed last summer, or the modest school-to-work apprenticeship programme introduced in Clinton's first year. Mostly, however, there is Reich's deep sense of impotence in the face of the forces which drove the president further and further to the right.
Many in New Labour will be tempted to dismiss Reich's experience-and that of Clinton more generally-as irrelevant to the Blair administration. Britain in 1997 is not the US in 1992. For a start, Labour has an impregnable majority, within a political system which gives prime ministers raw power presidents can only dream of. There will be no mid-term rebellion by the voters, no House leader Newt Gingrich to throw Downing Street off course. As many have noted, Blair's reconstruction of his party goes far beyond anything Clinton ever managed. The president's "New Democrat" campaign of 1992 was just that, a campaign. The famous policy of "triangulation," devised by his adviser, Dick Morris, which put Clinton in the centre-ground between Democrats and Republicans in Congress, was an admission of his inability to bring his party with him. Blair has already gone beyond this. He has, as he likes to say, "got his betrayals in early"; if Labour governs further from its socialist roots than ever before no one can say they were not warned.
And yet, there are lessons here. For Reich's story is not simply one of old left versus new. He is portrayed now as the "lone voice of the left" in the first Clinton cabinet. And this is how he comes across in the book after the 1994 elections, as he urges Clinton to take a more populist line against the new Congress. He accepted the role of leftist sniper with good humour. "Some people want a smaller and more efficient government," the 4ft 10 inch cabinet member began a 1995 speech in Washington with Gingrich beside him. "Well, I challenge anyone to find a smaller and more efficient Labour secretary... I can get by on 800 calories a day. Try to match that, Newt." Yet the fact that Reich ended up carrying the torch for the old left merely reflects how far Clinton failed to shift the debate on to new ground, as he had intended.
But five years ago Reich was the pre-eminent "New Democrat." Union leaders were downright hostile when he was nominated to the cabinet, the first Democrat labour secretary with no ties to organised labour. In the end they supported Reich's appointment, but only because they thought it might be useful to have a friend of the president in the labour department.
Reich did talk about old leftist concerns: rising wage inequality, poverty, unemployment. But his analysis usually read like a Harvard Business Review article: indeed, was often just that. He argued that the global economy was changing the rules by which companies, governments and workers operate. This called for new solutions: not stronger unions but new models of employee-company relationships. Not jobs for life but lifelong learning and training. Not Reagan-style trickle-down economics, but not the same old "tax and spend" either.
In his first, fractious meeting with Lane Kirkland, an unreconstructed union leader who was then head of the AFL-CIO (America's equivalent of the TUC) Reich writes of privately yearning to tell him to "stop trying to protect yesterday's jobs." He felt caught between the conservative deficit hawks and the union leaders whose only answer to globalisation was old-style protectionism. In his book The Work of Nations Reich had argued that neither the "laissez-faire cosmopolitanism" of the right nor the "zero-sum nationalism" of the old left was acceptable in the new economy. Willy-nilly, increased global integration was "unravelling the economic bond" that used to exist between individuals living in the same city or country. He argued for a third kind of strategy to combat these centrifugal forces. This would be a "positive economic nationalism, in which each nation's citizens take responsibility for enhancing the capacities of their countrymen for full and productive lives, but who also work with other nations to ensure that these improvements do not come at others' expense." He did not use the word stakeholding, but he might as well have done.
Reich felt Clintonism ought to stand for just such an approach. In an interview for US Wired magazine last year he described it as "a new strategy of adjustment and adaptation. Embracing the opportunities of the new economy and investing in our workers so they can thrive in it; improving wages by upgrading skills; turning our social safety nets into springboards to better employment." This third way featured heavily in the rhetoric of Clinton's campaign for re-election. But the administration made little progress translating the agenda into reality. Public investment as a share of GDP fell to a 30 year low during Clinton's first term. And although the president continued to battle for spending in "priority areas" such as the Head Start pre-school education programme, his victories in these areas have consisted in reducing slightly the sweeping cuts proposed by the Republicans, the bulk of which he had already accepted. To all intents and purposes, Clinton ran last year, and has governed since, not as a New Democrat but a New Republican.
The question for the Blair team will be whether they can do better. Reich's book provides as good a warning as any as to how difficult that is likely to be.
The intellectual-if not political-starting point of the Clinton administration was certainly similar. Reich recounts a conversation with Clinton a few days after the 1992 election, when the president is describing the order of business during the transition: "We'll discuss all the big trade-offs-investment versus deficit reduction, private-sector growth versus public investment, the middle class tax break. I want broad-based support. Macroeconomics is important, but micro is critical: productivity, education, job training, management-labour relations."
Reich's doubts set in early. (Suspiciously so. One cannot escape the thought while reading the diaries, that he may have amended some of the entries to seem more prescient than he actually was.) "Faced with genuine evil or a national crisis of undisputed dimensions, Bill will rise to it," he writes, before the administration has even begun. "But in more common situations where the public is uncertain about the choices it faces... I worry that his leadership will fail. He'll become unfocused and too eager to please."
Reich shows how quickly Clinton's microeconomic agenda-also the only big area of difference between New Labour's economic policies and the Conservatives'-fell victim to the need to retain macroeconomic credibility through a reduced budget deficit. "Alan Greenspan, Chairman of the Federal Reserve, haunts every budget meeting, though his name never comes up directly. Instead, it is our 'credibility' with Wall Street... never before in the history of mankind have the feelings of a street had such decisive force."
Reich worries early on that in framing Clinton's economic policy objectives around the goal of reducing the budget deficit the administration is building itself a "conceptual prison." And, sure enough, by August 1993 the president has passed an economic package focused on reducing the deficit. "The conceptual prison is complete. In due time we will end up incarcerated in a 'balanced' budget. Republicans and conservative Dem-ocrats will see to it. And because we can't raise taxes any more than we've done already, a balanced budget will require massive cuts in spending."
Posed thus, it sounds, once again, like Reich's battle was that of old-style tax and spender against the free marketeers. No room for that in the New Labour party, one would think. Gordon Brown has committed the government to the Conservatives' almost impossibly tight public spending plans and no increases in personal taxation. There is room for raising more money at the edges, especially on "safe targets" such as pension funds and profit-laden public utilities. But the Clinton experience shows how easy it would be for even these tax hikes to get landed with the old Labour label. Clinton's 1993 economic package was rapidly painted as "old Democrat," even though it had delivered one of the largest reductions in the budget deficit in a generation. Clinton was attacked for having broken his campaign promise of a middle class tax cut. And the Republicans persuaded the public that it had increased their taxes, even though only the top 1.5 per cent of taxpayers were actually paying more.
That the Republicans managed to pull this off was a reflection on Clinton's communication skills. New Labour optimists will thus comfort themselves that Clinton's failures in his first two years had more to do with poor public relations than with the policies themselves. The list of mistakes is familiar: getting side-tracked by the gays in the military debate; the complex and unpopular health care reform proposals; Clinton's infamous haircut on the runway at LA airport. As the book reveals, Reich had his own smaller-scale disasters. When the health and safety department decided to levy a fine of $7.5m against the Bridgestone Tyre company for the appalling safety standards at its Oklahoma City plant, Reich staged a dawn-raid on the plant, announcing the fine with a full press corps in train. No sooner had he left the plant than Bridgestone's vice-president upstaged him with his own press conference: the Oklahoma City plant was shutting down because it was unable to comply with federal safety standards. Its 1,100 workforce were laid off, and the local newspapers leapt on Reich's stunt as Washington meddling at its worst.
Like many of those new to the White House, Reich discovered that one spends a lot more time reacting to events than "making decisions that change the nation." In June 1993 the labour department was once again in the headlines over Tommy McCoy, a 14-year-old "bat-boy" for the Savannah Cardinals baseball team in Georgia. Over-zealous labour inspectors had discovered that Tommy's duties-giving each player his favourite bat during summer evening games-involved working after 7pm on school nights. The Cardinals had been forced to fire Tommy rather than suffer a stiff fine. Only a last-minute reprieve by Reich turned a "Save Tommy's Job Night" rally of outraged citizens at the stadium into a "We Saved Tommy's Job Night."
But Reich's-and Clinton's-inability to do more than react to the rightward shift in the national economic debate went beyond poor press management. There was a more fundamental error, which Reich himself confesses to. Reducing the deficit should have been seen not as an end in itself, but as part of a more sweeping reform of the structure of government spending and investment. "We should have been talking about how to re-allocate public spending away from today's expenditures on defence or the undeserving beneficiaries of government largesse (social security, Medicare, farm price supports) and toward investments in our future productivity... I didn't do it. I succumbed to the deficit obsession... I allowed us to start building that conceptual prison."
This, surely, was the potential third way. Clinton could have set out to show that a New Democrat could manage the nation's public finances better than the Republicans without sacrificing his Democrat aims. This would have meant ruthless cuts in sacred public spending cows such as defence and corporate subsidies. And it would have meant progressive, longterm reform of the massive "entitlement" programmes, only a fraction of which go to those on low incomes, but which, together with debt interest, now consume around two thirds of US public spending. It would also have involved making powerful enemies on the right, something which Clinton proved extremely reluctant to do.
When the president announced a surprise, balanced budget plan of his own to match the Republicans' in the summer of 1995 Democrats were universally outraged. But he was right in principle. It prevented the Republicans from labelling him an old Democrat and enabled him to run for re-election on his skills in managing the economy. What was wrong was the substance of the balanced budget plan. He eventually signed up to a budget which increased defence spending, while leaving middle class entitlements and $100bn per year in absurd corporate subsidies broadly untouched. The spending reductions came, instead, through cuts in benefits for the poor and in core government spending on education and public investment, all of which account for a tiny fraction of total spending.
Clinton did soften the sharpest edges of the Republicans' budget proposals. And in the latter stages of the first term he allowed Reich to run with some of his populist ideas, such as a campaign against corporate sweatshops and setting up "one-stop" employment and training information centres for the unemployed. But Reich's ideas only appeared in Clinton's speeches when they passed muster in Morris's weekly focus groups of swing voters. Skill vouchers for the unemployed and a modest increase in the minimum wage passed the "swing test." Talk about rising inequality and fat cat corporate executives did not.
Could Clinton have shifted the debate further in the direction suggested by Reich and still won the election? Many reckon it was the economy wot won it, and it is hard to exploit the feel-good factor as an incumbent if you are reminding voters of the need to combat stagnant family incomes and rising job insecurity. One wonders whether Blair may find himself almost as constrained in his efforts to translate the New Labour campaign into a genuinely new philosophy of government. Dick Morris would probably consider Labour's constitutional reforms very promising. Enhancing individual political rights is a classless objective, less easily confused with old Labour attacks on the well off. But in many other areas Blair will face the same choice as Clinton: whether to govern for all, as he has promised, or "in the interests of the many, not the few," as he has also promised.
One lesson is clear from Reich's book. If Labour does not make the celebrated big choices, someone else will. Clinton dodged the social security issue in his first term and was able to turn middle class support for the programme to his advantage while campaigning against the Republicans last year. But keeping social security off the table in negotiating the balanced budget deal meant that Clinton had to accept further deep cuts in the kind of spending and investment he cares about. And the arithmetic of the baby boomers' retirement dictates that, sooner or later, social security will be reformed. Clinton has merely increased the chance that it, too, will be reformed in a profoundly regressive manner, for example through big reductions in the amount by which all benefits get uprated each year. This spreads the cuts evenly and so hurts poor pensioners the most.
A national pension system that will ultimately have to renege on its commitments to future pensioners because it has run out of money is not "social security." But neither is a system which, by privatising all individual pension schemes, leaves individuals at the mercy of the stock market and the economic cycle. A true New Democrat would devise ways to avoid both extremes. As the fiscal crisis nears, Republicans will stand a better chance persuading the voters that radical wholesale privatisation of the system is the only way out. And Clinton may well have lost the chance to put forward a radical alternative of his own, one which would keep the system solvent and its collectivist spirit intact.
For all the differences between the British welfare system and the American, New Labour will face a similar challenge trying to reform it. So far, the signs are that it will grapple with it more effectively than Clinton has. Frank Field and others whom Blair trusts have been thinking, much as Reich did, about ways to restructure pensions, benefits and taxation to help families and individuals negotiate the pitfalls of the global economy without putting the government in the red. And in exploring and enacting these solutions Blair will have considerably more room to frame the terms of the debate than Clinton ever did. But he is not predestined to succeed. The conceptual prison is still dimly visible: the prison of fearing to offend and, as a result, failing to defend the collectivist values which Blair insists remain at the heart of New Labour. Clinton got caught in his prison early and never escaped. After fighting so hard to liberate his party from 18 years in opposition Blair must now avoid being imprisoned in government.
