Neoliberalism and Localism: A Reply to Gough Author(s): Adam Tickell and Jamie A.

Peck Reviewed work(s): Source: Area, Vol. 28, No. 3 (Sep., 1996), pp. 398-404 Published by: Wiley on behalf of The Royal Geographical Society (with the Institute of British Geographers) Stable URL: http://www.jstor.org/stable/20003719 . Accessed: 08/01/2013 16:14
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398

Comments

Gough J and EisenchitzA (1996) 'The constructionof mainstream localeconomic initiatives: mobility,
socialisation and class relations ' Economic Geography, 72, 2

HabermasJ (1976) The legitimation crisis(Heinemann, London) Harvey D (1982) The limitsto 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 Murray O'Connor C and Richardson F (1987) J (1973) 'Flexible The fiscal A (1994) J (1989) Local partnership specialisation 'Jungle and the unemployment Italy" crisis in Britain (Unwin Hyman,

London)
in the " Third crisis of the state (St Martins 'Capital and Class 33, 84-95 Press, New York) and global-local disorder' Area, 26,

Peck J and Tickell

law breaks out: neoliberalism

317-26 Tickell A andPeck J (1992) 'Accumulation, regulation and thegeographies 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 long system vividly and symbolically presaged the end of the Fordist-Keynesian 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 state, as the problems. Neoliberalism appears to have ushered in a Hobbesian 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 some of the more intrepid analyses of 'Post of (western) capitalism. Although Fordism ', ' flexible specialisation ', and ' flexible accumulation ' are already becom ing the future we never had, arguments that the local has become newly empowered and continue to gain ground. It is in this context that we wrote our self-consciously, 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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Comments 399

Eisenschitz and Gough 1993). For example, we fully concur that active local intensi collaboration both results from, and is enhanced by, (neoliberally-induced) 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 the power of the local. In addition, at times he appears this case at least-overstresses 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 amistake 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

definitionneoliberal.
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 ' the problems of it has had ' considerable successes ' (p 393) and overcomes ' While the logic of our argument is that neoliberalism cannot Keynesianism (p 393). lead to a renewed period of strong accumulation, Gough ismore equivocal:

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400 Comments

This form of regulation by value has powerful therapeutic effects for capitalism in a period of stagnation, even if itmay 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 Let us consider some of the evidence for the United Fordism-Keynesianism. Kingdom, where neoliberalism has failed in almost all of its stated goals. Take in the service company profits, for example. Although some companies-particularly seen their reported profits rise during the neoliberal years, sector-have 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 year setting a new post-war by 3 0 per cent and 5 1 per cent respectively-each 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 and job insecurity), leading to high levels of exploded in line with unemployment 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 benefit has fallen from around a quarter to a fifth of married men unemployment is now estimated average earnings (cited inHutton 1995), the cost of unemployment at just over 5 per cent of GDP (Unemployment Unit 1995). This, to reiterate, is the UK companies who increasingly have kind of ' therapy ' that the UK economy-and ill afford. to shoulder costs previously met through collective expenditure-can 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 cannot-work. While Gough maintains neoliberal solution simply does not-and was labour's excessive bargaining power over that the problem with Keynesianism

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Comments 401

capital, he fails to recognise that Europe's leading economy still maintains a strong with legally protected powers. In attacking our polemicised labour movement the defeats of labour. He is, critique of neoliberalism, Gough over-emphasises 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 to the growth of fascism. It was only when liberal stagnation and contributed 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, statement that 'Labour power can be shaken out of low profitability Gough's 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 prevents individ training (and in neoliberal conditions systemic underinvestment 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 is dangerously to cyclical imbalances and short-term programme susceptible 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 the potential for collaboration between localities criticism that we underemphasised the is also fair, but it should be seen in the context of other work highlighting local economic development and collaboration between degree of competition in northern England bodies et al 1995). (Dicken and Tickell 1992; Tickell 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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402

Comments

failure, but

their capacity

to do so is proscribed

by

the nationally

and

inter

nationallyprevailingneoliberalclimates.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 . . .. Local economic initiatives are severely limited by through spatial mobilities 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 to achieve the same effect. The local modernisation of industry is competition 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 state must at times choose capital is itself fragmented-the 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 appears to be confusing outcomes with 1992). In short, Gough For example, we did not claim, as he implies, that a strongly mechanisms. 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). of our However, Gough's objections are based on more than a misreading 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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Comments

403

threat of investment strikes should be enough to prevent us from attempting to create the necessity to capitalism of constructing a a better society, Gough underestimates new social order. Capitalism has proved to be so durable precisely because it has achieved something unthinkable to nineteenth century observers of liberal capitalism: era was it is hugely adaptable, and, dare we say it, popular. The Keynesian undoubtedly one inwhich 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 to Gough's ably), though under very different conditions 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

RegulationTheory'. Correspondingly,it is importantthat regulationtheory 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

regulationtheoryhas 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 structuresand socialpractices-which can stabilisetheaccumulation processandwhich provide a temporary resolutionto 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 anMSR, this marriage is never a completely harmonious one. MSRs represent temporary institutional ' fixes ',

theydo not neutralisecrisis tendenciescompletely.Eventually, the capacityof the MSR tomediate, accommodateand absorb these crisis tendencies is exceeded
through a process which might and the regime of accumulation Notes
1 These data differ somewhat to those Gough pursued cites for two reasons. strategies-and the discrepancy First, Gough refers to the G7 to countries-not early experiments all of which with fully neoliberal If nothing second because we have chosen between the data sets highlights

be characterised as ' institutional exhaustion ' will break down (Tickell and Peck 1995: 360).

highlight thepeaksand troughs,ratherthan lumpingtogetherthe end-periodof Keynesianismwith the

neoliberalism. else,

the validityof Disraeli's views about the (mis)useof statistics. 2 Incidentally, Gough's interpretation of our argumentat this point appears to be a littlemischievous.
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
for comments on an earlier draft of this paper and lain Murray We would like to thank Peter Dicken of the Unemployment Unit for his help in obtaining data. Adam Tickell would like to thank ESRC 'Regulating for funding his research fellowship, finance: the political geography of financial services ' Jamie Peck acknowledges the support of Harkness The (award number H2427001394). Fellowships, Fund (New York). The usual disclaimers Commonwealth apply.

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Comments

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