Center for European Studies Working Paper Series #145 (2007) Socializing Capital, Capitalizing the Social: Contemporary Social Democracy and the Knowledge Economy1 by Jenny Andersson Institute for contemporary history Södertörn University College 14189 Huddinge, Sweden [email protected] Abstract This paper analyzes the Third Way’s relationship to the knowledge economy, and the way the Third Way’s understanding of the knowledge economy leads to a reinterpretation of fundamental postulates of the Left in relation to capitalism. The paper argues that Third Way ideology is informed by a discursive logic of capitalization, a logic whereby social democracy identifies human potential – human knowledge, talent, creativity – as economic goods and ultimately new forms of capital. It insists that the Third Way is not neoliberal, as suggested by much research on the Third Way. The paper concludes that while the Third Way draws on fundamental continuities in the social democratic project, it nevertheless breaks with many of social democracy’s historic articulations in critique of capitalism, since these are transformed instead into arguments in favor of capitalism and are thus drawn into the process of capitalist improvement. The paper looks into this tension by analyzing particularly the notions of conflict, the Third Way’s notion of public good, and its articulation of culture. 1I am grateful to all at the Minda de Gunzburg Center for European Studies at Harvard and especially Peter Hall and Andrew Martin for my time at the Center and for constructive criticism of my work. This paper was presented to the conference “Debating the Knowledge Economy” at the Institute for Advanced Studies at Lancaster University in August 2006 and I thank the participants and particularly Paul Thompson for their input. 1 Introduction Much attention has been devoted, in the last years, to the Third Way, particularly its Anglo- Saxon form, but substantially less to its place in the history of social democracy. The first wave of studies of the Third Way saw it as neoliberal, as a continuation of significant elements of Thatcher- ism, regarding the economy, industrial relations, and social justice.2 I suggest, rather, that the Third Way draws on fundamental continuities in the social democratic project, continuities that are not unproblematic, however. Particularly, I am concerned in this paper with the Third Way’s relation- ship to the knowledge economy, and the way the Third Way’s understanding of the knowledge economy leads to a reinterpretation of fundamental postulates of the Left around capitalism. The knowledge economy has been a central element of the Third Way, almost to the point of becoming its raison d’etre.3 Just as earlier processes of social democratic revisionism took place around processes of industrial transformation, so the Third Way can be understood as the rearticu- lation of a set of ideological postulates in relationship to its conception of a new economic and so- cial order. Some of its articulations are indeed strikingly similar to social democracy’s 1950s and 1960s modernization discourses around the industrial society. New Labour’s modernization narra- tive has striking similarities to the “White Heat” of the Wilson era, which was also a discourse con- strued around the idea of adaptation to a new technology-intensive industrial economy.4 From the mid-1990s, the notion of the knowledge economy has occupied a similar function in social democ- ratic discourse, as the corner stone of a modernization narrative around information technology, education and lifelong learning, innovation and entrepreneurship. Just as social democrats in the 1950s and 1960s saw the industrial economy as the promise of an affluence that would lead away from class conflict and poverty, the Third Way, from the mid 1990s, saw the knowledge economy as a new stage of capitalism that promised “prosperity for all.”5 Moreover, the knowledge econo- my provided a new progressive narrative around questions of social justice – since social exclusion and the unequal distribution of opportunity is understood as a problem for the development of the human capital that is at a premium in the new economy. The knowledge economy also pinpointed the role of public intervention for education and new information technologies. It was thus, by a 2Influential studies of this first wave were Alex Callinicos, Against the Third Way (Cambridge, U.K.; Malden, MA: Polity Press; Blackwell, 2001), Steven Driver and Luke Martell, New Labour: Politics After Thatcherism (Cambridge: Polity, 1998), Stuart Hall, "The Great Moving Nowhere Show," Marxism Today (1998), Colin Hay, The political economy of New Labour (Manchester: Manchester University Press, 1998), Richard Heffernan, New Labour and Thatcherism: Political change in Britain (Basingstoke, New York: Macmillan; St. Martin’s Press, 2000). For Sweden see J. Magnus Ryner, Capitalist restructuring, globalisation and the Third Way: Lessons from the Swedish model, Routledge/RIPE studies in global political economy 5 (London: Routledge, 2002). 3The meaning of the concept the knowledge economy, and its relationship to other related terms such as post-Fordism, the information age or network production. is all but clear. As Bob Jessop suggests, the idea of a knowledge-based economy has emerged in the post-Fordist world as a pervasive metanarrative, while its empirical foundations in changing economies are still uncertain. It is not my intention here to try to clarify it. Suffice it to point out that the concept of the knowledge-based economy clearly has a productive function in contemporary politics, as a pervasive future vision of a new capitalist era. To this extent, the notion itself and its links to new forms of economic and social governance are worthy of our attention. See Bob Jessop, The future of the capitalist state (Cambridge: Polity, 2002), and Fred Block, Postindustrial possibilities: a critique of eco- nomic discourse (Berkeley: U. of California Press, 1990). 4Ilaria Favretto, The long search for a Third Way: the British Labour Party and the Italian Left since 1945, St. An- tony’s series (Basingstoke: Palgrave Macmillan, 2003). 5See Tony Blair, New Britain. My vision of a young country. (London: Fourth Estate Limited, 1996), Tony Blair, The Third Way: new politics for the new century (London: Fabian Society, 1998), White paper DfTI, “Our Com- petitive Future. Building the Knowledge Economy,” (1998), Charles Leadbeater, Living on Thin Air. The New Economy. (London: Penguin, 2000). 2 nascent new center-left from the mid 1990s on, seen as offering a way out of the neoliberal “there is no such thing as society,” while also providing a reason for breaking with the legacies of Fordism and the mechanistic notions of change of the old Left.6 There is another reason why contemporary social democracy is so fascinated by the knowl- edge economy, and it’s that the knowledge economy seems, to the optimists, to be a nicer kind of capitalism, a more social economic order, one that draws on human potential instead of destroying it. As the French economist Daniel Cohen has argued, the knowledge economy could be the era of human capital, a fundamentally more humane variety of capitalism.7 This struck a cord with a re- invented social democracy looking for new ways of working with capital. To the British Chancellor of the Exchequer Gordon Brown, in texts from the mid 1990s when New Labour was taking form, the knowledge economy was an “opportunity economics,” a new economic egalitarianism that was truly dependent on “exploiting the potential of all.” It is people’s potential that is the driving force of the modern economy, and it’s the capacity to enhance the value of labor through that which will make a modern economy succeed or fail. The challenge to social democratic politics, then, is to “ensure labour can use capital to the benefit of all,” rather than “let capital exploit labour for the benefit of the few.”8 To Brown, this is the point of departure for a new relationship between capital and labor. The knowledge economy signifies the final reversal of Marx’s power relationship between labor and capital as the skills revolution makes capital a mere commodity and puts labor in control of the production of value. The knowledge economy, then, is the promise of socialism. The important conclusion that we reach is that the Left’s century old case – that we must enhance the value of labour as the key to economic prosperity – is now realiz- able in the modern economy. If this analysis is right, socialist analysis fits the economic facts of the 1990s more closely than those of the 1890s.9 This analysis of a new power balance between labor and capital stemmed from the idea, in- spired by neo-endogenous growth theory, that since knowledge is a kind of capital within, located within the worker, it also makes the worker the owner of his or her capital, and no longer subject to other logics of capital. This is a mindboggling suggestion to orthodox socialist thinking. If capital is within us, then how can it exploit us? And if, as Brown suggested, capital is no longer an exploiting force but a force that, in the hands of a labor government, works for the emancipation of labor, then what is capital? In Brown’s words, labor is now free to exploit the capital put into the creation of knowl- edge in order to enhance its own value, while the role of financial capital has been reduced to “a commodity like plant and machinery rather than the directing force of the economy.” Politics of partnership, the Third Way’s emphasis on bringing the market into the public sector, are thus a new mixed economy, a new way of exploiting capital for the benefit of all. 10 To that extent, Third Way discourse contains a notion that might be described as the end of capital, or at least the end of the old labor/capital controversy and its relevance for social democ- ratic politics. This was a central postulate of New Labour, starting from the rewriting of Clause 4 in 1994, and the rejection of labor/capital conflict is a central claim of the Third Way’s appeal to a po- 6In the UK this theme was launched by the New Times debate around Marxism Today, Stuart Hall and Mar- tin Jacques, eds., New times (London: Verso, 1989). 7Daniel Cohen, Nos temps modernes (Paris: Flammarion, 1999). 8Gordon Brown, Fair is Efficient, vol. 563, Fabian Pamphlet (London: the Fabian Society, 1994a), Gordon Brown, “The Politics of Potential. A New Agenda for Labour,” in Reinventing the Left, ed. David Miliband (Cambridge: Polity press, 1994b). 9Brown, “The Politics of Potential,” p. 116. 10Ibid. 3 litical space beyond conflict and antagonism.11 This claim went hand in hand with the presump- tion, or perhaps aspiration,12 that the knowledge economy holds a promise for emancipation, and that an economy driven by potential will also bring the realization, finally, of the old socialist no- tion of “freeing potential.”13 Two important political conclusions were drawn from this in the mid- 1990s, which have formed the basis particularly of New Labour’s political strategy, but that also inform, with differences, other social democratic parties.14 The first one is the idea that the role of politics in the knowledge economy must be to strengthen the strategic role of human capital, i.e., labor, essentially by investing in it. This has given rise to a new political economy, which in con- trast to neoliberalism emphasizes the role of the state and the importance of public intervention for the creation of prosperity. The second conclusion, however, is one that follows from Brown’s sug- gestion that the knowledge economy is somehow detached from the logics of capital accumulation and works for the emancipation of potential, a postulate which has lead to a thorough rethinking in social democratic politics of problems previously associated with structures of capitalism. An opportunity economics would be one that frees opportunity for individuals to grasp, and gives them the means with which to realize their inherent potential. The Third Way’s notion of emancipation is this notion of everybody’s freedom to fully realize their potential – of “bridging the gap between what we are and what we have it in us to become.” However, emancipation does not seem to be the dominant feature of what the knowledge economy brings. There is sufficient cri- tical analysis of the post-Fordist production order to point to the possibility that, while it might hold the potential for emancipation for some, it also brings about new forms of exploitation for others, a relationship that is obvious and yet still poorly understood.15 The tension between eman- cipation and exploitation in the knowledge economy can be thought of in terms of the dilemma set up by the French economist Daniel Cohen – if the era of human capital is, on the one hand, a prom- ise of a more humane form of capitalism, it also brings with it, on the other, a highly economistic understanding of human potential and human beings as a form of capital.16 Conceivably, rather than representing the final end to the labor/capital conflict and hence the decommodification of all, the knowledge economy could be the ultimate commodification, as forms of good hitherto seen primarily as non-economic resources (culture, talent, knowledge, social relations) become forms of capital. The very notion of human capital is an illustration of this logic of capitalization in the 11See David Coates, Prolonged labour. The slow birth of New Labour Britain (Hampshire, New York: Palgrave Macmillan, 2005). Chantal Mouffe, “Politics without adversaries,” Soundings. 12I think the term aspiration, in an otherwise critical paper, is important. A crucial feature of Third Way ide- ology is that it brings together many incoherent and even contradictory standpoints. These points of tension are, arguably, the points of future political change. 13See particularly Brown, “The Politics of Potential.” 14See Jenny Andersson, “The People’s Library and the Electronic Workshop: Social democracy and the knowledge society,” Politics and Society 34, 3 (2006). 15Arguably, the social sciences have so far not offered a lot in terms of helping us understand the social hier- archies of the knowledge society. The 1970s debate on the two-tier society, a debate that followed post- Fordism, seems to have given way to cultural theories of social exclusion and descriptions of the spatial or- ganization of the network society. I would refer the reader to the works of the American sociologist Richard Sennett, one of the long-term critics of the social and cultural impacts of the knowledge economy, Richard Sennett, The corrosion of character: the personal consequences of work in the new capitalism, 1st ed. (New York: W.W. Norton, 1998); Richard Sennett, The Culture of the New Capitalism, The Castles lectures in ethics, politics and economics (New Haven London: Yale University Press, 2006); Richard Sennett, Respect: the formation of character in an age of inequality (London: Penguin, 2004). See also D. Barney, Prometheus Wired, The hope for de- mocracy in the age of network technology (Chicago: University of Chicago Press, 2000). The newly published French collection, La nouvelle critique sociale, La république des idées (Paris: Seuil/le Monde, 2006), contains an interesting debate on social effects of the new economy. 16Cohen, Nos temps modernes. 4 knowledge economy. How does social democracy deal with this dilemma? There are many ele- ments to Third Way policies that suggest that they are ultimately more about extracting the value of this capital than they are about controlling and disciplining markets and capitalist structures. It thus seems relevant to ask the question, does contemporary social democracy have a critique of knowledge capitalism or, rather, a theory of knowledge capital? Clearly, contemporary social democracy does not speak of capitalism as a system of the ex- ploitation of labor in the interest of capital, or at least, New Labour doesn’t, while there are varie- ties of this in social democratic discourse. The Third Way denies, in fact, as we have seen in the Brown quote, that a distinction between labor and capital can be made in knowledge capitalism, since labor is capital. Rather, it appeals to a higher common good in terms of “prosperity for all.” It lacks, at least in its British form, a debate on capitalist structures, on the dimensions between emancipation and exploitation in the knowledge economy, a notion of conflict. It does have, how- ever, a persuasive and at times authoritarian discourse of what drives the production of value in the knowledge economy. This new growth discourse is influenced by new growth theory and sup- ply-side economics, and construed around a plethora of new metaphors of capital (skill, knowl- edge, social and human capital, potential, talent, creativity), metaphors that bring human dispo- sitions and social relations directly into the process of the production of value. When contempo- rary social democracy defines the socialist project as freeing the potential of all – such as socialists have traditionally defined the socialist project - this seems to contain a fundamental ambiguity, between bringing out those aspects of the knowledge economy that could have a deeply emancipa- tory and progressive bearing, and an infinitely economistic logic of turning human potential into economic capital.17 I argue in this paper that Third Way ideology is informed by a discursive logic of capitali- zation, a logic whereby social democracy identifies human potential – human knowledge, talent, creativity – as economic goods and ultimately new forms of capital, indeed, as the raw material of the new economy. This is not a new phenomenon to social democracy. Processes of social democ- ratic revisionism, throughout history, are to a large extent about reconceptualizations and new definitions of what capital is and what creates value.18 Social democratic growth discourses have always been concerned with the rationalization and utilization of labor. It is thus extremely impor- tant to thread very carefully around the issue of the Third Way as a radical break or continuity with “old” social democracy. While I argue that the Third Way draws on fundamental continuities with “old” social democracy, my argument is nevertheless that these continuities, in the Third Way, seemed to be turned on their head. The Third Way breaks with many of social democracy’s historic articulations in critique of capitalism, as notions of human potential, culture, education, public good, notions that in the history of social democracy have referred to social values, in con- flict with the idea of profit, become, rather, arguments in favor of capitalism and thus drawn into the process of capitalist improvement. The paper looks into this tension by analyzing particularly the notions of conflict, the Third Way’s notion of public good, and its articulation of culture. Throughout, I base my argument on New Labour discourse. The Neoliberalization of Social Democracy? 17See Michael Freeden, “The ideology of new labour,” Political Quarterly 70, 1 (1999). 18As Ben Fine points out, what is at each point in time considered capital or value-creating activity is not a given; rather this changes with the discursive struggles that accompany periods of economic transforma- tions. B Fine and F Green, “Economics, social capital, and the colonisation of the social sciences,” in Social capital. Critical perspectives, ed. Schuller, Davon, and Field (Oxford: Oxford University Press, 2000). See also Block, Block, Postindustrial possibilities: a critique of economic discourse. 5 This difference between a critique of capitalism and a discourse of improvement or indeed a theory of capital in the Third Way can be brought back to tensions deep in the history of social democracy. While social democracy has, throughout its history, incorporated strands of utopian critique and radical alternative, it is not an anticapitalist movement, and it has never been. Social democracy is a movement torn between its critique of capitalism and its emphasis on gradual ame- lioration and improvement.19 What distinguishes the Third Way from “old” social democracy is thus not, as many observers have suggested, a sudden acceptance of market forces, nor a new pro- capitalist stance; rather it is the way that it gives new meanings to its historical articulations around capitalism in relationship to new ideas of what drives prosperity in the new economy. In this process, I argue, the Third Way turns arguments that, in the history of social democracy, were arguments in critique of capitalism, into arguments for capitalist improvement. The tension between radical, utopian critique of capitalism and gradual improvement can be thought of in terms of another, related dilemma in the history of social democracy, which also takes on a new relevance in the Third Way. This is the tension between what I call socializing capital and capitalizing the social, between social democracy’s desire to intervene into capitalist structures in reaction to their social effects, and its equally important strand, through history, of using social intervention to create economic efficiency and of thus embedding capitalism in society and social relations.20 Social democracy is a historical agent that throughout the history of welfare capitalism has intervened into the relationship between the economic and the social, mediating it and arbitrat- ing it, thereby also defining what constitute economic and social activities and thus also redrawing the boundaries between them; indeed, constructing the Economic and the Social as fields of action, existence and intervention. Its various modernization and rationalization discourses, through his- tory, have all been concerned with the rational organization and restructuring of this relationship. The Third Way does so again, with particular reference to the knowledge economy. Let’s consider, for the sake of this argument, that the Third Way is neoliberal, which was the suggestion of the first wave of studies on the Third Way. The point of departure of the Third Way project was, as we know, the end of Keynesian demand management and national economic policies in a world dominated by globalization. In contrast to the way that “old” social democ- racy’s Keynesian policies were focused on controlling capital within the boundaries of the nation- state through macroeconomic policies and demand management, a central tenet of the Third Way is the idea of globalization and of an open economy, where capital can not be controlled by the boundaries of the nation-state and where the scope of macroeconomic policies is circumscribed by the constant flux of capital.21 The Third Way, since the mid-1990s, can thus be described as a politi- cal project based on a rethinking of the nature of contemporary capitalism and the logic of capital, as well as of the role of state intervention and the scope of economic policies in this new world. This rearticulation of politics around the imperative of globalization is what has often been de- scribed as the neoliberalization of social democracy. In the British context, New Labour’s economic policies have been seen as the continuation of Thatcherism, because of their fundamental acceptance of the monetarist framework, their rejec- 19See Peter Beilharz, Labour’s Utopias: Bolshevism, Fabianism, social democracy (London: Routledge, 1992), Don- ald Sassoon, One hundred years of socialism: the West European left in the twentieth century (London: Tauris, 1996). 20For historic tensions in the social democratic project see Geoff Eley, Forging democracy. The history of the left in Europe 1850-2000. (Oxford: Oxford University Press, 2002), Sassoon, One hundred years of socialism. 21Hay, The political economy of new labour. Colin Hay and Matthew Watson, “The discourse of globalisation and the logic of no alternative: rendering the contingent necessary in the political economy of New Labour,” Policy and Politics 31, 3 (2003). Wickham-Jones, Mark, “Recasting social democracy.” 6 tion of collective action, and the refusal to tear up the changes in labor law introduced by That- cher.22 Colin Hay put it most critically when he described New Labour’s political economy as “studiously courting capital,” a “reconception of the parameters of political possibility in terms of the imperatives imposed by economic integration, financial liberalisation and heightened capital mobility – in short globalisation.”23 Based on the political presumption that capital is in a funda- mentally uncontrollable liquid state, what is left in terms of macroeconomic strategy is, in Hay’s terms, to accommodate to the perceived interest of capital for political, economic and social sur- vival. But the Third Way also contains a strong rejection both of the social philosophy of neoliber- alism and the economic doctrine of monetarism, as if not entirely ideologically misconstrued at least economically inefficient in an era driven by skill, knowledge, and information, all drivers of change that are understood to require a rethinking of the very scope of politics, similar to the re- definition of politics carried out by neoliberalism.24 As Colin Hay has shown, the Third Way is a political economy based on the assumption of the reality of globalization, and accordingly it re- defines the role of social democratic politics to act for the creation of wealth within the parameters set by globalization. Since capital is uncontrollable, what government must do is to provide the sta- ble framework and infrastructure so as to attract capital and inward investment.25 The other leg of this strategy, however, is to increase the value of the capital within its borders, that is, the human capital or the potential of the people. Attracting foreign investment has a parallel here in those labor-market policies, education policies, or asylum policies which attempt to attract the “best brains.” If the macro-strategy can be described, then, in Hay’s terms, as a courting of the liquid financial capital of the information age, the micro-strategy could be described as a capitalization of those human, social and cultural resources that are defined as productive capital; subject, in Third Way discourse, to investment and rationalization. We can bring this macro/micro strategy back to Gordon Brown’s statement, that in an economy where capital moves “at the press of a key,” the fundamental resource of the nation-state is the potential and talent of its people, the “brainpower” that makes up the skills revolution.26 In a matter of speaking, the earlier attempts of labor to con- trol capital have been replaced, in Third Way policies, by the attempts to control the capital em- bedded in labor. New cultural modes of governance aim at creating this capital, change the values and dispositions within knowledge workers, “build human capital.” This is the politics of intan- gible capital – a macro-strategy based on the volatility of financial capital, and a micro-strategy based on the equally intangible capital within us. This is very far from neoliberal. The Third Way is, I suggest, better understood as a political economy based on an understanding of knowledge as a specific form of capital embodied in peo- ple, and the creation of new means of economic governance to bring it out. These new means of governance go much further than the traditional means of economic intervention of social democ- racy. To this extent, somewhat paradoxically, the parameters of state intervention in the age of glo- balization, the eroding nation-state and what ever other flux become, if anything, larger, as virtual- ly everything becomes the object of economic policies. As Alan Finlayson has pointed out, the 22Driver and Martell, New Labour: Politics After Thatcherism. Hall, "The Great Moving Nowhere Show." An- drew Glyn, Social democracy in neoliberal times: the left and economic policy since 1980 (Oxford: Oxford Univer- sity Press, 2001), Chris Howell, Trade unions and the state. The construction of industrial relations institutions in Britain, 1890-2000 (Princeton, New Jersey: Princeton University Press, 2005). 23Hay, The political economy of new labour, p. 145. 24See Cabinet office, “Modernising Government,” (cm4310, HMSO, 1999). Ed Balls, “Open Macroeconomics in an open economy,” ed. Centre for economic performance (1997). Ed Balls, Joe Grice and Gus O´Donnell, eds., Reforming Britain’s Economic and Financial Policy (London: Palgrave/Treasury, 2002). 25Alan Finlayson, Making sense of New Labour (London: Lawrence and Wishart, 2003), Hay, The political econo- my of new labour. p 177. 26Brown, “The Politics of Potential.” 7 economy, in New Labour thinking, is almost omnipresent. Practically all New Labour policies, whether they be aimed at social inclusion, the pre-schooling of young children, or the preservation of the historical heritage, are economic in the sense of being given a role for the strategic creation of the human and social capital of the knowledge economy. In the same way, virtually all social or cultural values, from trust to curiosity and aesthetics are in New Labour thinking also economic values and therefore legitimate objects for economic intervention.27 This is directly related to the capitalization of knowledge in the Third Way’s economic theory, or, as Finlayson puts it, When knowledge is understood as the central commodity flowing in the economy, it is a short step to such a cultural mode of governance. After all a culture can, at one level, be understood as a set of shared knowledges. As such the analysis of economic production and the analysis of culture begin to fuse.28 This expansion of the field of the Economy has meant that areas such as education policies, cultural policies and social policies have become new forms of industrial policies.29 Particularly the Social has emerged as a central sphere of economic intervention. The Third Way is fundamentally interested in social relations, because it sees them as producers of wealth. It is not economically dirigiste, in its prudent macroeconomic norm politics, but it is socially dirigiste in a way that is not considered politically possible or socially desirable for the economic sphere.30 The Third Way, to this extent, contains a distinct interventionism that goes well beyond that of “old” social democ- racy, since it goes beyond economic policy and into the social sphere. Indeed the object of regula- tion is not the economy, but the “soft” or “wet” capital located within the knowledge worker, his or her very attitudes towards learning, employers or the community at large. In this respect, many aspects of Third Way policies are closer to social utopian discourses of intervention and engineer- ing in social democracy’s own history than they are to neoliberalism.31 This capitalization of the Social is a central part of the political economy of the Third Way. The Third Way rearticulates human and social relations as forms of capital, and designates policies aiming at the Social as growth policies, directed at bringing out the value of this capital. There is, as will be discussed, no better example of this than the notion of social capital, which has had a central place in New Labour policy. This reappraisal of the social sphere through the metaphor of “capital” displays paradoxical tendencies. On the one hand, it leads to a socializing logic of capital, in the sense of a discursive legitimation of the social function of capital, which leads to new dis- courses of rationalization, partnership and corporatism in the Third Way, since the interest of capi- tal and of society is presumed to be the same. On the other, it displays a capitalizing logic of the so- cial, an economic determinism that defines social relations as economic goods, and thus makes them the object of rationalization and modernization. Both these reflect a dream of harmony be- tween the economic and the social, which gives them a central place in the Third Way’s reconcilia- tory modernization discourse, but which also plays out tensions deep in the historic project of so- cial democracy. Socializing Capital : Politics Beyond Conflict 27Finlayson, Making sense of New Labour, p. 185. 28Ibid. p. 196. 29Coates, Prolonged labour. The slow birth of New Labour Britain (Basingstoke, New York: Palgrave Macmillan, 2005); Finlayson, Making sense of New Labour; Gail Stedward, “Education as industrial policy: New Labour's marriage of the social and the economic,” Policy and politics 31, 2 (2003). 30Driver and Martell, New Labour: Politics After Thatcherism. Vivien A Schmidt, “Values and Discourse in the Politics of Adjustment,” in Welfare and Work in the Open Economy, ed. Schmidt and Scharpf (2000). 31See Michael Freeden, Liberal languages. Ideological imaginaries and 20th century progressive thought. (Princeton, Oxford: Princeton University Press, 2005). 8 Certainly the Third Way differs from “old” social democracy in the role it ascribes to the market. In the UK, the symbolic importance of the Clause 4 debate was that it set the market at the heart of labor politics, and firmly established that capital, through dialogue and partnership, can work for the common good, a common good defined as “prosperity for all.” The market, in conse- quence, has been seen as a driver of social progress, introduced into education policies, social poli- cies and cultural policies as a way of bringing in investment and financial capital, but also as a way of creating a “culture of aspiration” and fostering drive and entrepreneurship, particularly in de- prived areas.32 This logic of socializing capital, of making capital a part of the common good, not to be con- fused with socializing the means of production, is not new in the history of social democracy, rath- er the historical project of social democracy is exactly to make capital work in the interest of a par- ticular definition of the common good and to embed the market in social relations. What is new, however, is the way that the Third Way’s understanding of knowledge capitalism inherently de- nies the notion of conflict or of differences of interest between labor and capital. Making the mar- ket a force for the common good by bringing it further into social relations and defining market virtues as a fundamental driver of social change is not the same thing as trying to discipline capital in the name of solidarity and equality, which is arguably where New Labour’s notions of partner- ship and community differ from the idea of corporatism that laid the foundation for the Swedish model. It is important to make this distinction. There are certain specific presumptions as to the nature of knowledge as a non-rival good with positive externalities that add to the Third Way’s well noted emphasis on reconciliation and its appeal to politics beyond conflict. Knowledge is created through learning – and learning is a so- cial activity, one that depends on trust, communication and reciprocity. The idea of knowledge- driven economic expansion contains a reappraisal of the social sphere; of trust, civic virtues, shared norms and values, partnership and dialogue, all things that stress interconnection, embed- dedness and interlinkages rather than conflict or atomism.33 New Labour’s social philosophy of communitarianism was clearly influenced, here, by certain key ideas of network production, for in- stance the idea of the social as a web or social fabric of interdependent and interconnected people, tied together through mutuality and reciprocity.34 Network production is described as ahierarchi- cal, cooperative, and based on trust relations between employer/employee. Economic dynamism in network production stems from partnership and dialogue rather than asymmetries, hierarchies, and conflicts. The idea of partnerships has been described as a new form of “competitive” corpora- tism, where the production of surplus takes place in concertation and “coproduction” between state and market, through a social contract where the state assumes an overall responsibility for creating the competitive environment for industry, through strategic investment in education, re- search, and knowledge infrastructure such as high cost technology, information highways etc., while the firm assumes a certain responsibility for fostering social capital and encouraging learn- ing. In this way, the firm – just like the family – becomes a provider of social virtues, trust and learning in harmony with the surrounding community. The Third Way embraces this understand- ing of capitalism because it offers a way out of the conflicts and struggles of the 1970s, while still escaping the dilemma of neoliberalism. It gives a relevance to limited notions of stakeholding,35 32See Department for education and skills, Higher standards, better schools for all. More choice for parents and pupils. Education white paper (London: HMO, 2005). 33Compare Fukuyama, 1995: Trust: the Social Virtues and the Creation of Prosperity. 34Mark Bevir, New Labour: a critique (London: Routledge, 2005).p 106f. 35The notion of partnership should of course not be confused with Will Hutton’s idea of stakeholding. Hut- ton, The State we’re in (London: Jonathan Cape, 1995). 9 and it permits the Third Way’s critique of the state, a heritage it got both from the new Left and the new Right. The notion of partnership draws on the quintessentially Third Way claim that the new economy challenges both the old Left’s and the new Right’s understanding of the boundaries be- tween market and state. The old Left, or so the New Labour story goes, thought that it could steer innovation and change and did not realize the individualism and private nature of creativity and entrepreneurship, while neoliberalism with its atomistic theory of economic man and free market did not see the fundamental social logics of processes such as learning and creativity. To that ex- tent, the Third Way contains a firm rejection of both socialism and neoliberalism, both with refer- ence to knowledge as a good with specific social externalities, fostered in trust and not in conflict.36 It could be argued that the politics of partnership reflect a new historical compromise be- tween labor and capital, similar to the one that laid the foundations for social democratic hegem- ony in Sweden, and that the historic corporatism of the Swedish model drew on exactly such an or- ganic notion of the market that New Labour set in place in its rewriting of Clause 4.37 But the cor- poratism of the Swedish model was based on the mediation of the differing interests of labor and capital, and it was also, arguably, a way of disciplining the market in the name of the wider social good.38 The emphasis on partnerships seems, rather, to avoid the very problematic that the histori- cal compromise attempted to solve, since it doesn’t recognize the notion of a difference of interest in the first place. Politics of partnership presume that interests and norms are essentially the same among market, state and citizen; an interest defined by the Third Way with the nebulous “prosper- ity for all.” In industrial relations, the notion of partnership is a reference to trust relations that will provide the basis for productivity and competitiveness in the interest of both employer and em- ployee.39 As Chris Howell has argued, the notion of partnership was the basis of New Labour’s “New Deal” with business, a new “partnership for prosperity” based on mutual trust and collabo- ration, which also meant that New Labour continued on the path in industrial relations laid out by Thatcher, recognizing the role of unions to protect individual workers’ rights, such as the mini- mum wage, but remaining skeptical of collective action.40 The notion of partnership set out a new role for trade unions in the knowledge economy, which is not that of representing the interests of organized labor, but one closer to the Japanese capitalism that was a source of inspiration for the debate on the new firm and specialized production in the period from the 1970s onwards. Worker influence, in this conception of industrial relations, is about making productivity gains through new forms of managerialism where the role of labor organization is to reintegrate skills into the production. This includes fostering trust, loyalty, and enthusiasm. As many writers on the organi- zation of work in post-Fordist regimes have pointed out, ideas of flexible production sets the work- er and his or her attitudes at the heart of the production process. New forms of management, in- deed of Taylorism, are directed at the rational management of the worker’s inner self.41 We can take this argument one step further by contrasting the Third Way’s conceptions of the relationship between private and public production with social democracy’s historic notions of 36Cabinet office, “Modernising Government,” DTI, “Fairness at work,” ed. Department of trade and industry (HMO, 1998?). 37See Jenny Andersson, Between Growth and Security. Swedish social democracy from a strong society to a Third Way (Manchester: Manchester University Press, 2006); Francis Sejersted, Lars Andersson, and Per Lennart Månsson, Socialdemokratins tidsålder: Sverige och Norge under 1900-talet, Sverige och Norge under 200 år (Nora: Nya Doxa, 2005). 38Bo Rothstein, The social democratic state: the Swedish model and the bureaucratic problem of social reforms, Pitt series in policy and institutional studies, (Pittsburgh: University of Pittsburgh Press, 1996). 39Howell, Trade unions and the state. The construction of industrial relations institutions in Britain, 1890-2000. 40Ibid, Institute for Public Policy Research, Promoting Prosperity (London: IPPR, 1997). 41Finlayson, Making sense of New Labour. 10