Reclaiming "The Public" through the People

Keynes had a prescription for social analysis when change is in the air but not yet institutionally grounded - we should "make a candid examination of our own inner feelings in relation to the outside facts."

Attempting such examination in regard to the public sector, raises various questions ; has the last twenty year long wave of neo-liberalism immersed the institutions of social democracy irreversibly - such that they are now sunken ruins, excavatable only by the historian equivalents of deep sea divers - or could they be retrieved and updated? With deft, strategic digging, could the land yet be drained and reclaimed? And are there the resources, energy, people or shared intellectual vision for such a task?

Evidence that the powers of the state have not been submerged beyond reach was paradoxically supplied when the President of the US - the least interventionist state in the Western world - and the Prime Minister of the UK - the state most aspiring to cut back its interventions in the market - were able, after September 11, to massively increase public spending on the military, and to control financial markets to block financial support for terrorists. Whatever the wider context of these acts, it is impressive that they were possible. Under different, more democratically accountable politicians and institutions, could not such powers be used for peaceful purposes? How do we make state institutions, as they have been in the past, more effective instruments of social justice? What are the limits of this process?

Observing the consequences of, on the one hand, increased state involvement (until the reign of Margaret Thatcher) in British society, and on the other efforts to reinstate the rule of the market, it seems what we need now is not a new 'brand' of mixed economy (`a third way'), nor a return to the pre neo-liberal balance of the 1960's, but a `third dimension' - one concerned with the principles of organisation internal to specific market and state institutions. A three rather than two dimensional model of state versus market, might open our minds to a variety of principles of organisation of state institutions and services, as well as market enterprises. The question becomes not 'more state or less state?', or 'more powerful markets or less powerful markets?' but 'what kind of state institutions or private enterprises? To meet what goals? Organised on what principles? With what kinds of organisation and management?' Such questions will never flow from 'state-versus-market' thinking. But third dimensions questions are crucial and proliferating: how should state institutions be administered? How may democracy be deepened beyond its electoral form, proved weak? How may public resources be managed responsively to the people who voted for them? And, within the market, how may enterprises be socially accountable, particularly when financial markets have effectively lifted off from the real economy, let alone the realities of society?

I shall argue here that the flaws we observe in the social democratic state, namely unresponsiveness to people's changing demands, and waste and corruption (though probably less than in the private sector) are not best remedied via the market but by democratic innovations in management within state institutions - for instance putting to more socially effective use the capacities of front line workers and skilled managers, and even using practical knowledge held by the users of these services. Similarly, I shall argue that the social irresponsibility of the private corporation cannot be overcome simply by state regulation. Nor is state ownership often a realistic or straightforward option. What is necessary is a fundamental transformation of the forces which drive investment - away from profit maximisation towards recognition of environmental, labour and other social concerns. This means deploying every possible lever for democratic accountability and social responsibility. One possibility is new institutions of democratic control over the pension funds which dominate the stock market (1). Another is democratic deployment of state purchasing powers for social ends.

The 'third dimension' questions of how institutions, public and private, are organised influence relations between the market and state. If public institutions are managed in a way which gives people a sense of genuine democratic control over them, then popular support for extending social control over private corporations is more likely. The more people give up on state institutions, defaulting to a belief in private business as more 'natural', the more any socially radical transformation of market institutions will also fail to inspire the public support they need. The mutualism of most building societies ended at a time when virtually no mainstream politician would stand up for democratic collective decision-making. But this becomes a vicious spiral downwards - democratic innovation in independent enterprises or voluntary associations is a seed bed for change in the organisation of the state.

Two models of 'state-versus-market' underpinned mainstream debates about public services in the 80's and most of the 90's. On the one hand, administered by professionals who 'knew' what people needed, there was the 1945 model of cradle to grave state provision, accountable via elected politicians to the people paying for and receiving it. On the other hand was the Nicholas Ridley model, in which, at its logical extreme, state bodies from the MOD to the NHS, to local government, became contracting organisations in which elected representatives met periodically simply to agree contracts recommended to them by a skeletal staff of lawyers and procurement officers.

Later we will discuss the policies of the New Labour government, focusing on contradictions and spaces it has opened up for democratic control over public resources. It was a government swept into office by overwhelming popular desire to end the policies of Thatcherism. Indeed you could argue it was not John Major that voters rejected in 1997 but the destruction of the welfare state and the growing gulf between rich and poor. These origins, as well as the presence - albeit not for long - of a minority of ministers and advisers in New Labour committed to significant redistribution and publicly provided public services, has been a source of constant tension and inconsistency in policies. The dominant approach, however (driven by Tony Blair) has included encouraging continued contracting out to private companies of the delivery and management of public services. New Labour's twist on this has been to induce parts of the public sector, for example social housing, to become private `not for profit', companies in which `the community' is represented. But these companies, like all companies, are limited by financial markets and commercial law, which limit their ability to be responsive to social need or accountable to the community. Constrained by unreformed commercial company law, 'not for profit' companies represent no new mechanism for providing public goods.

Contracting out plays with the idea of a third, organisational, dimension but does not actually practice different principles from those of the state or the market. Indeed, this combination of centrally imposed targets and deference to private companies seems to combine the worst of both worlds. Perhaps one of the difficulties for the government in coming up with a convincing strategy of public service reform is that it has spurned, or been ignorant of , innovative traditions in the democratising of public administration. Instead, it has treated business as the primary model of administrative efficiency from which the public sector must learn.

"Outside Facts"

1. The Growth of the State...

Throughout the mid 20th Century state institutions came to carry out functions which, as Keynes put it, `fall outside the sphere of the individual'. These included control of the supply of money (in an attempt to even out the ups and downs of the capitalist market and keep the resources of the economy fully employed) and provision of public goods and infrastructure (from hospitals and parks, to railways and postal services), so that public spending could meet needs not adequately answered through individuals buying and selling on the market. Further functions assumed by the state included legislation and taxation requiring private companies to behave responsibly towards the rest of society. Behind all these institutions were ethically based economic principles distinct from the market: the allocation of resources according to need rather than price and ability to pay financed through redistributive mechanisms including cross subsidy, progressive taxation and national insurance. The creation of new state institutions and public corporations based on these principles was speeded up by a war against fascism for which the people were willingly mobilised or mobilised themselves.

The "people's war" created widespread, deeply rooted confidence in the possibilities of mobilising public resources for the common good. The peacetime legacy of this made it hard for Mrs Thatcher et al to stamp out public commitment to public service (2). But the peculiarities of wartime had established a template of how public resources were matched to social need, and there was never any clear break from the wartime framework of simple, singular goals. Thus complexity and change and growing expectations was not built into the structure of the welfare state. Its original decision-making structures were based on a highly abstract notion of the universal, in which general principles laid down by elected politicians and implemented in a standardised way seemed sufficient. This was most apparent in public housing which only in the late 60's began to take account of variety and diversity in housing need. Recognition that the universal can only be manifest concretely and idiosyncratically came later - with feminism, for instance - as 'benevolent' paternalist welfare state assumptions began to be challenged.

For the wartime welfare state ends justified means - it was all but unconscious of questions of process. Military-type hierarchies were replicated across the public sector, staffed initially by military personel.

2. The Parallel Growth of Corporate Power

Facts concerning the dynamic nature of the private market are also relevant.

After the war, while the state intervened in the private sector, private business got a grip on the state. 'When the state extends its control over big business, big business moves in to control the state' warned Nye Bevin as early as 1944.(2) Neither the Labour party nor the unions used their members' inside knowledge of industry to counter private industry's effective capture of key sections of the state apparatus (most notably the department of trade and industry but also, industry specific; the pharmaceuticals of health; the road haulage and car industry of transport; the waste industry of the dept of the environment). Corporate financial interests held a strong hold over the British state via the Treasury (3). Although Nye Bevan was characteristically canny enough to alert the labour movement to this, the long-term danger it posed to the social democratic state was not apparent. In the conditions of boom of those days the mixed economy appeared stable. But as the boom gave way to tighter markets and a more competitive global economy, mergers, acquisition and rationalisations took place across the private sector on a global scale, causing a dramatic shift in the balance of power between private corporations and the state.

The 1970's saw the emergence of transnational corporations with budgets the size of medium size nations.(4) This meant greater mobility of capital: companies had a wider choice of where to invest. It meant financial markets which were increasingly speculative. Britain was particularly vulnerable to these changes because British capitalism, unlike say post-war Germany or Scandinavia, had never developed powerful institutions in which the private sector, including the banks, regularly negotiated with the state and the trade unions. Such linking institutions might have protected British social democratic state institutions to some degree from the most socially destructive pressures of global financial markets.(5)

The lack of checks on global corporate forces lead to an asymmetry and instability in the Keynesian 'mixed economy' where, as he had conceived it, a public sphere of economic activity would co-exist stably with a private sphere. Keynes was optimistic about the joint stock company, thinking it would become more and more like a public corporation. Where the industry concerned, for example the railways, had a strong obligation to serving society, nationalisation would become almost irrelevant, he thought, because the corporation(s) which dominated the industry would already in effect be acting like a public corporation. Although companies publicly quoted on the stock exchange are in many ways different from companies owned by private individuals, they are still driven by the competitive, profit maximising, capital accumulating process. Profits and dividends, especially on British financial markets, remain the indicator of success which holds the key to confidence in the company and hence its stability and ability to borrow and expand. As markets become dominated by smaller and smaller numbers of larger and larger companies, pressure intensifies and with it the search for new markets. By the late 1970's, as traditional markets became saturated, they began to look longingly at the public sector which, driven by very different imperatives, was in no position to compete with private sector on the strictly commercial terms which the Conservative government imposed. What's more, corporations put huge resources into lobbying to open up the public sector to the market. As the government responded to their pressures the Keynesian mixed economy began to change beyond all recognition.

This did not make national governments irrelevant but it led them to serve the needs of global markets. This growth in the power of market-driven institutions also laid the foundation for an increasingly unbounded international market. There was a political dimension to this: governments acquiesced to the lobbying and Round Tables of leading corporations' pressures. The triumphant way in which free-market politicians seized the symbolic moment of the fall of the Berlin wall and made it theirs when ideologically it could just as well have been social democracy's, led social democratic leaders to act as if the wall had somehow fallen on them. Taken by surprise and without a coherent programme for extending democracy to the administration of state institutions, the social democracies let the fall of the wall annihilate the ideal of state intervention.

3. The Erosion of Public Services

So it was that no sooner did the social democratic state extend its activities, and its notion of citizenship, to include social and economic rights (as well as civic and political rights) than an economic dynamic began which significantly undermined this expansion of rights. This process came to fruition in the late 1970's and most virulently through the 1980's and 90's.

Labour left office in 1979 in confusion, torn between its historic commitments to labour and its inability to bargain effectively with capital. Mrs Thatcher then embarked on deregulation to attract mobile capital to Britain. Mobile capital meant companies on the lookout for new markets, new spheres of investment. One such sphere was the conversion of previously non-market areas - including services - into commodities. Steadily and stealthily, through intense lobbying, strategic alliances and political influence rules were changed and laws passed which opened up local government, the railways, health and education to the private market. Compulsory competitive tendering, sub-contracting of ancillary services, the breaking up of services into parts that can be sold at a price, the demoralising and fragmenting transferral of workforces accustomed to providing a public service into companies requiring them to work for profit - all of these processes eroded the foundations of the social democratic state, which had been by definition a body of non-market institutions intended to meet social needs according to democratic principles of organisation and resource allocation.

The New Terrain of Struggle over the State

New Labour has not reversed the shift from state to market but it has altered the ideological and political terrain in which it takes place. First, seeking to remedy the worst injustices of the Thatcher years, it created openings, albeit ambiguous, for alternative directions within the public sector. The wider political context has not been favourable to these fragile experiments but they provide results from which we can learn. Second, through its continuation of contracting out, New Labour has inadvertently politicised implementation (of policies) and management within the public sector, stimulating amongst public service trade unions (who assumed Labour was elected to rebuild and extend the sector) new strategies which move beyond protest to the formulation of alternative proposals for public service provision.

1. Community and Democracy

Unlike Thatcher's, New Labour policies express a commitment to society. They evoke the concept of `community', in relation to public services and posit this community as an alternative to the state, at times quite explicitly. A former Labour minister for local government, Alan Whitehead described how `There was a view that communities are good things; they could tell you what was needed and administrators would go and carry it out without the intermediate layers of political democracy.' A particularly bold and now quietly marginalized government initiative, New Deal for Communities (NDC), illustrates the contradictions in New Labour's relationship to 'the community' and shows people re-routing a government-led initiative towards democratising state institutions.

NDC's commitment in 1989 was to grant 39 of England's poorest estates (of between 3,000 and 11,000 residents per estate) £50 million for each estate for a ten year programme of regeneration. The condition of the funding and the criteria for choosing the estates was that the decisions about the £50 million should be `community led'. This led to a variety of experiments, some 'community led' only in name, some led by communities too divided or beleagured to arrive at a sustainable decision-making process, and some where community representatives eventually negotiated a viable structure for genuinely participative democratic institutions. In these cases, local residents had real power over resources and their allocation - conventional forms of representative democracy were strengthened by a new participatory arm, responsive to the needs of the people. In particular, in some NDC's residents representatives called officials to account and influenced the day to day implementation of policy. In these localities, people ignored the wall put up by the government between community and politics, and expanded the narrow participation rights extended to them to encompass bigger political decisions about the future of services - whether housing, leisure facilities or the role of the local council in regeneration.(6) The absence of a framework of radical constitutional reform for local government, however, has meant that the lessons from these and other innovations in public administration have not been generalised.

2. Democracy and Public Service Management

I talked earlier about the erosion of public services, but 'eroded' is the wrong word, implying a gradual organic process rather than an effective dismantlement, involving conflict, power, levers of change and possibilities of reversal or new directions. What has happened since Mrs Thatcher is a radical shift in the centres of power in public sector decision-making.

Take local government, for example, though the same process has been going on other services. In the past, for key budget decisions the centre of power was the finance department. Now, an equally important centre of power is the procurement process, led by senior officers in different departments who determine the specifications for tenders. Since every service must now go out to tender, the process of procuring contracts, as much as the amount of money allocated, vitally influences that service.

To resist privatisation trade unions have opened up this procurement process, in particular putting forward public sector bids for delivery. To this end workers, users, committed managers and sometimes councils have scrutinised the organisation of services from the standpoint of effectiveness to the public and the use of public money, comparing their results with the proposals from private companies. I witnessed a very interesting case of this kind on Tyneside where senior council executives were putting out to contract 'Information Technology and Related Services' (the strategic technical heart of the council's operations). The assumption was that British Telecom would win this multi-million contract. The unions were not happy. They insisted that the council itself put in a bid and they committed themselves to working with management to produce it. The process of preparing the bid was innovative. Using a combination of industrial militancy and well-researched argument the unions convinced management to hold day-long sessions with staff where IT workers contributed ideas about how the council's IT work could be better organised to make use of their skills, improve the quality of the service to the public and even to expand and improve services across the city. The end result was a bid which managers and councillors agreed was in the better long-term interests of the city. BT's bid had been attractive because they were offering immediate investment money to a council in financial crisis. After the unions' construction of an alternative, however, it was clear that given the profits BT would cream off and remove, the `in house' option was economically as well as socially preferable.

It might be argued that that this democratisation and improvement in the organisation of the public sector required the marketisation of the public sector, if not its privatisation. It is true that service provision did need modernisation. On Tyneside the stimulus came from marketisation and the consequent threat of privatisation. The responses - processes of positive trade union involvement and a shift in the balance of power which granted staff a real say in service delivery - were triggered by the procurement process. But they could just as well, and more constructively, have been triggered by a political commitment to democratising local government administration and management.

As an example of that would be in London in the 1980's. Labour's manifesto for London in 1982 was commited to democratising local government hierarchy and under Ken Livingstone the baroque hierarchies of the GLC were indeed transformed, as was the relation of County Hall to the citizens of London. Lasting commitment to breaking down such hierarchies and opening up local government, requires a deeper democratisation of local government itself, through the introduction of proportional representation. This would put a pressure on politicians to make services responsive to the changing needs of voters, utilising public service workers' skills and imagination. I will argue later on that marketisation, inevitably meaning public funding of private companies to deliver public services, amounts to a weakening of democratic control. Private contracts are monitored mere through the formal mechanism of a legal contract when what is needed is deeper forms of active democracy.(7)

3. Democracy and Choice

New Labour has strangely misread public opinion, over-estimating sympathy for Thatcherite individualism. Thatcherism benefited from a reaction against what was presented as the extremes of collective power in the unions or in local government, but even before Labour was elected surveys showed a public opinion settled into majority stances; wanting public delivery of public services, preferring unions as against no unions, and accepting progressive taxation.(8) Thatcherite individualism certainly had an impact on the popular psyche - it wiped out the final traces of automatic deference to authority. What people took from it, paradoxically, was not a belief in the virtues of the market but a strong sense of individual rights in the face of authority, a rejection of political patronisation or presumption by public officials to know what is good for us.

New Labour's misreading of Thatcherism has led it to adopt a supermarket model of politics and talk of 'consumer choice.' The Office of Public Service Reforms calls public sector users 'customers': it aims to `improve current structures, systems, incentives and skills to deliver better, more customer-focused services'. This is not just a matter of language. It is about the ideal of the relationships envisaged between individuals and services. Emphasis is on choice of schools, hospitals - even train services and electricity and gas companies - rather than democratic control, as the criterion of quality. Hence 'market research' and 'customer feedback' surveys and consultations as the driving forces of reform, not popular participation in decision-making or opening up of the processes of public administration. The picture which Tony Blair generally paints is of a choice for the public sector between emulating the private sector's relationship to the people (as individual consumers taking isolated choices, pursuing individual preferences) or being an old-style bureaucrat, unresponsive to its citizens, endlessly fending them off and passing the buck. The idea of collective action, deliberation, association, i.e. a deeper democracy than the ballot box, being built into state structures as an internal force for change is alien to New Labour. Yet people pursue such actions to achieve the services they want. For example, education academic Sally Tomlinson shows that in education the overwhelming demand from parents is not for individual choice but for a good local school. Parents have come together to press for this. In Dulwich, South London, children travelled to 40 different secondary schools, and local parents - oversaturated with 'choice' - formed an association to demand a new local comprehensive.(9) The overwhelming rejection by parents in the early 90's of the Tory offer for schools to 'opt out' and become grant maintained was an expression of the same preference - for a public service which users and would-be users could influence through social association with each other and involvement in the school's decision making. One feature of the Tory 'opt out' process which particularly annoyed people was the narrowness of the voting constituency. True to its belief that there was no such thing as society, Thatcherite assumption was that only those with children at the school had any concern for the future of the school.

Ironically, just as New Labour was adopting this model of individual consumerism, consumers began to organise themselves, especially via new internet opportunities for time efficient collectivism, to apply moral and social pressure to corporate policies on labour and the environment.(10) There was a new interest in 'third dimension' questions: how to achieve effective social control over investment ? How to use public purchasing to influence corporate policy? How to strengthen the alternative social sector not simply in the subordinate interstices of the corporate economy, but in direct challenge to its heights?

Making Democracy Powerful

My own feelings are grounded in the social democratic belief that there are basic needs the market cannot meet, based as it is on price and ability to pay. Further, that the meeting of these needs is the responsibility of society as a whole through arrangements democratically agreed. The institutions which represent society at different levels are the elected parliaments, councils and assemblies responsible for state administration funded by the taxpayer. Clearly then the framework of an elected government responsible for allocating and administering public resources is fundamental to the meeting of basic social needs from housing, health, education and protection against destitution, through to security and protection against crime. But what has also become clear in the past twenty years of dismantling the state is that it matters considerably how these resources are managed. A bit like a child who almost destroys a toy or piece of household equipment to see what is inside, how it works, we have unwillingly witnessed the dismantled the welfare state and now in the process of trying to rebuild it we understand more clearly how it should work.

The new forms of democracy which have taken root in the ambiguous spaces opened up under New Labour, indicate a the possibilities for a genuinely experimental approach to organising public administration. The experiences of community-led regeneration show the importance for public employees of structures of accountability, as well as an ability transparently and in a rule-governed fashion to co-operate with representatives of residents in implementation of policy. Each of these make public employees into genuinely public servants in day to day sense of 'serving the public'. The experiences of opening up the public procurement process point to the importance for public decision-making of means by which public employees can influence the character or style of services and delivery. Public rejection of the consumer choice route to improving service quality suggests the importance of collective deliberation and decision-making when it comes to the expression of diverse individual needs and their fulfilment. Collectively derived decisions can produce better quality solutions than anything imposed from above.

The difference between these and other means of popular control over public resources on the one hand and the government's deference to the private sector model of efficiency, on the other hinges on understandings of democracy. The government relies heavily on contracts between public officials and private companies as mechanisms of democratic control but legal contracts are not a sufficient basis for democracy. They are blunt instruments of democracy at their best. Many aspects of high quality service cannot be legally summarised - the comfort of continuity of care, for example, or the inner refreshment of a beautiful park, or the creative benefits of a local library where staff welcome and stimulate children's eagerness to browse. Lawyers may delete such references as difficult to codify let alone make legally binding. What is codifiable is attendance or user figures, but since there may be no alternative provision, these cannot measure satisfaction . Moreover, genuine democratic control by users as well as politicians requires open access to information - access which most private companies refuse to give on the grounds of 'commercial confidentiality'.

Where can the impetus come from to develop a service to meet the changing needs of communities? In theory, market competition is a source of innovation. But the relationship of public service deliverers to their clients is not a simple market/customers relationship. And the big corporations now contracted to deliver our social services face no serious competition. Having locked the local authority/hospital/government department into a contract, they will be costly to dismiss. The legal contract may speak of consultation but via what mechanisms? Market research methods - focus groups and surveys - are inadequate means of engaging people's creativity.

If, as almost every senior public official admits, handing management over to a private company means cutting the wage bill, where is the will, realistically, to harness the insights and skills of stressed and demoralised frontline workers? This is not an argument for going back to the organisation of the state as it use to be - traditional methods of public management have also failed to release the creativity of their workforce, stifling, for instance, ideas for improvements. In fact, the almost army-like hierarchies we described earlier - mirrored by the defensive character of much public sector trade unionism - has meant the squandering of one of the public sector's greatest resources - its workers' knowledge.

As it grew, without any commensurate strengthening or deepening of mechanisms of democratic control, cracks appeared between the people and the policies they voted for and the supposedly public institutions for implementing these policies. Into the cracks anti-democratic interests had insinuated themselves, whether through powerful private lobbies or bureaucratic empires.

New Mentalities, New Processes

The answer is not a return to 1945 nor is it to replace institutions of public administration, with private companies who pursue profit, seeking to cut costs to make them 'efficient' in money terms. Public service has different notions of 'efficiency' which concern social needs that the market does not measure. 'Value for money' cannot be measured by legally definable targets. It requires constant evaluation in which service users have some real power. The thinness of representative democracy needs to be enriched by more direct public involvement in the implementation of policy. The priority then is to address and remedy the weakness of electoral forms of democratic control, `representative democracy,' over the state apparatus. The problem is to find ways of making responsive mechanisms to transmit the needs of the service users to service designers and deliverers.

This enrichment is partly a matter of new institutional thinking, drawing where possible from innovations in practice and therefore likely to have a measure of the new terrain. But it is also a matter of the methodology, culture and mentality that dominates government and politics. Two statements, one by Tom Paine and the other by Beatrice Webb, show contrasting assumptions that can underlie public policy. Each has fundamentally different implications for the nature of public institutions - that is, in the language I adopted at the beginning, for the nature of the third dimension.

Beatrice Webb, a powerful influence on the welfare state, summed up the orthodoxy that underpinned it thus: `We have little faith in the "average sensual man." We do not believe that he can do much more than describe his grievances, we do not think he can prescribe his remedies'. The assumption here is that the knowledge relevant to social change was exclusively scientific and statistical - available only to the trained mind of the state official, academic expert or professional politician. Other forms of knowledge - as expressed, for example, in the daily lives of people without institutional power - were just 'common sense', superstition, emotion or whatever and irrelevant to public policy. Contrast Webb's words with Tom Paine's in 'The Rights of Man'; 'It appears to general observation, that revolutions create genius and talent; but those events do no more than bring them forward. There is existing in man, a mass of sense lying in a dormant state, and which unless something excites it to action, will descend with him, in that condition, to the grave. As it is to the advantage of society that the whole of its facilities should be employed, the construction of government ought to be such as to bring forward, by quiet and regular operation, all that capacity which never fails to appear in revolution.'

Paine's approach accords with what we now call tacit knowledge - i.e. practical and other forms of non-codified, non science-based knowledge. State institutions lag behind the revolutions that have taken place in our understandings of knowledge, however, which is one reason social democratic institutions were vulnerable to the extreme individualism of the reaction against the state institutions of the Soviet bloc, with their claims to know and predict the needs of the people. There are two crucial implications of Paine's words. First; practical knowledge and skill can be shared and socialised - becoming a resource for democratic, participatory decision-making. Second, radical participatory democracy is coupled to the social efficiency of government. All too often 'participation' is an add-on, at best moralistic and politically correct, at worst a cynical PR ploy. By grounding his ideas of government in an understanding of human capacity, Paine argues for government institutions designed, from their foundations, to bring such capacities forward.

There is no one form that the regular and quiet operations of such a genuinely capacity-building and utilising process need take. Indeed the devising of such forms would be a pilot deployment of the capacities they hope to foster. We can draw out some vital principles from experiments to support this suggestion.

My earlier UK examples illustrate the importance of popular participation in the community and the workplace, and possible forms for participation. They indicate ways of strengthening the power of popular control by building democratic pressures into policy implementation processes. They show us participatory democracy surviving precariously in the crevices of the existing power structure, able to relate only to the micro-level of state institutions with very little purchase on national politics, though with an echo and parallels internationally.

Democratic Bargaining Power. The Role of Participatory Democracy

It is possible to draw further principles from more ambitious, politically committed attempts to develop participatory democratic institutions. The participatory budgeting initiated through the Workers Party in Brazil provides a well established example of an institutionally embedded and rules-governed process.(11) In an open and transparent process of negotiation local residents can participate directly, through a combination of open plenaries and elected recallable delegates, in deciding the priorities for new investments city wide. In Porto Alegre, for example, through fifteen years of trial and error a well-elaborated set of institutions has been developed through which citizens participate in setting public spending priorities for their neighbourhood and city. Delegates of participatory budget processes then negotiate with the mayor and the city councillors.

A key principle here is politicians sharing power. As the late Celso Daniel, a former Mayor of another `participatory city, Santo Andre put it: ` We believed in taking the principles of democracy from social movements, including the trade union movement, with us when we gained office. That meant we had to share political power, the management of the city with the community.' Power sharing means the co-existence and mutual negotiation between two sets of democratic institutions, two sources of democratic legitimacy - one representative, one participative.

Representative democracy's legitimacy stems from the minimal but equal participation of all through the vote, whereas the legitimacy of participatory democracy lies in the high degree of activity of what is likely to be a minority through institutions that are transparent, open to all and based on mutually agreed rules. Representative institutions determine the principles and general direction of an elected government. The processes of participatory democracy provide ways in which the people can play a further decisive role in the detailed elaboration of these principles. The open, rule-governed process of popular participation in proposing the detailed priorities of a budget, for example, or managing a local public facility, has more democratic legitimacy than a group of officials working behind closed doors, often doing their own deals with certain social groups and economic interests. Participatory democracy also plays a vital role in monitoring the work of the executive and state apparatus, able to go where and know what politicians cannot.

Participatory institutions generate self-confident expectations which lead to pressure - in the form of lobbying or campaigning - being applied to the representative elected bodies. Formally, representative democracy has the final say, but since representatives must seek re-election in a multi-party system, then - as long as the electoral system is fair and democratic - they have to be responsive to proposals drawn up by their constituents.

The experience of Brazilian cities like Porto Alegre and Santo Andre bear out the Paine link between social efficiency ("... it is to the advantage of society that the whole of its faculties be employed") and democracy ("the construction of government ought ... to bring forward all that capacity..."). First, participatory processes close the gaps between elections and the work of state institutions, into which corruption, vested interests and empire building can creep (before the participatory budget corruption was rife; now it is rare). Second, participatory processes, involving as they do a high proportion of poorer citizens, have redistributed wealth and resources to poorer communities. This was part of the PT's mandate but it went against many vested interests and would probably not have been achieved without the additional lever of power which the participatory process gave to the poor, those who stood to gain from the PT election. Thirdly, participation has led to higher quality services partly because its power is not simply to set priorities but also to monitor the implementation of these priorities. Finally, the new system of managing public resources through a combination of electoral and participative democracy means an overall gain in democratic legitimacy and as a result, potentially, in democratic power. People are more likely to feel like, in Tom Paine's terms, 'proprietors in government'. This sense of popular ownership has itself been a source of bargaining power with private corporations wishing to locate in the city. There are several examples in Porto Alegre for instance, of multinational retailers wanting to build supermarkets and having to enter a hard bargaining process stimulated by the participatory budget, leading to significant social gains such as the company creating extra jobs, or providing training and extra space for local shops at affordable rents. Participation-enhanced democratic power has been a source of strength in bargaining with international bodies like the World Bank too.

These are not neat, finished institutions, models for a new kind of state. They are not spontaneous outbursts of rebellion either, as participatory democracy is sometimes caricatured. Rather they are lasting sources of democratic bargaining power with private and public institutions otherwise beyond the reach of the people involved in the participatory process. We could call participatory democracy an 'embedded' source of democratic bargaining power; as well as the internal impact of democratising the management of public resources, there is an external benefit - the strengthening of local democracy when bargaining with outside bodies that influence citizens' lives.

This idea challenges the traditional liberal division between politics and economics. 'Embedded 'bargaining power provides political institutions with a means of standing up to the anti-democratic pressures of private corporations, it also points to ways in which political institutions can ally with economic pressures for democracy. Alliances with cooperatives, the social economy generally, with trade unions and others working for democratic control over pension funds, with consumer campaigns against corporate injustices - all these contribute to wider economic democracy, without which participatory democracy will remain always unfinished and under threat.

This notion of embedded bargaining power implies the possibility - and necessity - of reforming the state through a process of democratisation and stimulating in civil society sources of countervailing democratic power to both the state and private capital. This is not to say that the two processes are necessarily and always compatible or without tension. They contain different logics: the actual reform of the state takes place within an institutional framework of representative democracy, whereas the building of counter-power involves an open-ended process of experiment with new untested sources of democratic power. But in their different ways the experiences of Newcastle and Porto Alegre illustrate that this process of building counter-power, messy and uneven as it can be, provides a kick start and a source of continuing energy for reforming the state. It is necessary to reinforce the ability of elected representatives to carry through the will of the people in the face of obstacles presented from within the state bureaucracy and the private market. This way of seeing institutions in terms of bargaining power recognises democracy as a constant struggle, never an end state.

The case of Brazil, where Luiz Inacio "Lula" da Silva leader of the Workers Party, was elected President with a 68% vote, presents us starkly with the most difficult problem challenge for democratic bargaining power: how to counter the power of financial markets, the IMF and the US Treasury? Together, these unelected financial forces are pressing the Brazilian government to repay debts -including debts accumulated under the dictatorship - at a level that is destroying Lula's ability to carry out his mandate. The Brazilian dilemma is a further confirmation that no longer can strategies for a democratising the state be a matter merely of designing new institutions of democratic administration. They have also to maximise democratic power in the face of extra-democratic threats. Not only local and national sources of democratic pressure and reinforcement are needed, but also the growing international movements for democracy, evident since the Seattle protests against World Trade Organisation, and on the streets again in growing numbers against Bush and Blair's war against Iraq.

Democracy is not inevitable. Forms of reaction and authoritarianism are as I write, Spring 2004, powerful on the world scene. But just as Keynes described an underlying move, where markets failed, towards state intervention, now we can sketch the ways in which people are inventing stronger forms of democracy, where earlier forms have lost their vigour. The more we understand such a dynamic, the better able we are to seize opportunities to assist its progress.

References

1. See Robin Blackburn, Banking on Death or Investing in Death? The History and Future of Pensions, London, Verso 2003
2. Labour Party Conference Report, 1944.
3. See Geoffrey Ingham, The Nature of Money, Cambridge: Polity Press, 2004.
4. Richard J Barnett, Global Reach: the power of the multinational corporations, New York: Simon and Schuster, 1974.
5. Colin Leys, Market Driven Politics: Neoliberal Democracy and the Public Interest, London: Verso, 2001.
6. See Hilary Wainright, Reclaim the State: Experiments in Popular Democracy, London: Verso, 2003.
7. See Angela Eagle, 'A deeper democracy: challenging market fundamentalism', A Catalyst Working Paper, London: Catalyst, 2003.
8. E.g. Roger Jowell et al, British Social Attitudes: the 14th Report - the end of Conservative values?, National Centre for Social Research, 1997.
9. Quoted in Catherine Needham, 'Citizen-Consumers: New Labour's Market-Place Democracy', A Catalyst Working Paper, London: Catalyst, 2003.
10. See the 'boycotts list' held by Ethical Consumer
11. Hilary Wainright Reclaim the State, pp. 42-69.