It is a commonplace to say that successful centre-left parties - in the US, UK and Germany - have won elections by detaching themselves from the sort of redistributionist agenda repeatedly rejected by voters in favour of a growth-oriented, meritocratic programme. But this "Third Way" narrative does not account for George Bush's interest in huge spending increases on education and infrastructure; nor for Al Gore's abandonment, in 2000, of the redistributionist manifesto of 1996. It does not tell us precisely why such a politics arose in the first place. Why does the new Labour agenda appeal to the electorate? Why does it arouse such hostility from both left and right? It is because this agenda accords with deep changes in the nature of the state.
Every era has an answer to the question: what is the state supposed to be doing? This answer determines the state's legitimacy - the basis on which it claims and retains power. This basis defines the constitutional order of the state.
It is often said that the constitutional order of the nation state was set in 1648 by the Peace of Westphalia. Today, a different view is emerging that the state was born earlier, at the beginning of the 16th century, and that there have been several constitutional orders of which the nation state is only one. The present order of the nation state dates from the late 19th century, when the first mass franchise acts, large-scale free public education and social security programmes came into being - in other words, when the state was put in service of the material welfare of the nation.
Nation states maintain, nurture and improve the material conditions of their citizens by assuring them equal rights to well-being that derive solely from their membership in the nation itself. Imperial states, by contrast, were charged with enhancing the national interest as a whole, which is different from the interest of any particular group. Burke argued in 1774 that "parliament is not a congress of ambassadors from different and hostile interests . . . but . . . a deliberative assembly of one nation, with one interest, that of the whole". Contrast this with Lloyd George's statement that "four spectres haunt the poor - old age, accident, sickness and unemployment. We are going to exorcise them. We are going to drive hunger from the hearth. We mean to banish the workhouse from the horizon of every workman in the land."
Imperial states mobilised and exploited whatever national resources they had available (including the colonial resources of otherwise stateless nations). They were not responsible to the nation; rather, they were responsible for the nation. Nation states, by contrast, belonged to every nationality in order that each might determine its own future. Yet every constitutional order, even at the moment of its greatest triumphs, carries within it the seeds of its successor. The imperial state, which was pre-eminent for about a century, was undone by the very nationalism on which it called for loyalty and self-sacrifice to the state. And today, the nation state is being challenged by developments it has called into being with its triumph in the "long war" of the 20th century.
That war was fought to determine which form of the nation state - communist, fascist or parliamentary - would succeed to the legitimacy of the imperial states. Parliamentary democracies won in part through development of nuclear weapons and other sophisticated military technologies; rapid mathematical computation; and international transport and communications. Now each of these developments is undermining the nation state. Weapons of mass destruction and long-range delivery systems make every state, whether it has nearby enemies or not, vulnerable to terrible attacks. Globalised markets allow the rapid transference of capital, and remove from any state the ability to manage its currency and economy. An increasingly universal culture (including human rights guarantees) threatens the power of the state to preserve the culture of the nation through law, links once remote sources of infection and epidemics and, perhaps above all, brings about dramatic demographic shifts toward the ageing. These developments challenge the legitimacy of the nation state by rendering impossible its promise to improve continually the equal material well-being of all citizens.
But the state is not going away even if its current incarnation, the nation state, is dying. The state will, as before, change the terms of its constitutional order by changing its legitimating premise. We can already glimpse the new "market state". In exchange for power, it will maximise the opportunities of the society it serves. It will reduce the nation state's characteristic reliance on law and regulation; it will use market institutions and incentives to conduct many government operations; it will be more responsive to capital markets and business networks. To quote Gordon Brown: "Neither the old 'fine-tuning' of the past, which appeared to trade off inflation for growth, nor the rigid monetary targets of the 1980s, made sense in newly liberalised capital markets."
Like the nation state, the market state assesses its economic success or failure by its society's ability to secure more and better goods and services; but in contrast to the nation state, the market state does not see itself as more than a minimal provider or redistributor. So it aims to alleviate poverty by providing the poor with education that allows them to participate fully in the labour market rather than by giving them generous welfare payments. It raises armies from volunteers, whose compensation must be competitive with non-military employment, rather than from conscription. It maximises a society's total wealth instead of maximising the wealth of any particular group (such as the poorest) and thus depressing total economic performance. Given the demographics of the developed world, only such a change can fund even the more modest social programmes of the future.
The imperial state sought to enhance the nation as a whole, the nation state to help the well-being of groups. The market state, however, tries to maximise the choices available to individuals. It wants to lower the costs and difficulties of individual choice and therefore emphasises education, transparency and accountability. The market state is classless and indifferent to race, ethnicity and gender; for evaluation, it prefers the quantifiable.
Margaret Thatcher and Ronald Reagan, for all their efforts to reduce taxes, were among the last nation-state leaders. They tended to centralise power, despite their rhetoric, because they wished to use the authority of law to enforce cultural norms. Reagan tried to criminalise abortion, Thatcher to introduce the poll tax. Both favoured enhanced criminal penalties for drug abuse. Both tried to break the unions; both exploited "wedge" issues in their political campaigns (affirmative action in the US, strikes in the UK), the opposite of the market state's politics of inclusion and its focus on the individual rather than the group.
By contrast, Tony Blair has seized many of the vantage points of a market-state leader. Thus, whereas Thatcher and John Major favoured privatisation because they preferred investors and managers to government operators in principle, Blair relies on private involvement only to the extent that he thinks it enhances public services. In public-private partnerships, the government says it is against total privatisation; it wants only to inject the public sector with the service ethos of businesses and their efficiency. The public sector will no longer be the exclusive provider of public services, as it is the exclusive provider of laws. It is no longer simply equated with the public interest. Rather, the state becomes an enabler, sometimes relying on non-profit firms, sometimes on private companies, to achieve its goals. So it uses private capital to finance new hospitals and prisons, encourages NHS trusts to send patients to private hospitals in order to cut waiting lists, and sells council housing to housing associations. A quarter of all councils have sold off their homes to housing associations so that they can raise private money to finance repairs and build anew.
Similarly, the outsourcing of council white-collar jobs in education, human resources and "back office" administration, as well as in refuse collection and street cleaning, are all characteristic of a market-state approach. Private sector firms run prisons, local authority revenues and benefit services, homes for the elderly, and even schools.
Blair himself seems to assess these reforms from a market-state perspective - that is, from the state's duty to maximise opportunity. "Everything we do," he said in February, "flows from our belief that in a fair and just Britain, everyone should have the chance to make the most of their potential." The object was to provide "more choice for the consumer". He spoke for greater devolution in the public services, to doctors, nurses, heads, teachers and police officers. When Blair said at the Labour conference last year, "we learnt that equality is about equal worth, not equal outcomes", he declared a market-state leader's point of view. His government's policies seem to start from the market-state premise: decriminalising cannabis; charging university students an economic fee (with subsidies to the needy to ensure that the opportunities depend on merit); requiring greater transparency for shareholders so they can evaluate executive pay.
This confrontation between old and new constitutional orders brings a certain ferocity to politics: as the premise of governing changes, adherents to the old order feel betrayed, adherents to the new exasperated. These conflicts do not fall along party or left/right lines. Nation-state leaders support affirmative action (from the left) or anti-abortion laws (from the right); they are hostile to private schools (from the left) or minority languages (from the right); they support hate-speech laws (from the left) or criminalising narcotics (from the right); they wish to ban hunting (from the left) or pornography (from the right). The common element is the use of law to enforce a nation's - that is, a historically created cultural group's - moral goals.
Advocates of the old order cannot quite believe the policy proposals of the new order because these are so unresponsive to nation-state assumptions. They seem simply pretence, perhaps a political gimmick, or merely unprincipled. An old colleague of Blair's said: "Come on, Tony, now we've won again, can't we drop all this new Labour and do what we believe in?" The Prime Minister replied: "It's worse than you think. I really do believe in it."
Market states will need to modify their indifference to communal values: our leaders must learn to cultivate, both in themselves and in us, values of loyalty, reverence for self-sacrifice, civility, respect for family life, regard for privacy and admiration for political competence. For this mission, too, I believe Blair to be exceptionally well suited.
Philip Bobbitt is the author of The Shield of Achilles (Allen Lane, The Penguin Press)