"If governments served the people, regulated capital in the public interest, protecting consumers from the usual exercises of corporate power, demanding higher product safety standards, workplace protections and so on, capitalism itself would be undermined."

Analysis of the role of the state in contemporary capitalism usefully begins with understanding neoliberalism as a ruling class project. We know what it means in its Thatcher-Reagan clarity, reducing interference in the market which is aimed at restraining capital, hence deregulation, privatizing government functions, selling off its assets and contracting out whatever functions governments remain. The beneficiaries of such policies express their gratitude in supporting politicians who favor their interests. In the U.K. debate over the accountability of quangos and how they should be seen ideologically represents a counterpoint to the larger issue of the fiscal crisis of the state. All of this market-driven stress on the purported efficiency of private enterprise and the lack of competence of government, allows "common sense" balance the budget conservative politicians to win elections by denouncing the government they run or wish to run.

All of this is true but why does it work? Surely the ideology is supported with deep pocketed funding of think tanks, media empires and continuous opinion molding campaigns powerfully supported by influentials in the business world and government. But if neoliberal policies have reduced the security of most members of society, promoted inequality and hardship, why isn't there ideological resistance, opposing political movements which contest for hegemony? What has happened to parties presumed to support working people, Labour in the U.K., the Democrats in the U.S.? Is everyone a sellout? Is it as simple as people just being bought? Yes and no.

In most formal democracies there are two dominant parties or coalitions. One is of the right-center, the other of the left-center. The former embraces chauvinist nationalism typically with a racist tinge that is for lower taxes and cutting "waste" from the public debt. Its base is among small business people, more isolated small town and rural residents, and social conservatives who see ominous and shadowy powers controlling their lives from afar doing them harm. The major beneficiaries of the actions of these parties in power are the wealthy and influential elites the base of support has every reason to dislike. The left-center promises to regulate capital so that markets operate "fairly" and endorses a certain amount of redistribution and provision of public goods. Its reformist program, of limited scope, legitimates the system. It does not challenge, but rather supports its rationalization and facilitates, without offending powerful fractions of capital, a smoother accumulation path. Left-center politicians see themselves as being realistic and acting pragmatically; that is they accept the constraints the really existing capitalism of the moment imposes.

It is best to see neoliberalism as a response to class interests and the structural constraints capitalism puts on a society. The social surplus produced by working people is appropriated by capital - this is why the system is called capitalism. Workers are paid and are able, to an extent varying with their bargaining power, to provide for their families. The surplus value created in production goes to the owners of capital.

In a true democracy the majority would, in the normal course of things, demand that the government as representative of the people impose progressive taxation, to appropriate the large part of this surplus that does not go to reinvestment in productive activities, to meet public purposes - providing socially desirable goods and services such as health care and education, and provide for those excluded from employment by the system's norm of keeping a large part of the potential workforce in reserve to hold down wages generally, in the form of job creation to directly meet social needs, day care, neighborhood clinics and so on and providing for those unable to work, or who should not be asked to work, single-parents of young children, students who should not have to work while they are engaged in studies and so on. Capital of course objects to such a societal role for the state which strikes at its class domination. It therefore demonizes the state as inefficient and wasteful - even as it is instrumental in preventing the state from being efficient.

If governments served the people, regulated capital in the public interest, protecting consumers from the usual exercises of corporate power, demanding higher product safety standards, workplace protections and so on, capitalism itself would be undermined. Free enterprise is about preserving the autonomy of capital over social decision making, not simply in the realm of production, but in the operation of government and insuring the class privilege of the elites which are the small, top two percent or so which own the means of production, and the penumbra of well paid media flacks, lawyers and others, who serve their interests.

Neoliberalism is the contemporary ideology attacking the gains the working class has made in the past, limiting the power of capital by redistributing part of the social surplus to meet public need and regulating the crudest, most harmful abuses of capital. In the face of repeated economic crises brought on by the natural tendency in a capitalist system to overexpansion and collapse (the boom and bust business cycle), the working class is expected to accept the cost of the crisis with more unemployment and higher taxes while the state bribes capital to create jobs which are not provided in the number needed despite payment of extortionist demands. In the present global financial crisis bankers' well known efforts to keep the bubble going were rewarded with huge amounts of taxpayer monies - to save the banks so they could renew the same practices under the same incentives that had led to the crisis. The crisis is occasion for those who always want to roll back gains made by the working class to force wages down further and withdraw hard won public services.

The struggle over the deficit is about the balance of burden between workers and capitalists. On the face of things the return to record profitability and bonus levels in finance suggests confidence that it will be working class taxpayers who will be left responsible for paying for capitalist crisis. The demand for a downsizing of the public sector is in part the taking advantage of the crisis by those who always wish to destroy the public sector, "to shrink it to the size it can be drowned in a bathtub," as one leading American anti-government crusader famously put the matter, but also in part to make further funds available to absorb losses taken on by the state from the financial sector, and to weaken confidence in government to deal with other pressing problems such as the environmental crisis.

A serious response to this challenge commensurate to the need to end the capitalism accumulation model based on rampant consumerism and waste would be to face issues of the carrying capacity of the planet. To renew, indeed re-enforce the power of financialization as an engine of redistributive growth invites new asset bubbles and new debt fueled marketing. Despite evidence that the resource base of such an expanded consumerism would make life as we know if less possible for the planet, capital sees no other option than perpetuation of its accumulation model which in Anglo-American and other centers of finance has become more dependent on the production of fictitious capital - an M-M' model of appropriation from the productive surplus.

In the past, a reformist social democracy in European countries and a liberalism embodied in New Deal reform was convincing to most working class voters. The ideology suggesting capitalism could be tamed and made to work better for working people was supported by significant reformist accomplishments. The material situation allowed such a politics to be the common sense of "the thirty glorious years" following the Second World War. In this country what is left of the liberal-labor alliance is marginalized by the centrist corporate Democrats who dominate the party at the national level. It is important to understand that this is the case and a different politics grounded in the actualities of the current stage of global capitalist development be pursued.

To oversimplify, but not too greatly, what we have seen is a shift in the politics of transnational capital and international banking which in weakened condition coming out of the Great Depression and World War II wanted labor peace, access to global markets, and saw need to use state power to promote infrastructure and education to underwrite its own growth. From the 1930s it found benefit in allying with labor against national capital and small business which favored austerity, holding down taxes and wages. In what is called the era of national Keynesianism, the post World War II years in which the coalition of organized labor and those elements of capital which had been forced to recognize unions in the 1930s and saw government activism to stimulate demand as good for their profitability, enabled Welfare State gains.

In today's world playing by the rules of capitalism means a declining standard of living for workers of the core countries where there is over the decades since the end of the post World War II period a decline in the growth rate, reduced investment in the real economy, and a takeover by the financial sector which thrives on speculation. Transnational capital based in the countries of the core looks to the emerging market economies for investment opportunities. Looking at the problem in terms of the need for citizens of the U.K., the U.S., and other countries of the traditional core of the world system to adjust to new realities and accept further neoliberal-based policies is to misdirect attention from the system. Thinking beyond the ideological limits imposed by capital and its servants in government requires going beyond denouncing neoliberalism to an anti-capitalist position that explains what is happening in class terms and understanding the system building a movement to overcome it.

William K. Tabb is Professor Emeritus, Queens College, City University of New York. He is the author of Economic Governance in the Age of Globalization (Columbia University Press, 2004) and The Amoral Elephant: Globalization and the Struggle for Social Justice in the Twenty-First Century (Monthly Review Press, 2001) among other publications.