It was a grand idea for a demo, a marriage of guerrilla theater and slick ad-agency wit. On May Day–a week before Prime Minister Tony Blair officially launched his re-election campaign–London was transformed into a virtual Monopoly board to spotlight the destructive power of capital. There was a rally against Third World debt outside the World Bank in the Haymarket, cardboard hotels to protest homelessness on Park Lane, free veggie burgers outside McDonald’s at King’s Cross and plans for a Sale of the Century in the consumer canyon of Oxford Street–all squares in the British version of the game. Facts about world trade were printed on Monopoly money; legal advice was dispensed on cards marked “Get Out of Jail Free.”

Despite the advance hysteria about armies of brick-throwing anarchists, most of the demonstrators seemed “fluffy” to the point of marshmallowdom. Overthrow Capitalism and Replace It With Something Nicer, one banner suggested politely. A man dressed as Mary Poppins defied a mayoral order by feeding the pigeons in Trafalgar Square; cyclists in sparkly wigs protested the reign of the car. But after last year’s riot, in which shop windows were smashed and Winston Churchill’s statue got a green mohawk makeover, the police were taking no chances. They herded the demonstrators to Oxford Circus, where 6,000 officers in riot gear kept 5,000 people trapped for seven hours with nothing to drink but the rain. By late afternoon, to no one’s surprise, the predicted violence had materialized.

Without the police cordons holding it together, the demonstration could easily have slipped from pluralism to total fragmentation. Some groups came out to share the work they do all year; others seemed interested only in a good protest party. There were no unions, no community associations, few pressure groups of any kind. This splintering of purpose is partly a reflection of disfranchisement. According to a Channel 4 poll, most people in Britain agree that multinational corporations have more control over their lives than Tony Blair’s government, and that those corporations care only about their profits. None of the mainstream parties address these concerns. Last year’s May Day protesters dug up Parliament Square; this year the action had moved to the true symbols of power: the banks, McDonald’s, Niketown.

The general election that will give New Labour its historic second term is set for June 7, but there is no tension, no buzz: We might as well be reappointing the chairman of Britain plc. Representative government seems more and more of a sham. MPs are slaves to the party whips, who force them to vote with their leaders regardless of constituents’ views. Policy is made, American-style, by the administration in Downing Street and its unelected advisers. When George W. Bush announced his plan to go ahead with the Son of Star Wars missile defense system, it was Blair’s press spokesman, Alastair Campbell, who confirmed the government’s intention to toady along as usual, minutes after his boss had made a far more cautious statement in the House of Commons.

There’s also no viable opposition. The Liberal Democrats (who often pop up these days on Labour’s left flank) are shut out by Blair’s endless postponement of the promised referendum on proportional representation. Conservatives are busy picking over William Hague’s bones, maneuvering for position in the leadership contest to come. Inevitable defeat has brought Tory right-wingers out of the woodwork, and Hague’s halfhearted attempts to keep his party’s right arm from flying wildly upward have satisfied no one, marking him finally for the cull. The Tory foot-in-mouth outbreak began with an MP’s comment that Labour is turning the British into “a mongrel race”; before long Margaret Thatcher’s old lieutenant Lord Tebbit was confiding on prime-time radio that he knows of no happy multicultural society. Even in Britain, where publicly acceptable “concern” about asylum-seekers stands in for unacceptable racism, such comments tend to place the Tories (just) beyond the pale [see John Ghazvinian, page 20].

In these circumstances, one might expect Labour to be more forthright. Here is a party whose poll ratings hover near the 50 percent mark, whose huge majority has been predicted (by that arbiter of elections The Sun) to increase on polling day to 227 seats. None of the setbacks of the first term seem to have left a stain–the truckers‚ fuel-tax blockade, a generous spray of scandals, railway disasters, Ken Livingstone’s mayoral victory against the party machine, the collapse of what used to be British Steel. Even the piles of bovine corpses burning nightly on TV are beginning to fade in the memory, though the crisis in the countryside continues; perhaps, after mad cow disease, bonfires of carcasses have come to seem a normal part of the agricultural year.

Hoof-and-mouth, the livestock virus that made Blair push back his original election date, is largely a disease of the market. Harmless to humans, it causes animals to gain less weight and yield less milk; its rapid spread was made possible by intensive farming, which involves the transport of animals over many miles. The government’s policy of rejecting vaccination in favor of mass slaughter, applied with great fanfare and inefficiency, catered primarily to the meat export trade and the big farmers represented by the National Farmers’ Union. Its human victims are small producers, some of whom lost their livelihoods, and people who work in the tourist industry selling Britain’s “traditional” landscape. They are a politically marginal lot, and the media are tired of whingeing farmers.

Yet for all its Teflon track record, it is hard to imagine a government less clear about what it has done and where it is going. As the campaign began, Labour was busy spoon-feeding each audience what it wants to hear. The Financial Times got an exclusive: The Prime Minister will again promise not to raise income tax. Meanwhile, The Guardian and The Mirror were offered Labour’s plans to introduce “baby bonds”–trust funds endowed by the government to give every child the financial cushion enjoyed by the middle classes. To discern Labour’s true direction you have to triangulate the leaks and count the cost: Baby bonds will come to less than $1.5 billion a year, while the chancellor’s 1 percent cut in income tax is already costing $3.5 billion.

The spin doctors at Millbank have apparently decided to take the Gore tack and fight on the right, though apathy is a far worse threat than William Hague. There will be “tough” speeches on crime, patriotism, asylum and immigration–the one issue on which the Tories have led Labour in the polls. The government has done nothing to counter the xenophobia bubbling furiously in the press, even on the pragmatic grounds that immigrants contribute 10 percent more to the economy than they take out. Among the asylum-seekers who have been “processed” and sent home to clear the waiting lists before the election are a group of Iraqi Kurds, who evidently have nothing to fear from the same Saddam Hussein Britain is still bombing. In compensation, minorities and the liberal-minded are offered bland speeches about how chicken tikka masala is now Britain’s national dish.

Pundits here like to parse the sources of Labour’s mealy-mouthed caution. Is it the still-fresh trauma of eighteen years in the wilderness, in which case the party may yet emerge transformed from a new victory? Or is it conviction–or lack of it? Unregenerate optimists point to Thatcher’s radical second term as an example of a miracle wrought by a mandate. But the record of the past four years reveals a pattern of modest reform stalled by two immovable forces: an absolute refusal to discomfit business, and a Rottweiler’s instinct for control.

The government’s most radical changes–not much boasted about–have been constitutional. The implications of the Scottish Parliament and the Welsh Assembly are only just beginning to be felt. Unlike their English peers, Scottish students can still go to university for free; Scottish education and healthcare are so much better managed that many who live south of the border choose to commute for them. But the lines of responsibility and power are blurred. Wales has declared itself a GM-free zone, yet it can’t stop the government from running crop trials in its fields; it can opt out of Westminster’s plan to set up more specialist schools but has no control over teachers’ pay.

Blair’s intellectual belief in decentralization is at war with his deep mistrust of democracy, as shown in his botched attempts to install New Labour yes men as London mayor and Welsh Assembly leader. He has turned the hereditary peers out of the House of Lords, but the “People’s Peers” appointed to replace them might have been bused in from a New Labour cocktail party. Meanwhile, government control over the citizenry has intensified. There has been no progress on freedom of information. Under the new Terrorism Act it is a crime to go to a dinner party with a member of one of the Home Secretary’s proscribed international groups; the Criminal Justice and Police Bill will make it an offense not to obey a police officer who tells you to leave a demonstration. It’s a good thing Nelson Mandela, recently honored with a Trafalgar Square concert and a Cambridge degree, is out of prison: The new law could have banned demonstrations in Britain for his release.

Labour’s first term was understood to be a time for laying foundations–that is, for demonstrating fiscal prudence and exorcising the Old Labour bogeyman. Now comes the second act, in which, we are told, the National Health Service, public transport and public education will once again be made the envy of the world. The party came to power in 1997 with a promise to stick to Tory spending limits for the first two years; in fact, it has spent less than the Tories on public services in each year of this Parliament, despite a comfortable budget surplus. There is a serious shortage of British teachers willing to work for low pay, and doctors on the frontlines of the NHS are so stressed that they recently threatened to quit en masse. Petrified of the old tax-and-spend label, Labour has recycled its pledge to increase numbers without raising income tax. Critics on both right and left complain that the sums won’t add up. As one columnist put it, “Britain cannot have EU spending and EU standard public services with US tax rates.”

If the details of Labour’s plans for revamping the welfare state have not yet been unveiled, there are plenty of clues to the government’s thinking in what has been done so far. Reform of benefits and taxes has begun to reduce the appalling number of children living in poverty. But the very poorest children, many of them in single-parent families, are worse off than they were before. New Labour’s New Deal, with its insistence that those on benefits work or join programs to help them pull up their socks, tends to leave the weakest and neediest out in the cold. Gradually Blair has moved Britain further away from Beveridge’s ideal of universal provision, a system of welfare, healthcare and education for all. Instead of a public trust founded on mutual responsibility, the welfare state is becoming a handmaid to Labour’s vision of “aspirational Britain”–charity, not solidarity. No one would quarrel with the aim of helping people to help themselves. But if private enterprise is valued over public commitment, and if those who depend on state assistance are stigmatized as failures, the sense of community still palpable in state schools and doctors’ offices will soon be fractured. With it will go the best defense of British citizens against the caprices of global capital.

Rather than making a renewed case for tax-based public funding as the best way to protect public services, Labour is opening doors everywhere to private corporations. Failing schools are already handed over to business-run partnerships; among the companies directly involved in educating British children are Shell Oil, weapons manufacturer British Aerospace, sweets and soda giant Cadbury Schweppes and (of course) McDonald’s. The dress rehearsal for the new system is the Private-Public Partnership, a plan to partially privatize the London Underground. Mayor Livingstone is against it; so is Bob Kiley, the former chief of New York’s Metropolitan Transit Authority, whom Livingstone recruited to run London Transport. But the government is deaf to warnings about safety, cost and quality emerging from London Transport’s own studies, even after the (literal) train wrecks caused by Thatcher’s breakup of British Rail.

There’s not much talk anymore about the Third Way, the mystery ingredient that put the New in New Labour. If you had to distill a definition from the experience of the past four years, you might say it is a form of caring capitalism that eats away membranes protecting the body politic from opportunistic businesses in the belief that the organism as a whole will benefit. The true test will come when the recession bites Britain, as no doubt it will, and businesses start to look elsewhere, as they already have. Under this longed-for Labour government we have seen competent management and an end to postimperial gloom, some overdue constitutional changes and a new commitment to Europe, a modest redistribution and the granting of a few essential rights–a minimum wage, the formal right to belong to a union. But the gap between rich and poor has widened, civil liberties have been eroded, the health service and the schools remain in crisis. British workers still have less protection than their European colleagues, and corporate taxes, lower than in any other industrialized country, have been reduced still further. The weather this year has been so awful that even a sliver of sun piercing the gray feels like blazing summer. Judging by the election forecasts, it is the same with politics.