Friday, May 01, 2009

Don't believe the myth- Margaret Thatcher ruined egalitarian 1970s Britain

This piece of mine appears in the First Post.

Monday, May 4 marks the 30th anniversary of arguably the most significant event in post-war British politics: the coming to power of Margaret Thatcher.

The dominant narrative - accepted even by many who consider themselves to be on the left - is that Britain's economy in the 1970s was in such dire straits that our country urgently needed a change of direction.

Britain, in this account, was the 'Sick Man of Europe'. The unions and inflation were out of control. Our inefficient nationalised industries were an expensive disaster. The Labour governments of 1974-79 were complete flops. The post-war mixed economy model had failed.

But this narrative is a myth.

It's true that inflation hit 27 per cent in 1975, but this was largely a consequence of the Yom Kippur War oil price shock, which saw oil prices quadruple, and not a sign that the mixed economy model had collapsed.

By 1978, the British economy was rapidly improving. Inflation was down to single figures and unemployment was falling too. Productivity was rising, including in the nationalised industries. North sea oil revenues were starting to transform the balance of payments, which showed a surplus of £109m in 1977. And in December 1978 Britain recorded a massive trade surplus of £246m

During 1978, Britain's standard of living rose by 6.4 per cent to reach its highest ever level: so much for the 'Sick Man of Europe'.

"The outlook for Britain is better than at any time in the postwar years," was the verdict, not of a Labour party propagandist, but of Chase Manhattan bank's chief European economist, Geoffrey Maynard.

Bernard Nossiter, a Washington Post journalist, argued in his 1978 book Britain- the Future that Works, that Britain, unlike the US, had created a contented society that had managed to get the balance right between work, leisure and remuneration.

Far from having had enough of Labour and the post-war consensus, opinion polls show that the party would have won a General Election, had Prime Minister James Callaghan called one, as expected, for October 1978.

The so-called 'Winter of Discontent' of 1979 - which ushered in Thatcherism - is also shrouded in myth. James Callaghan never said 'Crisis, what crisis' - that was an invention of The Sun. The strikes themselves only lasted for a comparatively short period and were largely over by February 1979.

One might ask why all this matters. It does, because if we are going to break with neoliberalism, we need to shatter the myths put forward by Thatcherite ideologues. We need to understand the truth which was that the British economy performed far better 30 years ago than is commonly believed. The mixed economy model didn't fail. We were no more in need of Mrs Thatcher's 'painful medicine', than someone suffering from a common cold needs a course of chemotherapy.

Acknowledging the truth about the 1970s is important, because it means that we can then return to an economic model that served the great majority of Britons extraordinarily well for over 30 years after World War Two. It was a model under which large sections of the economy - including transport, energy and most major industries - were in public ownership; capitalism was strictly regulated and made to work for the common good and manufacturing was regarded as more important than finance.

In no other period in British history was there such a rapid rise in living standards. The gap between rich and poor was significantly reduced. As the One Nation Tory Harold Macmillan, one of the architects of the post-war consensus, famously declared, we never had it so good.

Since 1979 we have followed a very different economic path: one of deregulation, privatisation and allowing 'market forces' to rule the roost. And we all know where that has led us.


jock mctrousers said...

These are some good statistics, that need to be better known. That myth of Old Labour's financial incompetence needs to be challenged. Since Kinnock the Labour Party has spinelessly accepted a narrative composed by its enemies, or alternatively its been taken over by its enemies.
Robin Ramsay, editor of 'Lobster' journal (the 'journal of parapolitics') has an interesting slant on all that in his little booklet 'the Rise of New Labour'. He claims (roughly)that Edward Heath deliberately sacrificed the British economy to achieve the requirements for entry to the EU, and Labour inherited the mess; that, as Neil says, the British economy was essentially healthy and there was no need to go to the IMF; and that it was Old Labour's 'political incompetence' that led them to passively accept the blame being apportioned to them by the Tory-friendly press. It's a very interesting slant, which I don't really do justice here. So of course NuLab were correct to learn the lesson about the power of the press, but not right to simply capitulate to the right-wing agenda.
There is more support for the statistics Neil quotes, and Ramsay's argument, in the first 2 books by the award-winning Glasgow University Media Group - 'Bad News' and 'More Bad News', which are studies of the media presentation of the 'winter of discontent' and related matters, similar to the approach of Herman and Chomsky in 'Manufacturing Consent' but using their homegrown method (which created a bit of a stir on publication of their recent 'Bad News from Israel'). They compare the press reports on the state of Britain at the time with the available statistical evidence which shows that the days lost to strikes in the UK at that time was below the European average, and even below the UK average, but the press and tv waged a relentless campaign to misinform the public.

DBC Reed said...

One thing you have to remember is that Callaghan pretty well ushered in the Thatcher era with some absurd statements.e.g "you can't spend your way out of a recession"(1976);nobody's told Bush Obama and Brown this one ,thank God.His sidekick Tony Crosland weighed in with "The party's over"in 1975 starving local government of finance ever since,all those tatty parks with locked toilets.
Having inherited the mess created by the useless Heath and the embarassing Barber , instead of declaring like Enoch Powell,of all people ,that the unions were as "innocent as new born lambs" of causing inflation, Callaghan bought into The Big Lie and tried to squeeze inflation out of the system by keeping wage rises way below the rate of inflation to which the unions reacted with fury.And quite right too! The British unions did not want to be paid in depreciating currency and neither did OPEC which warned three or four times that it would put up oil prices if Western currencies drifted into inflation.
Callaghan stikes me a bigger class traitor than Ramsey MacDonald who at least enacted a Land Value Tax in 1931.

neil craig said...

And Labour never ran the place so incompetently they had to call in the IMF (& the liberals) to tell them how to do it. And it would be quite unfair to point out that most countries most years achieve their highest GNP ever so it is hardly an achievement - that being the nature of economic growth. And North Sea oil wasn't responsible for those high expoerts & in one of Thatcher's mistakes, for keeping up the £ & thus destroying more of our industry).

DBC I'm not sure what makes you think Bush, Obama 7 brown are examples of successfully spending your way out of recession. However you are right that, if one believe in monetarism, government & their printing presses, not the unions (& not OPEC) are responsible for inflation. The Labour party should not have let the Tories get away with saying that but since they were the government they kept silent.

Dan, portsmouth said...

Good article Neil,excellent

DBC Reed said...

@neil craig
It suited too many right-wing entrists in the Labour party to go along with the myth that the unions and OPEC were causing inflation ("inflation is always and everywhere a monetary phenomenon").
Kinnock,another disgrace,did n't say a dicky bird in favour of the miners.

Mr. Divine said...

Unemployment was rising in 1975, 76 77 78 79 .. there was no falling.

And yea how do you measure standard of living?

neil craig said...

DBC this is indeed the libertarian [position. It is a sign of the intellectual bamkruptcy of the socialist movement that, having accepted big state socialism they simply cannot endorse anything that does not involve ever more & ever more destructive government subsidy.

matt severn said...

falling economic production, stifiling inflation, the country torn apart by repeated strikes, bailed out by the was a terrible time. You are living in a dream world

Neil Clark said...

jock: great post, some excellent points. an interesting point is considering the hostility of most of the media, how well Labour actually fared in the 79 election.
if the neoliberal version of history re the 'nightmare' of life under 'old' labour in the 1970s is correct, why on earth didn't the Tories win a bigger victory?

DBC Reed: some fair points. Callaghan made two fatal mistakes- one, was not going to the country in the autumn of 1978, the other was not doing the deals he could have done to win the vote of no-confidence in March 1979. The opinion polls were beginning to improve for Lab in the spring again and if he could have postponed an election till the autumn he would have had a much better chance of winning one than in May 79, which simply came too soon after the industrial disturbances of January.

Dan: Many thanks!

Neil Craig: You're right- Labour never ran the place so incompetently. They didn't in 1964-70 and they didn't in 1974-79.
Britain was better off in 1970 than it was in 1964 and better off in 1979 than it was in Feb 74.

Mr Divine,
er, no.
u/e was 4.4% in 1977 and dropped to 4.3% in 1978 and to 3.9% in 1979.
Let's look at the figures for the first seven years of Mrs T's Premiership shall we: 5%;8.09%;9.4%;10.4%;10.6%;10.8%;10.9%. Pretty impressive, huh?

matt: take a look at the facts, don't just read Simon Heffer opeds about the 70s.

Anonymous said...

You gotta give Maggie one thing: she wasn't QUITE so keen as Blair to take our country into illegal wars.

Neil Clark said...

anonymous: you've got to remember that the world situation was different- the existence of the Soviet Union restrained the US. Thatcher argued for action against Yugoslavia in the mid 90s and supported both the bombing of Yugoslavia in 1999 and the equally unlawful invasion of Iraq in 2003.

Anonymous said...

An argument often used by supporters of Thatcher is that prior to Thatcher taking power the country was in a terminal state of decline and Thatcher came to the rescue. It it interesting to read a blog entry which questions this viewpoint.

conor morris said...

Very good article, highlites a lot of very good points.

Dominic Henderson said...

very interesting, can you cite any of the statistics you give?

Dominic Henderson said...

this is very interesting, but I'm not going to make the mistake of saying it's either 'right' or 'wrong' can you cite your information?

Anonymous said...

Margareth Thatcher drove a blooming economy into ruins, so far that by today our economy is still struggling.