The recurring subjects that dominated the news in the early years of the seventies were still filling newspaper columns and television reports at the end of the decade: rapidly
rising prices and soaring household bills; strikes and arbitration to halt their spread, along with great prominence given to pronouncements from trade union leaders; subsidies to the nationalized
industries; concern at the perceived failures of management and general introspection about Britain’s ‘national decline’; the tax burden; serious violence in Northern Ireland; the
forces of NATO and the Warsaw Pact facing each other across a dividing line separating two rival Germanys, with accompanying chilly rhetoric traded between the ‘Free World’ and the
elderly men of the Kremlin. It was as if a decade of strife had unfolded without actually settling any of its persistent problems – except that increasing numbers of television viewers (but
not newspaper readers) were able to see it all reported in colour. By contrast, a Briton gifted with the ability to switch seamlessly from the news of 1979 to that of 1990 would have been
astonished to find that – despite the intervening prominence of unemployment and the continuation of the IRA’s armed struggle – many of the daily staples of the seventies were
either no longer major concerns by 1990 or else had been transformed out of all recognition, while those that remained were analysed and debated through the prism of almost completely different
assumptions. Indeed, the transformation of the eighties, judged by this admittedly crude method, seems not only more profound than that which was wrought during the seventies, but also more primary
in nature than the breaks in continuity that could be spotted by flicking between Britain in the respective summers of 1991 and 2001. Change over those years was startling in spheres influenced by
the internet’s spread and in some social attitudes, but far less fundamental in politics and economics. Compared with the decades that preceded and succeeded it, the eighties truly exploded
with a decisive bang.
In 1979, democratic government was still the exception across most of the globe. Indeed, by then scarcely thirty-five democracies remained in the world. Thus the near worldwide collapse of
communism as a viable alternative model to both capitalism and liberal democracy was patently the greatest turnaround of the eighties. That the consequences were felt most acutely in
those countries that shed their Marxist–Leninist dogma ought not to detract from the enormous alteration to the parameters of thought and action in Britain that this
epoch-defining change inspired. At its most basic level, the fear of imminent nuclear annihilation receded and with it one of the great alarms of the past forty years. But that was not all. At the
start of the eighties, adherence to Marxist preconceptions was still not necessarily considered a mark of recondite eccentricity in academic circles; some self-confessed Marxists, like the Oxford
economist Andrew Glyn, held senior lecturing positions and others from an older generation, like E. P. Thompson, Christopher Hill and Ralph Miliband, continued to be widely read and admired. Active
membership of the Communist Party of Great Britain was no bar to being vice president of the NUM, a union so powerful that at least until 1985 it was credited with possessing the potential to bring
the country and its government to their knees. At the decade’s start, Labour Party membership remained open to Trotskyite ‘entryists’, many of whom proceeded, for a time, to wield
considerable authority in local government. Gorbachev’s
glasnost
and
perestroika
made Britain’s far-left appear backward-looking in their ideas, while the fall of the
Berlin Wall and the Soviet Union’s subsequent collapse dealt them a grievous psychological blow. These events necessitated new thinking from the conventionally minded as well. After all, the
Cold War’s end transformed what the UK had, since the late 1940s, believed to be one of its primary responsibilities in the world, and, having adjusted to the loss of empire, the receding
significance of the Royal Navy and the British Army of the Rhine after 1990 left Britain once again searching for its distinctive role. A major reassessment of government priorities followed.
During the eighties, approximately as much of the state’s total budget was spent on defence as on the NHS; by 2010, the NHS budget was three times greater than the defence budget.
The two issues that the Conservatives argued were the greatest concerns facing the UK at the outset of the eighties were inflation and trade union power. That neither remained front-rank worries
in the nineties and noughties might be considered a testimony to Thatcher’s ability to bring them to heel (though it was far from clear to observers in 1990 that inflation – which had
temporarily swelled back to 10 per cent – was defeated). Certainly, the differences in the corporatist relationship between government, unions and inflation before, during and after the
eighties could scarcely be clearer. The year of Thatcher’s accession, 1979, began with trade union militancy exerting such a grip on the economy that the Labour Cabinet had considered calling
a state of emergency and putting troops on the streets to keep essential supplies moving. It would not have been extraordinary if they had done so, since the similarly harassed Conservative
government of Edward Heath had felt compelled to declare a state of emergency on five separate occasions
between 1970 and 1974. Nor were the unions important merely because
strikes caused disruptions and lost revenue. They were partners in government to the extent that they were accorded a critical role in economic policy, agreeing with government ministers’
nationwide pay norms to prevent great numbers of employees – even in the private sector – from earning above a prescribed amount. In addition to this endeavour to restrain inflation
through an incomes policy, there was a prices policy, with many medium-and large-sized companies statutorily obliged to send proposed price increases to the Price Commission, which would then
decide whether to approve them according to the formula set by its Price Code. The principle of price regulation was to continue for major utilities where privatization did not create sufficient
competition, but the notion that inflation might be controlled across swathes of the private sector by bureaucrats second-guessing whether thousands of companies had got their prices
‘right’, rather than leaving them to be determined by the market, conveys how differently those in authority looked at problems before Thatcher.
The incomes and prices policies were among the first restrictions her administration junked, along with exchange controls, whereby an entire department of civil servants had existed purely to
prevent British companies, investors and holidaymakers from taking more money out of the country than they were allowed, to prohibit them from opening bank accounts in a different currency, and to
stop them buying as many foreign shares or properties abroad as they liked. That the state should have the power to prevent its citizens from freely walking out of the country with their own money
was, between 1939 and 1979, a generally accepted fact of life. Allowing Britons to invest their money wherever they liked was deemed ‘reckless’ and ‘doctrinaire’ by Denis
Healey, the former Labour Chancellor of the Exchequer.
1
And he was firmly on the right of his party.
Indeed, in assessing the extent to which Thatcher’s first and second administrations recast the political and economic climate, the telling contrast is not perhaps the obvious one between
the Conservative manifesto of 1983 and Labour’s counter-promises to erect tariff barriers around the UK in order to protect it from international competition, since even in the recession-hit
Britain of that year the electorate overwhelmingly rejected this incarnation of ‘socialism in one country’. Rather, the contrast is provided by the promises made in the 1983 election by
the Liberal–SDP Alliance. Widely identified as straddling the moderate middle ground, the Alliance emphasized the absolute necessity of bringing back a permanent incomes policy, on a
statutory basis if need be, restoring the Price Commission in a new guise and introducing a counter-inflation tax to be levied on those private sector companies that government officials adjudged
were ‘paying above the pay range’.
2
To this collectivist mindset, it was the state, rather than any compact
between employer and employee, that was ultimately the arbiter of the fair rate for the job. Furthermore, the Alliance opposed privatizing any of the existing nationalized companies.
The most remarkable characteristic of the SDP was that it was a new party with old ideas. Yet, by the end of the eighties such seventies solutions were off the agenda of all the main parties, and
even Labour had given up on the prospect of renationalizing British Telecom, British Airways and the other major corporate entities whose ownership was now in the hands of millions of shareholders,
unit trust investors and pension fund providers.
Thatcher ‘forced the political debate in Britain on to the ground of who can best run a market economy’, her admiring former Cabinet colleague Nicholas Ridley summarized, ‘it
is no longer about whether we have a market economy or a socialist one’.
3
It might be added that her name and her party were never on the
ballot papers in countless other nations where this has also become the narrower choice. Nonetheless, it was decisions taken in the UK during her time that provided the critical impetus for a
global revolution in economic thinking, which extended across the two succeeding decades. No country had previously attempted privatizations on the scale of those floated on the London Stock
Exchange in the mid-eighties, and the British model was duly studied and followed around the world. Those most responsible for this export of an idea ought perhaps to have stood comparison with
such once-revered mid-Victorian free-traders as Sir Robert Peel, Richard Cobden and John Bright, at least in terms of their worldwide influence. Eighties Britain was not just one more country
caught up and pulled along in the trend of globalization. Alongside the expanding range of Wall Street, which Big Bang helped integrate with the City of London, Britain was the trendsetter of
globalization.
The previous, mid-Victorian age of globalization had facilitated Britain’s efforts to become the ‘workshop of the world’. In contrast, late twentieth-century globalization saw
Britain’s share of international manufactured trade diminishing. By 1990, the number of Britons employed in wholesale and retail finally overtook the number engaged in manufacturing. It had
taken the better part of two centuries, but Napoleon’s claim that the country was ‘
une nation de boutiquiers
’ was finally realized. Actually, it was not the French emperor
who first coined the phrase. Fittingly, it was Adam Smith. His treatise on
The Wealth of Nations
was published in 1776, but might have been meant for the age of Thatcher:
To found a great empire for the sole purpose of raising up a people of customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a
project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers.
4
The outnumbering of makers by traders raises the question of whether this was a natural and benign development or, if it was preventable and malign,
whether policy in the eighties should have been different. Could keeping exchange controls and other interventionist measures to shore up manufacturing companies have helped shield the
country’s industrial base, thereby providing jobs, income and self-respect to communities that were instead torn apart by the factory closures of the period? Making capital more mobile
encouraged it to seek the best return for its investment wherever that might be found and to be indifferent to whether this benefited workers in Goa over those in Gateshead. Some consequences of
this internationalization of capital and ownership are discussed in chapter fourteen.
EN54
But it should not be presumed that British industrial
decline would have been reversible if capital movement had continued to be restricted and government had remained interventionist. In this respect, a cross-Channel comparison is instructive. When
the UK’s exchange controls were scrapped in 1979, the manufacturing sectors in the UK and France accounted for, at around 27 per cent, almost exactly the same share of their respective
national GDPs. Instead of following the British Treasury’s lead, the French continued to restrict the outflow of investment in an effort to keep capital tied up within France and to support
French industry, only abolishing exchange controls eleven years after the British, in July 1990. By then, rather than diverging, the two countries’ respective manufacturing sectors remained
within a fraction of each other, at around 23 per cent of GDP. Nor did France’s more interventionist tradition cast a discernible shadow over results thereafter. In 1999, the gap was still
marginal, with the 19.3 per cent of French GDP generated by the manufacturing sector being scarcely different from the UK’s 18.5 per cent.
5
By
2010, manufacturing was contributing 11 per cent to France’s gross value added measurement to GDP and 12 per cent to that of the UK.
6
If it
was specifically Thatcherism that destroyed British industry, how is France’s comparable decline – much of it under the socialist Mitterrand – to be explained? What the UK’s
early abolition of exchange and other capital controls did ensure (and which France’s delaying actions did not bequeath to Paris) was the renaissance of its financial sector, upon which the
taxes to fund everything else became increasingly – and some believed overly – dependent.
In this environment, the competitiveness of what remained of British industry, as with other economic sectors, came to rely upon the effectualness of Thatcherite ‘supply-side’
reforms, which removed obstacles to productivity (for instance, disabling trade union militancy), delivered lower costs for purchasing the necessary equipment and raw materials (free trade),
and lessened the risk and expense in taking on – and dispensing with – employees (fewer statutory employment rights, entitlements and restrictions). The
subsequent replication, at least in part, of this approach throughout much of the world, alongside important technological advances like the internet, helped drive the twenty years of post-eighties
low inflation. It may also be posited that had such ‘supply-side’ conditions existed to depress inflationary pressures at the beginning of the eighties – in place of the high
prices that were the reality – then the tough interest rate squeeze of 1980–1, which finished off so many struggling industries, would never have become a requirement of monetary
discipline and dole queues would have been kept much shorter. What might have been achieved in the eighties without the burden of three million unemployed remains the great ‘what if?’
of the decade.