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The Tories'
economic legacy WORKING CLASS PEOPLE have now had to endure almost thirteen years of Tory government. The Tories have proved to be loyal servants to the wealthiest in society. Since they were el ected the average income of the top tenth of the population has gone from £162 a week to £545 a week; the bottom tenth from £42 to £99 a week.* Enormous sacrifices of jobs, housing, and the welfare state have been made by workers in the past decade.
The Tories argue that it was all worth it. that Britain is 'Great' again. Thatcher. for example. in October 1990, answered Labour criticisms with the following words: "Absolute poppycock. Is he (a former Labour minister - PV) not having any regard for the total industrial and commercial transformation that has taken place in this country, the colossal increase of production, the colossal increase in efficiency in our manufacturing industries, the freeing up of the whole financial sector... Is he not considering the far terer strikes we have now because we got trade union law right? Is he not consid. ering the extra investment we are now getting in industry because.. people are no longer afraid of the word profit? Poppycock. Codswallop. Bunkum and balderdash. They could not have done it. It took someone with real spine to do it." (Veursteek).
How true are Thatcher's words? Has the last decade revitalised the British economy and laid the basis for prosperity in the 1990s? To answer that question we must explore what the Tories intended to achieve and whether or not they succeeded in their aims.
Their theory was based on supply-side econ omics. The job of government and the state was not to help job creation or industry by pumping money into the economy: These demand-side 'Keynesian' methods (after the economist. Ke!nes) were seen to be the evils that had caused inflation and the economic problems of the 1970s. The role of the state was to be dramat- Pete Watson examines the Tories'
claims to have 'laid the basis for prosperity in the 1990s'.
ically reduced. Spending was to be cut back, and state-owned companies. land and housing were to be sold off.
The tax system was to be reformed. There was to be a shift from income tax to VAT. High rates of taxes for the rich were seen as holding back wealth creation and investment. With lower rates of taxation there would be more money to invest in jobs: with more jobs would come more tax revenue. Neither should the state interfere in the transfer of capital abroad. While the frontiers of the state were to be rolled back in these areas, government had to inter- * Much of the information in this article is from the recently published book be Christopher Johnson, The Economy Under Mrs Thatcher. 19-9.1990. As a specialist adviser to the Commons Treasury Select Committee. Johnson provides a host of authoritative statistics about the Thatcher years. He is, however, no socialist. He debunks monetarism but can provide no coherent programme to solve the cconomic problems of British capitalism. He overplays the possible successes of a government working under capitalism while underplaying the role of the world economy in the events of the 1980s. With these limitations, a good reference book. The Economy Under His Thatcher: 1929-1990. by Christopher Johnson. Published by Penguin, 1991 at $5.94.
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15 cont
Geoffrey
vene in to union reform.
The Tories in 1979 were supporters of the ideas of 'monetarism'. This theory holds that it is the quantity of money that is the most important factor in the overall level of spending and economic activity in an economy. Price stability is a key question for capitalists: too much money chasing too few goods' may lead to inflation. Through stable prices they hope to predict the costs of production and can therefore lay long-term investment plans.
For monetarists the only action required by government to ensure prosperity and price stability is for the central bank, the Bank of England, to stabilise the rate of growth of the money supply at a rate equalling the rate of growth of the economy. In its purest form monetarism opposed any 'interference' in the workings of the market by government except for central bank control of the money supply.
This theory is incapable of solving the problems of the British or any other economy. The roots of economic crises under capitalism do not lie in the money supply but in the production process itself. Targets for monetary growth cannot remove the basic source of crisis and contradiction under capitalism, which is the incapacity of workers to buy back the goods they produce and the tendency for profit rates to decline. Furthermore, a removal of state subsidies, cuts in spending and privatisation, do not mean wealth and 'freedom of choice' for workers. The 'free market' means freedom to make profits for the few: for the rest, barbaric conditions.
The military police dictatorship of Pinochet in Chile implemented this 'pure' form of monetarism. By 1985 eight million Chileans out of a total population of eleven and a half million were undernourished. Such are the wonders of the 'free market"! Pinochet succeeded temporarily in effecting such a programme because of the defeat of the Chilean working class in the counter-revolution of 19°3. The Tories also feared the power of the labour movement. Milton Friedman, theoretician of monetarism. once called trade unions a 'distortion' of the free market. (Capitalism and Freedom, 1962). The Tories saw unions as a barrier to capitalist develop. ment. They protected wages and conditions. If these were protected it meant slimmer profit margins for the employers. The 1980s therefore saw eight major bills plus other minor legislation intended to shackle the unions in the legal chains of Employment Acts.
These were the intended aims of the Tories. Cut public spending, transfer public owned assets into private hands, cut personal taxation for the rich, control the money supply and therefore inflation, and break the power of the trade unions. Through creating conditions for profitable production. the 1980s were expect-
crucial
prices
ed to creati essful
be a decade of economic on and rising living standard
were they?
growth, job s. How succ-
ONE OF THE proud boasts of the Tories is that they had inflation 'licked' in the 1980s. The facts say otherwise. Inflation, as measured by the Retail Price Index, rose 7.3% a year so that the price level doubled in the 1980s. This was worse than the average for the advanced industrialised world at 5.5% (OECD average). If Britain was to truly be regarded as a world power once again it should compare favourably with the big three industrial nations. The average inflation rate for Germany was 2.9%. Japan 2.2% and the USA 5.5%.
Monetarism was quickly abandoned as the magic potion to cure the British economy. Various monetary measures were used, MO, M2 and M3, to limit and control the money supply. All to no avail. By 1981 Geoffrey Howe, then Chancellor of the Exchequer. virtually disowned monetarism and switched to tax increases as well as cuts to attempt to squeeze out inflation. Interest rates rose during 1981 to 16%, making loans more difficult to come by and shutting industries down.
Inflation fell from 22% in 1980 to 4% in 1983 but at what cost! Tory policy had deepened the recession. The years 1980 to 1983 had the worst recorded growth in post-war history. 0.3%. Over two million jobs were lost: many manufacturing jobs were lost forever. To this catastrophe Thatcher responded with the phrase, TINA - 'There Is No Alternative'
Inflation fell. This did not mean that the economy had become 'fitter. Howe's 1981 budget had cut spending in the economy but inflation was falling in most industrialised countries anyway due to the fall in the price of commodities coming from the less developed world. The capitalist class internationally were bus! transferring their crisis onto the masses of the ex-colonial world. This remained a feature of the 1980s.
Inflation was to jump again later in the decade when the then Chancellor Nigel Lawson released tbn into the economy through tax cuts. No economic theory based on capitalism has been able to cure inflation: only a vibrant and healthy economy can suppress inflation. This was not the Britain of the 1980s.
"THE GOVERNMENT OF business is not the business of government" said Nigel Lawson in 1982. The Tories set out to dismantle the public sector. Employment fell in this sector from 7.4 million to six million from 1979 to 1989; 1.5 million council houses were sold by 1989: &29bn was raised through the privatisation of companies such as British Telecon and British Gas; a further £3lbn was raised from sales of land and buildings. By 1988 government spend-
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ing was 7% less as a proportion come than it was in 1982-83.
One of the purposes of this programme was to reduce the level of taxation. Nigel Lawson once said that "exorbitant taxes, like extreme necessity, destroy industry by producing despair." Lower taxation was to bring incentives to work and invest. But despite privatisation the tax burden rose not fell. As a percentage of gross domestic product (GDP) - the total of Britain's production omitting net income from abroad - the average tax burden rose from 34% in the 1970s to 37% in the 1980s. Moreover, it was higher at the end of the 1980s than at the beginning. The rich didn't suffer though. Through tax cuts, someone on over $70,000 a year in 1990 had gained an incredible £36,060 a year hand out!
But privatisation and public expenditure cuts had a wider purpose than just tax cuts. They were to bring 'efficiency', and freedom of indiv- ¡dual choice. They were to bring in 'a shareowning democracy'
There has been an enormous rise in home ownership. The proportion of owner occupation is now higher than France or West Germany. But this has not created a new system of ownership in Britain. Home ownership merely means that a family's income is dominated by a bank or building society rather than a landlord or local authority. The leap in house repossessions over the last two years confirms this. House prices have jumped on average from $21,000 to £62,000 in the last decade. Prices as a whole have only risen two times.
Hasn't privatisation spread ownership society? It is true that the number of holders has risen from three million in 1 nine million in 1988. But 60% of new holders own only one share; 22% own or shares. The percentage of shares held personal sector has actually fallen in the from 28% in 1981 to 20% in 1988. In was 54%.
Privatisation has helped government spending. Without its proceeds the government would have overspent for every year of the 1980s except one. But it is just a 'one off. Like North Sea oil and gas, it can provide a windfall to government revenue. But when all major assets are privatised, what will fill the revenue gap?
across
share- 979 to
shareily two by the 1980s.
1963 it
"THE TRADE UNIONS have become the biggest obstacle to raising the living standards of the working class as a whole; they are the chief cause of unemployment and the main reason for the decline of the British economy... Britain remains paralysed by the consequences of the coercive powers irresponsibly conferred on the unions by the law; there can be no solution for her until these special privileges are revoked." (The 1980s: Unemployment and the Unions
NATER
You could be an Owns CANO.
E BRITISH
So said Fritz von Hayek, one of Thatcher's favourite economists. While in public the Tories talked of there being "no need for confrontation" (The Right Approach to the Economy, 1977), behind the scenes plans were laid for an assault on trade union rights.
Having learnt the lessons of Heath's defeat at the hands of the trade unions in the early 1970s, the Tories played their hand cautiously: Thatcher was to pay dearly for an all out "big bang' approach to the class struggle when in an overconfident mood she unleashed the poll tax on ine working Class. But with trade union legislation the Tories attempted to adopt a policy of death by slow strangulation. Acts were passed in most years of the last decade. 'Secondary" picketting was outlawed, unions could be penalised for unofficial action, protective measures for women workers and youth were removed and secret ballots were introduced
At the same time on the industrial front itselt the Tories were feeling their way towards a confrontation with the union they teared most, the National Union of Mineworkers. The 1980 steel strike, the 1981 civil service strike, and the 1982 rail and NHS strikes, were bitterly fought and ended in compromises. The government made concessions to the miners in 1981 to avoid a fight at that time.
In 1978 a secret report from a policy group headed by Nicholas Ridley had been leaked to The Economist. The Ridley Report, as it became known, was pessimistic, for example, about the prospects of defeating strikes in the public sector, particularly in water, gas, electricity and the NHS. "The eventual battleground should be chosen by the Tories in a field they think should be won." But it went on to explain how to lay the basis for a victory against the miners. It was
Dismantling the public sector.
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hatcher was fortunate to
lead a government
during a orld boom.
necessary, it explained, to build up coal stocks. prepare for coal imports, introduce dual oil and coal firing in all power stations, and encourage non-union lorry drivers. It was also necessary to prepare a "large mobile squad of police equipped and prepared to uphold the law against violent picketting." These prophetic words were acted out in 1984-85 when the NUM, comprising just one per cent of the TUC membership, brought the Tories to the brink of defeat.
The miners' strike was prepared for and provoked by the Tories and the ruling class. It cost the economy £2bn. Its defeat meant subsequent unemployment and pit closures for mining communities. Nigel Lawson declared the jump in public spending due to the strike "a worthwhile investment for the nation". (The Economy Under Mrs Thatcher. p228)
Trade union membership fell by three million in the 1980s, from 57% to +6% of all employees. Days lost in strike action in the second half of the 1980s fell to a third of the early 1980s. It is wrong however to draw the conclusion that the Tories have won the war and the trade unions are now defeated. Trade union leaders are steeped in this pessimism. But it is they who bear the main responsibility for the deteats inflicted on the working class in the past decade.
The 1980s were not years of industrial peace The years to 1985 were similiar to the 1970s in terms of days lost in strike action. The decline in strike action since then has been an international phenomenon. The boom up to the end of the decade had in some cases allowed employers to buy industrial peace, swapping productivity changes for pay rises, while the retormist prejudices of union leaders had been temporarily strengthened. Warfare between the classes has not been abolished: it has only been temp orarily hidden or has appeared in a different form than strike action. But even in this historic low of days lost in strike action, in 1987-89 92% of strike ballots held produced votes in favour of industrial action.
The offensive against trade unionism has borne fruit for the employers in one sense. Manufacturing labour productivity (real output per employed person) went up by 4.5%% a year over the decade. This represents more work per employee as jobs are shed from industry, and more profits extracted per worker by the employer Average capital productivity (real output per unit of capital) however, only rose 0.8% a year and manufacturing investment only 0.6% a year on average. The picture is one therefore of an economy where profit rates were pushed up-
wards through the sweat and toil of workers rather than through manufacturing investment.
Any economy that bases its manufacturing strength on an intensified exploitation of labour, through speed-ups, job cuts etc, rather
than investment in new plant and machiner!
will eventually become uncompetitive on a
world scale. A worker has only so much strength and speed to do the job. Neither can he or she work 24 hours a day. Machinery, on the other hand, can constantly be improved to produce goods cheaper and of better quality.
This picture was confirmed in Britain with the rise in imports: after 1988 Ellbn more manufactured consumer goods per year came into Britain than were exported. The base of Britain's economy has been increasingly shifted from manufacturing, the heart of a strong economy, towards finance and services. Between 1979-89 there has been no increase in profits at all in manufacturing. Finance and services showed a 7.4% annual increase.
The rate of growth of the British economy in the 1980s - 2.2% per year in a decade of 'boom' - was the same as the 1970s and worse than the 1960s (3.3% ). It was 0.6% lower than the average for the advanced industrialised countries. No amount of 'incentives' and 'supply-side economics could revitalise British capitalism.
Thatcher was fortunate to lead a government during the world boom of 1983-1990. She was able to bask in the reflected glory of the modest progress that was made by the major capitalist powers in those years. She attempted a balancing act between the European Community and the USA as if Britain was their economic equal: her intransigence on Europe and her over-confidence on the poll tax led to her downfall.
Britain's performance was poor next to its competitors. Its growth rate was below average. its unemployment and inflation rates were worse than its rivals. While profitabilit! and productivity grew in the 1980s. its manufacturing base was seriously eroded in comparison with other advanced capitalist countries. That erosion continues.
Investment in all sectors has slumped during the current recession. Gross private non-residential fixed capital - the assets held by the capitalists excluding buildings. stock, money. land and natural resources - fell in 1990 by 0.-%% over the previous year. The OECD average for the adranced capitalist countries showed a rise of 5%. In 1991 it was estimated to have fallen by a catastrophic 10.8% compared to an average rise of 0.1%. (OECD December 1991).
Britain's performance was even poorer when it is considered that the world boom of 1983 to 1990 was comparatively weak. In the great post war upswing between 1950 and 1973 more was produced than in the previous three quarters of i century and man! times more than any comparable period in human history. By 19-3 output was almost three times that of 1950 in the advanced capitalist countries as a whole. In comparison. growth (GDP) between 1983 and 1989 was an average of only 3.6% per year in the advanced industrial countries (OECD).
The first period of the world boom between
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1983 and 1987 was a weak consumer-led boom with sluggish investment. US government spending was crucial. President Carter proposed a budget deficit of $15.8bn for 1981; the deficit in 1992 is expected to be $345bn! Cheap commodities from the ex-colonial countries were also important. World growth was slow until 1988 and even after then was lower than the 1960-1973 average. Productivity between 1979 and 1988 was less than a third of the average of 1960-1973 and investment and profitability only briefly surpassed the earlier period in 1988 and 1989 (OECD figures).
It was only in 1988 that investment rose significantly and a real boom took off. This was due to rising profitability and the necessity to expand production capacity after five years of consumer-led boom. The world economy simultaneously received an extra injection of money capital released by big business because of the collective fear created by the world share crash of 1987. This period of capitalist investment and relatively large increases in production was short-lived. In two years it was over. Britain by 1990 had been a weak partner in what had been a weak boom.
THE TORIES STAND for a property owning democracy'. Yet Britain could not even be described as a 'free market. The 1980s saw increasing monopolisation of industry. While fixed capital spending by industrial and commercial enterprises doubled between 1983 and 1988, expenditure on mergers multiplied eightfold. In industrial sectors such as cement, tobacco and margarine. the top five companies have a market share of 80-98%. No government, Labour or Tory, can plan growth, jobs and prosperity on the basis of capitalism. Decisions are made in the boardrooms and not through the ballot box. And not even any one boardroom can have a final say on how the economy progresses.
This will undermine the plans of the Labour Party leadership who also base themselves partially on 'supply-side' cconomics. Training. research and development, and transport, are to be developed by a Labour government to provide the framework for the capitalists to invest and develop the economy as a whole. The Labour leaders policy document. Looking to the Future states: "We welcome and endorse the efficiency and realism which markets can provide... the market can be a good servant but is often a bad master." But who would be the servant and who the master?
The same document links public spending growth to economic growth. What if there is no growth? The 8% cut in public spending made in 1977 by the then Labour government was far sharper than cuts made in any one year under Thatcher.
The 1980s were not years of deep right wing reaction. They were the years of the miners' The Tories strike, the Liverpool city council campaign, and prepared the anti-poll tax movement. The self-confidence carefully for the miners'
of the British ruling class and the Tories rose through the decade partly due to the economic boom and the crisis of Stalinism. and also partly because of the utter failure of the leadership of the labour movement to effectively channel the anger of workers against the class enemy. Thatcher and her government scored an important political victory with the Falklands War of 1982. And like other governments around the world, the boom assisted their re-election. But there was little basis for that self-confid- COLE ence. There are deep-seated problems in the British economy. The working class remains the decisive force in British society: only a leadership is needed to release its enormous latent power.
If a government that had the friendship of the ruling class and which was 'wind-assisted by a world boom could not transform the British cconomy. how can an incoming Labour government! Only a programme that involves the nationalisation of the commanding heights of the cconomy can begin to correct the damage done to industry and to workers lives during the Tories years in office. It must have at its forefront the idea that socialists want democratic control of the economy. not the sham democratic socialism of the Labour leaders. All parliamentary parties at present formally support the right to vote in local and national elections. Why should it not also be our right to vote in the running of the workplaces and our communities? Real and consistent democracy cannot be found in the programme of the Tories or right-wing Labour. It is the property of genuine Marxism. O MIR O15
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