There’s already plenty of commentary, here and elsewhere on Margaret Thatcher. Rather than add to it, I’d like to compare the situation when she assumed the leadership of the Conservative Party with the one we face now. As Corey points out in his post
In the early 1970s, Tory MP Edward Heath was facing high unemployment and massive trade union unrest. Despite having come into office on a vague promise to contest some elements of the postwar Keynesian consensus, he was forced to reverse course. Instead of austerity, he pumped money into the economy via increases in pensions and benefits and tax cuts. That shift in policy came to be called the “U-Turn.”
Crucially, Heath was defeated mainly as a result of strikes by the coal miners union.[1]
From the viewpoint of conservatives, the postwar Keynesian/social democratic consensus had failed, producing chronic stagflation, but the system could not be changed because of the entrenched power of the trade unions, and particularly the National Union of Miners. In addition, the established structures of the state such as the civil service and the BBC were saturated with social democratic thinking.[2]
Thatcher reversed all of these conditions, smashing the miners union and greatly weakening the movement in general, and promoting and implementing market liberal ideology as a response to the (actual and perceived) failures of social democracy. Her policies accelerated the decline of the manufacturing sector, and its replacement by an economy reliant mainly on the financial sector, exploiting the international role of the City of London.
Our current situation seems to me to be a mirror image of 1975. Once again the dominant ideology has led to economic crisis, but attempts to break away from it (such as the initial swing to Keynesian stimulus) have been rolled back in favour of even more vigorous pursuit of the policies that created the crisis. The financial sector now plays the role of the miners’ union (as seen in Thatcherite mythology) as the unelected and unaccountable power that prevents any positive change.
Is our own version of Thatcher waiting somewhere in the wings to take on the banks and mount an ideological counter-offensive against market liberalism? If so, it’s not obvious to me, but then, there wasn’t much in Thatcher’s pre-1975 career that would have led anyone to predict the character of her Prime Ministership.
fn1. I was too far from the scene to be able to assess the rights and wrongs of these strikes or the failed strike of the early 1980. It’s obvious that the final outcome was disastrous both for coal miners and for British workers in general, but not that there was a better alternative on offer at the time.
fn2. The popular series, Yes Minister, was essentially a full-length elaboration of this belief, informed by public choice theory
{ 33 comments }
Freddie deBoer 04.09.13 at 3:53 am
Pardon me for cross-posting this comment.
But the power of our finance sector is different from the power of the miner’s union in both degree and kind. The miners had power from their political organization but (far more crucially) through direct action. Unfortunately, direct action is always subject to the application of state force. The state only needs sufficient coercive force to overwhelm that of a union for direct action to fail, and the application of such force is built into our system from the ground up.
The financial class, meanwhile, has power because it has money. That control, too, could potentially be disrupted by state action. But we have neither a functioning legal and practical apparatus to discipline capital in this way, nor a culture that is currently ready to accept the imposition of force to counteract the power of capital. As much as the 70s might have been a time of labor power relative to today, the state already had systems in place to clamp down on labor, including through the application of actual force. There’s nothing in our system or our culture, currently, that could do the same against the banks, or even more, the bankers.
I hope what you envision is possible, but smashing unions was a tried-and-true activity of power in the 1970s Anglophone world. A similar kind of direct imposition into our financial system– like, say, nationalization, whether partial and temporary or otherwise– is possible, but not at all ingrained in our systems today. So I’m pessimistic.
david 04.09.13 at 5:04 am
That seems a little implausible four years after Northern Rock was nationalized. The bureaucratic apparatus certainly exists, it’s that the zeitgeist of acceptable policy ideas doesn’t specify doing so for reasons other than stabilization.
david 04.09.13 at 5:18 am
(and if your response is “but it’s utterly impossible to inject ideas into the Serious Person zeitgeist”, there’s this obscure blogger called Scott Sumner that may surprise you…)
MM 04.09.13 at 7:13 am
This is OT on this post, but I am late to the party and there isn’t much point in commenting where it wouldn’t be read, so:
I find the vitriol against Thatcher hilarious. I don’t see any specific person blamed for the hollowing-out of the industrial base of W. Virginia, western PA, Buffalo, Ohio, basically the entire midwest; yet we must hold Thatcher personally responsible for what befell various bits of the UK, for much the same reasons and at much the same time as the industrial decline in various parts of the US (well, Thatcher was responsible for speeding along the demise of a sclerotic system that had held on in the UK longer than might have been considered polite, but she didn’t cause the implosion). Had Thatcher been a regular Tory – male, privileged, with a hyphenated surname – she might have gotten away with it: “those Tories, can’t expect any better from them”. But she was female and middle-class, and so what she did was a betrayal, explainable only by her being deeply evil or deeply misguided.
History of course has borne her out. She won 3 elections herself; she might have won more but for the momentary lapse of reason that was the poll tax. And parties and leaders essentially in the Thatcher mould have won every single election in the UK since 1979. Meanwhile, the vitriol kept on, and keeps on, flowing.
JRHulls 04.09.13 at 7:25 am
Thatcher’s economic policies were always a disaster right from the start. Her continued existence in office was almost entirely dependent on the north sea oil boom, which effectively reversed Britain’s balance of payments, while decline in further enhanced the favorable impact of the boom. One merely has to look at the effects of the boom as shown graphically in this Birmingham University article.
http://www.socscistaff.bham.ac.uk/backhouse/homepage/aukm/Chapter9.pdf
Note especially figure 9.6 on the dramatic impact on balance of payments, the rise of which corresponds almost directly with the rise of Thatcherism and the financial sector and the decline of UK manufacturing. Thatcher’s luck was Britain’s misfortune. If her continued economic leadership had been forced to rely on the effects of her economic policy rather than the North Sea boom, her tenure in office would have been very short.
JRHulls 04.09.13 at 7:25 am
Should read decline in Sterling
derrida derider 04.09.13 at 7:36 am
“Thatcher reversed all of these conditions, smashing the miners union and greatly weakening the movement in general”
With, it must be said, an enormous amount of assistance from the miners union and the movement in general. There really WAS a problem of organisations of doubtful democratic legitimacy and representativeness wrecking the mixed economy.
Tim Worstall 04.09.13 at 8:14 am
“Her policies accelerated the decline of the manufacturing sector, and its replacement by an economy reliant mainly on the financial sector, exploiting the international role of the City of London.”
Slightly odd. Manufacturing output was higher when she left office than when she entered. Indeed, manufacturing output was higher when she left office (obviously, correctly adjusted for inflation) than it had ever been previously. UK man output peaked in 2006/7 I think it was. Maybe 2005.
Today manufacturing is about 12% of UK GDP. About the same as France, pretty much exactly on the global average of manufacturing as a %ge of GDP.
The City (according to Willem Buiter at least) is about 4% of GDP. Total financial sector, including retail insurance etc, is some 8 or 9% of GDP.
I’m sure it’s possible to say that there should be more manufacturing and less finance. But I’m unconvinced that “Her policies accelerated the decline of the manufacturing sector, and its replacement by an economy reliant mainly on the financial sector, exploiting the international role of the City of London.” is wholly and exactly true.
david 04.09.13 at 8:16 am
Given the Chavez post earlier, it strikes me that there’s a hilarious symmetry between giving Chavez credit for the natural-gas boom and giving Thatcher credit for the oil boom. Both expensively papering over cracks in ideological flights of fancy.
Harald K 04.09.13 at 8:37 am
Oil in the Soviet Union is another example of a resource boom papering over cracks in ideological flights of fancy. Any more?
bert 04.09.13 at 8:38 am
Worstall, you should truncate all your posts to “Slightly odd.”
The current coalition talks a lot about regulatory arbitrage (if we clamp down on finance it will simply move elsewhere). A LibDem-flavoured subsection makes this argument in good faith, while the rest of the coalition uses it as a convenient alibi for doing nothing. It’s an argument that needs an answer. Perhaps the introduction of a Tobin tax that shored up the fiscal positions of the governments that imposed it would lead by example.
I heard the movie director Ken Loach on the radio the other day (this link probably won’t work if you have a non-British IP address). He was promoting a film called The Spirit of ’45. Essentially though he wants a rollback of Thatcherism. If the rollback could stop at 1979 he’d be happy to go from there, and have a go at pushing a gassy fantasy of ‘industrial democracy’ as the way forward. If you’ve seen Land and Freedom you’ll have a sense of exactly how practical that program would be.
Ken Loach shouldn’t be dismissed. If you’ve not seen Kes you’ve a treat in store. But his politics don’t make sense, partly because he refuses to engage with the problems of the 70s and sort the actual problems from the perceived problems, as John puts it. Thatcher was a weird combination of reactionary and revolutionary, and the crisis of the 1970s created the space for someone like her to operate.
david 04.09.13 at 8:45 am
Could any faction of the 1970s UK labour (or Labour) left have successfully organized a graceful decline of coal mining from the economy?
Tim Worstall 04.09.13 at 9:27 am
“Ken Loach shouldn’t be dismissed.”
I do so dismiss: he once nicked a girlfriend off me. Sorry, an independent woman decided upon him rather than me. Not that that has anything at all to do with his politics……
marcel 04.09.13 at 11:30 am
Tim:
Slightly odd.
Barry 04.09.13 at 12:38 pm
david 04.09.13 at 5:04 am
” That seems a little implausible four years after Northern Rock was nationalized. The bureaucratic apparatus certainly exists, it’s that the zeitgeist of acceptable policy ideas doesn’t specify doing so for reasons other than stabilization.”
I think that the difference is that nationalizing (even a failed) large bank is a rarity; crushing unions through massive use of force (legal or illegal, depending on the needs of the day) is the *norm* in many countries (including the USA).
Also, one question is the background of the political class. IIRC, Labour would have been run by people with strong union backgrounds and connection; the Tory Party would not have been. In both the US and UK today, both parties are run by people with far closer connections to the financial elites than to anybody in an actual labor movement.
Josh G. 04.09.13 at 1:18 pm
Most commentators seem to take it for granted that Britain in the late 1970s was broken and needed to be “fixed”, but Neil Clark disagrees. Since I wasn’t alive in the 1970s and have never lived in Britain, I’m probably not the best person to say for sure, but such limitations don’t seem to stop many other pundits from praising Thatcher as the greatest thing since sliced bread.
MPAVictoria 04.09.13 at 1:21 pm
“Oil in the Soviet Union is another example of a resource boom papering over cracks in ideological flights of fancy. Any more?”
Alberta, Canada
rf 04.09.13 at 1:28 pm
“Oil in the Soviet Union is another example of a resource boom papering over cracks in ideological flights of fancy. Any more?â€
Saudi Arabia
Tim Worstall 04.09.13 at 3:10 pm
“Oil in the Soviet Union is another example of a resource boom papering over cracks in ideological flights of fancy. Any more?â€
Venezuela?
ajay 04.09.13 at 4:32 pm
Could any faction of the 1970s UK labour (or Labour) left have successfully organized a graceful decline of coal mining from the economy?
The Labour Party, in government in the 1960s, successfully organised just such a decline. Harold Wilson closed more pits and laid off more miners than Margaret Thatcher ever did. British coal mining was on a more or less steady downward slope in terms of both production and employment from 1959 onwards.
ajay 04.09.13 at 4:34 pm
Slightly odd. Manufacturing output was higher when she left office than when she entered. Indeed, manufacturing output was higher when she left office (obviously, correctly adjusted for inflation) than it had ever been previously.
Why, it’s almost as if the UK economy changed size between 1979 and 1990. As though it… grew. Can any economists here comment on whether that might be possible? A national economy, growing?
Sounds slightly odd to me.
Bruce Wilder 04.09.13 at 6:37 pm
I wonder if others are reading the post on Bretton Woods as being of a piece with Quiggin’s?
David Kaib 04.09.13 at 7:10 pm
“From the viewpoint of conservatives, the postwar Keynesian/social democratic consensus had failed, producing chronic stagflation, but the system could not be changed because of the entrenched power of the trade unions, and particularly the National Union of Miners.”
I’m not sure this is right. I think from the point of view of neoliberals around the globe, the central problem was the entrenched power of workers. The economic crisis provided the legitimation needed to break the power of unions and non-elites in general. The problem with the consensus was that it placed too much limits on the top and undermined desperation for everyone else.
Dave Weeden 04.09.13 at 9:00 pm
John, I’ve got to disagree about “Yes, Minister”. It was inspired as much as anything by the Benn Diaries. (Now, OK, you can make a case that Tony Benn was also against Social Democratic thinking, but I don’t think that was the point.) Rather, it’s a genuinely timeless critique of our kind of democracy. Smart, even decent, people can get elected, but a technocratic society requires years of training. The civil service will always know much more than an MP parachuted into a department. Of course they resent ministers and blind them with facts. I largely sympathise with them: why should some populist MP, who last week (say) was blustering about immigration, suddenly be qualified to say what constitutes a university degree, or decide if food production is safe?
Of course, on the other hand, the civil service can suffer from groupthink, or the “it was always done this way” approach.
Atticus Dogsbody 04.09.13 at 10:30 pm
Did I see the Crooked Timber masthead on ABC24 last night?
purple 04.10.13 at 2:47 am
Thatcher wasted North Sea oil – it’s worse than merely saying she benefited from it.
Meanwhile Norway sits on a $740 mm SWF fund from their North Sea reservoir.
Britain has exactly nothing to show for their oil but some groovy rich people who benefited from the privatization it enabled.
John Quiggin 04.10.13 at 4:49 am
@Atticus: You probably did, I had it on-screen for the setup shot for my interview. I have a superstitious horror of watching myself on TV, so I didn’t see it.
John Quiggin 04.10.13 at 4:53 am
@Dave W: Here’s Antony Jay, writing the Foreword to an IEA volume on public choice theory
http://www.iea.org.uk/publications/research/government-whose-obedient-servant-a-primer-in-public-choice
in which he explains how his experiences led him, by a different route, to the same conlusions as those of this ‘admirable book’.
Google produces heaps of references making the same point – this was the only one I could find quoting Jay directly.
pjm 04.10.13 at 5:11 am
I am surprised no one has commented on how the most radical and divisive Prime Minister of the 20th C was elected 3 times without a majority of the popular vote.
Pete 04.10.13 at 11:56 am
pjm, is that a comment on the interaction of FPTP and a three-party system, or an oblique way of pointing out that she was re-elected despite “unpopularity”?
pjm 04.10.13 at 2:00 pm
@Pete 30. I think FPTP is a problem. I have a tendency believing that much of the cynicism about UK political institutions (across the spectrum) derives in some measure from it.
sherparick 04.10.13 at 6:16 pm
One of the great changes that occurred between when the Mineworkers destroyed Heath’s (and later John Callaghan’s Labor Government – http://en.wikipedia.org/wiki/Winter_of_Discontent) was that U.K, still depended pretty much on coal for power and heat. However, in the early eighties North Sea oil and gas was being produced in large quantities and Thatcher’s Government had also stored up large surpluses of coal. Thatcher, not withstanding the merits of the case, was very strategic and adept tactically in the conflict with the NMWU. She avoided an open confrontation through her first term, only embarking on the campaign after winning the big majority after the Falklands Khaki election and making preparations for a long strike. Meanwhile she did a great job of painting Arthur Scargill, with help of whole Tory party, right-wing media, and the BBC as the villain of the piece. When strike occurred she was ready and the workers were divided.
As for the deindustrialization and the “Full Montying” the Midlands, Scotland, and Northern England, although Thatcher did not provide much cushion, the same process was going on in the American Midwest and the old industrial areas of Germany, Belgium, and Eastern France.
pjm 04.10.13 at 7:38 pm
@Sher 32. The last time I was doing any social sci grad school Governing The Economy was required reading detailing the respective fates of France and the UK. Iirc, the conclusion was that the UK fared much less better than France in terms of the manufacturing base because of the greater influence of the the finance sector. Before we give Thatcher a pass on de-industrialization it might be helpful to remember that the loss of manufacturing base isn’t so important in itself as how fast and who bear the costs.
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