Tag Archives: 1979

Inflation and unemployment – the Margaret Thatcher experience

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From 1979, inflation doubled in the first year of the Thatcher administration from 10% to 22%. The recession that followed brought the rate down to 5% in 1980. At the same time, unemployment soared to a breathtaking three million – and that was the official figure.

For Thatcher, inflation was always a bigger priority than unemployment. This was unusual at the time because memories of the starving jobless in the 1930s still loomed large in Britain.

Whereas in Germany, memories of hyper-inflation chimed more with the Thatcher viewpoint. That’s not to say British people weren’t fed up with price rises in the 70s – but the spectre that haunted families more was the prospect of the breadwinner being out of work.

To combat inflation, Thatcher embraced an economic theory called “monetarism” that necessitated high interest rates, higher taxes (VAT doubled almost straight away) and sharp cuts in public spending. The result of what one politician dubbed “voodoo economics” was disastrous for millions of people between 1979 and 1981.

It didn’t even work very well as a theory. Inflation was brought under control by 1980 but the money supply continued to grow. So there were further spending cuts that led to calamitous falls in economic output and whole regions de-industrialised. Unsurprisingly – monetarism was dumped by 1984.

To get a clearer idea of Thatcher’s thinking on inflation, I found a 1974 speech made in Preston by Thatcher’s economic guru Keith Joseph. He made it very clear that inflation was regarded by the Tories as the main enemy and not the traditional bogey of unemployment.

In fact, he argued, governments had been so spooked by the Great Depression of the 1930s that they thought mass joblessness was always around the corner. So governments spent money and then tried to hold down pay with incomes policies – always unsuccessfully.

Keith Joseph’s words in 1974 make interesting reading given what was to happen in Thatcher’s first two years in power with unemployment leaping:

It is perhaps easy to understand; our post-war boom began under the shadow of the 1930s. We were haunted by the fear of long-term mass unemployment, the grim, hopeless dole queues and towns which died. So we talked ourselves into believing that these gaunt, tight-lipped men in caps and mufflers were round the corner, and tailored our policy to match these imaginary conditions. For imaginary is what they were.

“Inflation is caused by governments” – speech by Keith Joseph in 1974

Already by the mid-1970s, people were shocked by an unemployment level of 500,000. Joseph swept that aside. Public money should not be used to create jobs. And anyway, he went on, a significant percentage of the unemployed were shirkers and scroungers.

There are the drifters and hippies who draw “welfare” but engage in activities to earn money, legal or illegal. From time to time the Ministry carries out local checks, and suddenly the number of registered unemployed melts away. How many fraudulent unemployed there are at any given time can only be estimated, but they probably account for at least a tenth of the registered unemployed at normal times. We ought to do more about such people, but expanding demand will not turn them into honest men.

“Inflation is caused by governments” – speech by Keith Joseph in 1974

The Great Depression of 1979 to 1981

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Anybody over 50 years of age who lived in the Midlands or North of England and Scotland after 1979 will remember the economic depression that ravaged the industrial heartlands. I went to university in Liverpool in 1981 just after a summer of riots in that city and can recall well the sight of closed factories and decaying docks.

So – what on earth happened at that time? Up until Margaret Thatcher took over in 1979, unemployment had actually been falling for two years. Inflation had been brought to under 10%. Industrial output was finally ticking up as were living standards. The middle of the 70s had been disastrous. The Labour government of James Callaghan had to grovel to the International Monetary Fund for a bail out. But by the end of the decade, the economic indicators were improving. Plus oil from the North Sea was about to provide a bonanza.

However – Thatcher played to a sense that the post-war political consensus had run into the buffers. Even if the economics looked more favourable, the political and social environment in Britain was very volatile. Many people were fed up and looking for decisive leadership. And so Thatcher was elected. Unfortunately, she came into power wedded to what Labour Chancellor of the Exchequer Denis Healey described as “voodoo economics”.

Pursuing a monetarist economic policy turned a global recession into a British depression. Our unemployment sky-rocketed from 1979 to 1981 from about a million to three million – and that was the official statistics. Those stats were constantly revised in the 80s to massage them downwards.

Big rises in interest rates, indirect taxation (VAT), the exchange rate and cuts in public spending depressed demand and accelerated factory closures and bankruptcies. Every evening, the TV broadcast news would announce thousands of job cuts and names of firms now facing closure. These included household name brands and affected all sectors.

I got used to reciting the figures as a young political activist at that time. Manufacturing jobs slid by 22%. In vehicle production, jobs crashed by 28% – nearly a third of those in work. Young people were disproportionately affected with under-25s making up 40% of the jobless total. Two out of every three school leavers couldn’t find work. As the recession continued, it became clear that the number of long-term unemployed was increasing at an alarming rate. Many who had worked in blue-collar manufacturing, mining and dock work were stuck on the dole.

The incredible cost of this level of unemployment was around £17bn in benefits and lost tax revenues. I’d have to calculate the real cost in today’s money. That is a 1981 figure. It didn’t make economic sense. But it made political sense. For Thatcher, inflation was the real demon and fear of losing your job was a weapon against the power of the trades unions.

The death of Blair Peach and the Southall riot

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In 1979, the Labour prime minister James Callaghan called a general election after dithering for months. The extreme right National Front hoped this would be their breakthrough and organised a provocative rally in Southall, an area of London that had seen the growth of a large Asian community. The result was a violent clash between fascists, anti-fascists and police resulting in the death of a teacher called Blair Peach. This is part of an account I wrote several years ago based on contemporary reports:

The National Front arrived as planned at around 7pm and wound up the crowd with some Nazi salutes from the Town Hall steps.  The party was required to admit members of the media but refused to allow the Daily Mirror in with an NF steward explaining “we are allowing in reporters from decent papers who are not black lovers”.

The NF’s youth organiser Joe Pearce surveyed the sit-in and declared the NF would “send back every single Asian out there”.  Rather more curiously, their parliamentary candidate John Fairhurst promised that if elected he would ‘bulldoze’ Southall to the ground and replace it with an ‘English hamlet’.

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Blair Peach – died in the 1979 Southall riot

As the NF meeting got underway, a young teacher from New Zealand, an activist in the Anti-Nazi League, sustained a blow to the head from a weapon that left him staggering in to a nearby house.

The impression is sometimes given that Blair Peach died instantly in the street but in fact he was still conscious though very dazed and finding it hard to speak when the ambulance arrived a quarter of an hour after the injury.  There was no blood or external trauma but it’s clear that he was suffering from a swelling in the brain, what’s termed an extra-dural haematoma.

Blair Peach died in an operating theatre at the New Ealing District Hospital at 12.10am.  After his death, Met Police Commander John Cass was asked to investigate what had happened.  His full report was only made public three decades later.

A total of 31,000 man hours would be spent looking in to the circumstances of Blair Peach’s demise but not enough evidence was found to launch a prosecution.  However – Cass performed one action during his enquiry that leaked out at the time.

On 5th June, 1979, he ordered the lockers of SPG officers to be opened and searched.   In court, Cass revealed that he had discovered a range of irregular weapons. These included a sledge hammer, two jemmies, a three foot crowbar, a yard long piece of wood, a metal truncheon with a lead weight at the end and, what really excited the media, a “Rhino whip”.

There was no suggestion that any of these were used against Peach and Commander Cass was at pains to say that he could not prove that these items had been taken to Southall on the fateful day.

But thirty years later, the report by Cass clearly showed that he believed Peach had been killed by an officer in an SPG unit.  He was also convinced that certain officers had obstructed his investigations.

The police handling of the National Front meeting in Southall could have been so different, even by the standards of the late 1970s.  The newspapers at the time contrasted what happened there with a similar situation in Plymouth.  In that town, the NF meeting had been abandoned after Anti-Nazi League members filled the hall ahead of their arrival.

The Sun was unimpressed, seeing this as a breakdown in the police handling of the situation.  But it transpired that the Chief Constable in that part of Britain had taken the view that it was the NF that needed monitoring by the police with a view to bringing charges against them for stirring up racial hatred.

Notting Hill carnival ends in riots

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In the summer of 1981, riots gripped every major city in Britain – but with particular ferocity in Brixton, London and Toxteth, Liverpool. However – there had been some dress rehearsals in the years immediately previous. Throughout the late 1970s, Notting Hill Carnival had ended in violence. Some of the following account contains language from that era that obviously I do not endorse. 

In the run up to the 1976 carnival, the Carnival Development Committee faced opposition to the big event from several quarters.  Chief Superintendant Ron Patterson was photographed for the local newspaper holding up a long roll of paper – a petition by local residents to stop the carnival.

“It was handed to me by a North Kensington housewife.  She said it was a token of support for the police by the ordinary people of North Kensington.”

Local councillors suggested moving the event to White City stadium and the Chief Superintendant thought Battersea Park would be an acceptable alternative.  The top cop even took a member of the carnival committee for a walk in the park to convince them that it would be a better venue than the streets of Notting Hill.

But the committee decided to stand firm on the now almost traditional carnival route over the August Bank Holiday and one might say that battle lines were drawn.  The black community wanted its festivity while councillors, residents and the police were either hostile or distinctly lukewarm.

Through the Spring, the carnival organisers and police had increasingly intemperate meetings over the route, stewarding and liquor licensing.  What became clear was that in 1976, the police presence would be upped in spite of a warning from the Black People’s Information Centre that this would be an explosive move.

The very fateful day arrived and before long, tens of thousands of people had thronged the streets.  Estimates of the eventual numbers on the streets vary from 150,000 to 200,000 so the carnival was already a major event in Britain.

One young guy remembered the steel bands playing and drifting away from his friends, found himself at the corner of Acklam and Portobello Road.

“Across the ‘bello flies a highway and under the fly-over the heavy dub groups were staging their section of the carnival, belting out the sounds of bass guitars.”

The followers of various sound systems were in attendance including one called Prince Melody.  But the young black reveller didn’t have much time to take in the sounds as he walked in to a large group that already had about thirty policemen on the run.  All around, he could see people picking up whatever was to hand and throwing it at the cops.

Somebody selling revolutionary pamphlets decided that this was one barricade he didn’t wish to stand on and packed up.  Nearby, loudspeakers were blaring ‘Chase Them Crazy Baldheads Out of Town’.  And to cap off this surreal scene of mayhem, a black woman was shouting in to a megaphone: “Yeah, lick them.”

As photographs of the time testify, the police had indeed turned out in force but once the heat was turned on, many of them had only dustbin lids and bottle crates for defence.  There were no riot helmets, padded uniforms or shields.  Instead, many had zero head protection, were in rolled up shirtsleeves and just swinging a truncheon around.

But if the crowd thought this was a rout for the police, they were about to be disabused.  They had been surprised by the ferocity of the crowd reaction but the retreat was a moment to regroup not leave.

The young guy now saw a ‘rastaman’ standing in front of five hundred youth and shaking a red, green and gold stick in the air urging them to “burn the wicked”.

“I walk through fire,” he yelled, strutting towards the cowering officers.  Behind him, more cautiously, came the youths still hurling bricks and bottles.  But suddenly things changed dramatically.

‘Get them!’

The cry came from the police lines and a phalanx of dustbin lid clutching Metropolitan officers hurtled forward, truncheons chopping the air in all directions.  The rastaman disappeared in the melee and the young guy was bundled in to a police van with four others.

Coats covered the windows and he claimed a police inspector poked his head in the head door and barked an instruction to a subordinate.

“Take down the coats, they mightn’t stone us if they see niggers inside.”

Though there would be several stages towards the development of the riot police we know today, this was an early milestone.  After the 1976 carnival, the police returned – minus their Chief Superintendant who had moved on – with much better equipment.

Instead of flooding the area haphazardly and relying on bottle crates for defence, the police returned with shields, helmets and even night goggles.  Battle re-commenced with an expectant media having pretty much earmarked an annual carnival riot in their planning calendars.

The media would not be disappointed.  All hell duly broke loose in 1977 with a distinctly unpleasant bust up between police and revellers inside the Mangrove Restaurant on All Saints Road.  The restaurant had turned away a gang of youths they felt were looking for trouble and was full of revellers watching the steel bands go by.

Eye witnesses claimed that a large force of police entered All Saints Road from Lancaster Road and sealed off that point of exit and the Westbourne Park Road end as well.  Beating on their riot shields, the police advanced down the road towards the Mangrove.

The owner of the premises, Frank Critchlow, tried to persuade the police not to enter but earned a truncheon blow for his efforts.  Stewards that had been appointed by the restaurant to keep order in the area now found themselves pushing against the doors to the Mangrove to prevent the police entering but they eventually got in.

Everybody was told to leave in no uncertain terms and resistance was met with more truncheon blows. One DJ, Basil, stood by helplessly while his sound system, Black Patch, was smashed to pieces.

The anguish of people like Basil was of little concern to the Daily Mail, which went in to fulmination mode in the aftermath.

“If the West Indians wish to preserve what should be a happy celebration which gives free rein to their natural exuberance, vitality and joy, then it is up to their leaders to take steps necessary to ensure its survival.”

The Daily Express was reminded of a different group of blacks on its front page the day after.

“War Cry!  The unprecedented scenes in the darkness of London streets looked and sounded like something out of the film classic Zulu.”

On the floor of the Mangrove lay the remnants of Basil’s hi-fi and the broken vinyl pieces from forty-eight singles and five LPs.  This was the kind of memory that would be stored then unleashed in a torrent of violence three years later.

Austerity economics – how it failed 35 years ago

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Since winning the 1979 General Election, the Conservatives had embarked on an economic policy described as ‘monetarism’   This entailed rigorous control of the money supply in order to curb the great British disease of inflation.  The outgoing Labour Chancellor of the Exchequer Denis Healey, no stranger to cutting government spending himself, had dubbed the new creed as ‘sado-monetarism’.

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The high priest of monetarism was a professor at the Chicago school of economics by the name of Milton Friedman.  Without going too far in to the vast detail that any debate on economics can become mired in, Friedman essentially threw out the conventional Keynesian wisdom that in a depression, governments should spend to keep people in work.

Out of control public spending, he argued, would lead to something called ‘stagflation’ – stagnation with high inflation – which was a prevalent condition of many economies in the 1970s.  The answer was a kind of shock therapy where high interest rates, as one weapon, would make it unattractive to spend money.  This would then lead to restraint in wages and prices, which would result in inflation coming down.

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JK Galbraith

Oh that life was so simple, Keynesians retorted angrily – in many newspaper columns and on the letters pages.  Friedman’s leading Keynesian nemesis on the global stage was the elderly but highly alert J K Galbraith, who had served in President Franklin Roosevelt’s administration steering through the New Deal.  He warned over and over again that Friedman’s medicine would lead to idle industrial plants and high unemployment.

Just because it hurt, Galbraith thundered, didn’t mean monetarism was actually doing any good to Britain.

“Suffering must have a purpose: out of much suffering there must come much good.  No one is quite sure how this works in economics; one only knows that the bad times are somehow the price of the good.  Pain and punishment are considered especially salutary for other people.”

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General Pinochet – enthusiastic supporter of austerity economics

So agonising were the effects of monetarism that many on the left pointed out that in its most undiluted form, it had only successfully been applied in Chile – which still languished under a military dictatorship.  The implication being that a democracy could not hold the lid down on a population tormented by the rigours of this doctrine.

Within the trade unions, the widespread suspicion was that the Conservatives were using high levels of unemployment deliberately to beat down pay demands.   With an instinctive hatred of state regulation of the economy, Thatcher didn’t want to get involved in imposing incomes policies (as Labour had tried to do in the 1970s) but fear of the dole, it was thought, was her preferred weapon against wage inflation.

In reality, the Conservatives quietly dropped monetarism and adopted a more pragmatic and less doctrinaire approach after 1982.  But not before they would experience a bitter lesson from Britain’s hugely pissed off youth on how far you can pursue an experiment before the subject bites back.

When the Left condemned theocrat rule in Iran

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IMG_6949Some people on the Left seem unhappy about condemning the infringement of women and workers’ rights in Iran today. Such unease didn’t exist back in the early 80s.

Most of the Left did not welcome the victory of theocrats in Iran. Like many people in that country’s major urban centres, they had hoped for a democracy and a secular republic.

Not only was there dismay at the rise of the “mullahs” – but also the widespread use of capital punishment. It was not only the Shah of Iran’s people being rounded up and disappeared but socialists and democracy activists.

This is a flier for a meeting from the time opposing some of the recent hangings and naming the victims. Labour party members were repelled by this barbarity and were joined by Muslim students in the UK. There were calls for “solidarity” with Iranian workers against the ayatollahs.

Maybe those who are reticent to criticise the Iranian government today should read this blog and remember what the Left used to stand for.

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Newspapers for and by the jobless in the early 1980s

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After 1979, there was a calamitous rise in unemployment – especially among the youth. In northern cities like Liverpool, Manchester and Newcastle – a kind of dole culture took hold. You could be forgiven for thinking that not having a job was the norm while being in work was some kind of privilege.

Local authorities and trade unions funded unemployment centres. I recall the centre in Liverpool on Hardman Street with a pub attached at the back called The Flying Picket where you might bump into Alexei Sayle at the bar on some nights.

Some of these centres produced cheap newspapers for and by the unemployed. They would normally reflect the opinions of the dominant political group within the centre – often on the ultra-left.

Here are some examples – note the attack on the TUC for not doing enough for the unemployed. A common theme at the time was that the Labour Party and trade union leadership were sadly wanting in the face of the Thatcherite onslaught.

 

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