Tag Archives: jobs

Inflation and unemployment – the Margaret Thatcher experience


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


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.

Newspapers for and by the jobless in the early 1980s


 

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.

 

New evidence on the De Lorean scandal


The Troubles in Northern Ireland – years of terrorist attacks by Irish Republicans and Loyalists – left the province economically knackered. There was a huge reliance on state funded jobs, compared to the rest of the UK, and high levels of unemployment. So when American entrepreneur and General Motors executive John DeLorean showed up promising to build a new car industry in Ulster, politicians fell over themselves to make it happen.

The DeLorean Motor Company, that he set up in 1973, had developed a very distinctive looking car with gullwing doors and stainless steel finish. One of his cars featured in the movie Back To The Future. I remember these cars well and hilariously a mate of mine driving one opened the door to wave as he drove past and the door flew off – fortunately not injuring anybody!

As we all know now – after setting up a production facility in Northern Ireland in 1978 to great cheers and goodwill, things started to go wrong. The cars didn’t sell and the company finances revealed a black hole. A new book on the ensuing scandal claims that Thatcher was informed about the discrepancies in the DeLorean accounts and refused further funding resulting in the loss of 1,500 jobs. You can read more about that new book by clicking HERE.

Here’s a crash test for a DeLorean back in 1980.

1981 Manchester riot with police station surrounded


Manchester riot

The most violent night in the Moss Side riot

July was the month of riots in 1981 and they came thick and fast from Toxteth, a re-ignited Brixton (which had already rioted in April), Southall and mini-riots from Coventry to Leicester and some very unlikely places like Chigwell in Essex!

The Manchester riot was particularly vicious. I remember driving through Moss Side – having been on a canal trip! It was just after the violence had died down and there was evidence of the destruction everywhere. And a very eerie atmosphere.

Read the Wikipedia entry on the 1981 Moss Side Riot and it could easily be an article in a police magazine. The community leaders failed to stop the youth taking to the streets (as if they had any real power to stop them) and Chief Constable James Anderton was lauded by one and all for his tough measures including driving police vans directly at the rioters (similar tactic resulted in one death in Toxteth) and snatch squads then pouncing on rioters.

In truth, Anderton – who famously brought his religious views very publicly into his work – came under a hail of criticism from both the left and even other police chiefs. His approach was seen as abrasive and antagonistic. Undoubtedly he thought that was just what the situation needed.

The most memorable and chilling moment of the riot was when a police station was surrounded and among the weapons used were garden tools and a crossbow!

Sandwiches for the unemployed on the Jobs Express in 1981


Through 1981, hundreds of young people made their way down to London on the Jobs Express.  This modern day Jarrow March was received positively by most people with even muted criticism from the Tories and Fleet Street.  Some newspapers did sneer that it was all a far left conspiracy and that the youth were being used by extremists, etc.

But there was no doubting that unemployment in the early 80s recession had hit teenagers very hard with the drying up of apprenticeships and factories closing. As the Jobs Express made its way to London, trade unionists – like those pictured below – mucked in to make sandwiches for the youngsters and give them a cheer.

This being 1981, however, it’s not surprising to read in this article that as one group of teens on the march came back from a disco, they were set upon by fascists. No further details are given but this was a grim sign of the times.

Article from the Wembley Observer

Article from the Wembley Observer

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