Austerity economics – how it failed 35 years ago


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’.

9780436164859-uk-300The 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.

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Anti-Thatcher humour – “frugal fun for the unemployed”


It’s impossible to imagine now how endemic youth unemployment was between 1979 and 1983. In the Toxteth area of Liverpool, about 90% of the youth had no work. One survey in London estimated that 26% of young unemployed had contemplated suicide. Still, it spawned a rather dark sense of humour…

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Badges of the 80s

Political badges from the 1980s


Emptying out my parents’ attic as they downsize, I opened a tatty plastic bag and out fell a load of political badges from the 1980s. These were worn with pride on my lapels at various demos back in the day. They date from about 1979, when I’d have been 16 years old through to around 1984 and the miners’ strike. As a snapshot of what we fought, cared and fretted about – they’re truly fascinating. And the language now seems a bit dated on some of them.

Badges of the 80sBadges of the 80sBadges of the 80sBadges of the 80sBadges of the 80s Take a look at the photos below and I’ll just chat through some of them. Nuclear arms – big obsessions. There were surveys at that time where most young people honestly believed there would be a nuclear catastrophe in their lifetime. Remember we had the Soviet Union versus Uncle Sam and in 1981, I went on the massive CND demo to Hyde Park. I remember one old dear screaming at me that I was as bad as those Hitler loving pacifists in the 1930s Peace Pledge Union. Another big demo that year was the People’s March for Jobs and you can see a big badge there for that.

The 1981 Brixton riots put the focus on the SUS laws – stop and search by police, which impacted on black kids a lot more than white. And it’s still an issue today – how depressing!  The anti-racist badge saying “will you choose to abuse” seems a bit patronising and corny now – your views? Note the brilliant badge with Home Secretary William Whitelaw and his detergent that would whitewash police tactics over Brixton – still think that’s amusing.

On the global front – you had Chile under the Pinochet dictatorship and of course we all know how much Thatcher liked him. There’s also a Polish Solidarnosc badge as the movement against Stalinism in that country took hold – then faltered. Spain had emerged from the Franco dictatorship and the socialist party – the PSOE – was about to take power. Though the promised socialist revolution never materialised. Rhodesia gave way to Zimbabwe at the end of the 70s and you can see a badge there. Ireland and the ‘Troubles’ were a constant feature with bombings in the north and on the mainland UK. In 1979, Lord Mountbatten was blown up. Thank goodness that all seems like ancient history now.

Above all else – there was a visceral hatred of Thatcher. When I watch all these 80s progs saying we were all yuppies in that decade, it makes me furious. Nobody who was there would recognise that narrative. We were heavily polarised as a country. You either loved Maggie or hated her – and your style of dress and badges reflected that.