Tag Archives: unemployment

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

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’.

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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.

The last years of the Greater London Council and the battle with Thatcher


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Campaigning to save the GLC

The whole saga around the Greater London Council in the early 80s doesn’t exactly cover Margaret Thatcher in glory. It’s arguably the worst example of her political centralising tendencies.

In 1977, the GLC had switched from Labour to Conservative control – under the flamboyant Sir Horace Cutler. Under him, many of the ideas that would become national Conservative policy after Thatcher’s victory in the 1979 General Election were tried out – in particular, the sale of council houses. Cutler also transformed Covent Garden from a fruit and veg market to a chic shopping experience that incidentally banned shops selling denim!

By 1981, Londoners were ready to bring Labour back and the party won under Andrew McIntosh. In a very daring and controversial move, Ken Livingstone representing the left of the London Labour Party then deposed McIntosh and was installed as the new leader of the GLC.

This began several years of Livingstone taunting Thatcher over the rising level of unemployment and a very strident defence of minority rights. There was also a campaign around keeping London Underground fares down.

Thatcher detested the GLC and in 1986, she abolished it along with six other metropolitan county councils – Merseyside council for example. Even by the standards of the time, this was a shockingly partisan move – an attack on authorities that were all Labour controlled. Needless to say the official excuse was that bureaucracy was being trimmed. But I don’t think anybody bought that line.

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

Unemployment was so bad even an ex-mayor was out of work


The 1981 March for Jobs was hugely well attended with jobless walking for miles to London to make their point to Maggie. One of those on the dole and facing a bleak future was the former Mayor of Watford, Alan Bonney, who found himself at the age of 40 unable to get into the labour market. Furious, he joined the march and the Daily Star showed him at his political height and subsequent grim position in life.

Alan Bonney as Mayor

Alan Bonney as Mayor

Alan Bonney on the march

Alan Bonney on the march

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