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.

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


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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

The first night of the Toxteth riot – 1981


The first night involved scuffles, an arrest and some injuries on both sides but after this Toxteth simmered with a glowering rage.  On the following night, an anonymous caller to the police reported a stolen car and officers who went to investigate were pelted with bricks and stones.  This was the first skirmish of what would be a very long night of violence.

Eyewitness accounts from the time described a dairy and a car hire shop at the top of Upper Parliament Street providing a fortuitous combination for the rioters.  A group of youths took the milk bottles from the dairy and filled them with petrol from the car hire outlet.  The police line that was attempting to advance up “Parli” suddenly found itself at the receiving end of blazing Molotov cocktails.

Worse was to come as the actual hire cars were enlisted for use against the police line.  Rather like the game of dare with stolen cars in the 1950s movie ‘Rebel Without a Cause’, youths jammed the accelerators with bricks then drove at pull speed towards the police jumping out before impact.  “The police scattered like flies each time a driverless car screeched down at them,” an eye-witness later said.   One press report called the action a wild “dodgem game”.

A police officer remembered one car “hit a lamp-post and burst in to flames. If it had stayed on course, it could have killed someone.”  But it wasn’t just the cars that were hurtling towards the police line.  The Daily Express, in its coverage that weekend, claimed that twelve milk floats from the dairy were driven in a similar manner while two hundred youths built barricades of flaming car tyres sending a pall of smoke rising high above Liverpool.