The transformation of the British economy in the 1980s

From CroziervisionWiki

1 The 1970s
2 What was done
3 The Outturn
4 Questions
5 Notes

[edit]

The 1970s

It is difficult to describe just how bad things were in the 1970s

Strikes, always strikes. Strikes:
- in the mines in 1972 and 1973. The latter leading to the Three Day Week
- at British Leyland seemingly all the time
- the Winter of Discontent in 1979 when the power workers, the lorrymen, the binmen and just about everyone else went on strike. One of my first memories was our family buying a torch because the power workers were on strike
- at one stage The Times disappeared for a whole year
intimidation to enforce strikes. This hit its zenith during the Grunwick dispute
inflation. All the bloody time. It hit 27% at one point. It seems trivial until you think that it is destroying savings and encouraging strikes as workers try to regain the purchasing power they've lost
there was an overwhelming feeling of decline. It even reached abroad. An acquaintance remembers a chapter in his French geography textbook entitled: "Britain: heading for the Third World?"
an embarassed feeling when we looked abroad, especially France and Germany
Beer and sandwiches at Number Ten as the government of the day begged the unions to go back to work
the pathetic attempts to put things right like:
- joining the Common Market on poor terms
- the Social Contract
- price controls
- import controls
the ever mounting losses in the nationalised industries: coal, ship building, BL, British Airways
begging to the IMF for a bail out like some banana republic
rising unemployment, rising from under a million at the start of the decade to 1.5m at the end.

[edit]

What was done

The government:

introduced monetarism¹
curtailed union powers. This included
- forcing them to hold ballots before they called strikes
- limiting the numbers allowed to picket
- banning secondary picketing
abolished strike pay. Yes, for many years the British government paid people to go on strike
privatised many nationalised industries including:
- British Telecom
- British Airways
- British Gas
- Electricity generation and distribution
- Water distribution
- Rolls Royce
- British Leyland (by then called Rover)
- Trustee Savings Bank (after a caught case proved that they did in fact own it)
- British Steel
reduced top rate tax (though not, funnily enough, the over all tax take)
faced down strikes. The big ones were the steel workers in 1980 and the miners in 1984-5

[edit]

The Outturn

On the upside:

inflation came down to 3-4% until the government abandoned monetarism in 1985 (fools!)
growth returned. It averaged 3% for most of the 1980s
strikes came down to astonishingly low levels

But on the downside:

at least (the figures were fiddled (and still are)) 3 million people were unemployed (up from 1.5m in the mid-1970s)
crime rocketed
pop music got bloody awful
Doctor Who was cancelled

Perhaps most significantly no major political party is attempting to reverse the changes that were made. People do talk about the "post-Thatcher consensus".

[edit]

Questions

But what about the late-1980s recession? Grr, bloody Lawson. The recession that began in 1989 was not entirely the fault of the government (it was worldwide) but it was mainly the fault of the government. In 1985 they (after all the hard work and for no obviously good reason) abandoned monetarism. They lost control of the money supply and inflation took off. In order to correct the mistake they had to increase interest rates. This caught out a lot of people who had borrowed at low rates in the mid-1980s. Result: recession.
But what about the 3 million unemployed? Firstly, unemployment is only a problem if it means poverty. By the 1980s this wasn't really the case. Secondly, change hurts and big change hurts a lot. When you go from a restricted system to a freer system things take time to get better. Brian Micklethwait puts it like this:
A new market is chaotic, and (and this is the point) ignorant. People do not, e.g., know how to spot cowboy operators, or bad products made in all sincerity but badly. Ignorance and foolishness abound, and so to start with, down goes the graph of achievement. But then, if this really is a true market, things bottom out and start to improve and in the longer run the result is a market that is orders of magnitude better than the government could ever have managed.
This works the other way round too. In their ignorance producers do not know what to produce so are cautious about employing people. But eventually they figure it out as they did in the mid-1990s
But what about all those people in the cities making a bomb? Well, what about them? What's wrong with making money?
Your argument is about freedom but what has monetarism and restricting the rights of trade union picketers got to with freedom?
- on the monetarism question what monetarism does is to maintain over all price stability. Or to put it another way maintain the value of the currency. This is precisely what a private bank would do because that is what most of its customers would want its money to do: act as a store of value. In that sense a monetarist policy is simply mimicking what would happen in the free market. And in that sense is OK.
- trade unionists. The point here is about maintaining the right to cross a picket line. This would have been almost impossible for the police to have done unaided. The alternative would have been to have used troops (which was done before World War I).
So, what about crime then? I believe crime rose. But it had been rising before 1980. Indeed, it had been rising since 1960. I believe that was because various government policies had meant that criminals were less likely to be arrested, prosecuted or convicted. And, if they were convicted the punishments were less severe. Since the mid-1990s there has been a decline - not that you'd notice. I believe that this is because more criminals were locked up - in other words punishments became more severe.