Saturday, 13 April 2013

Britain's "health" in the 1970s.

It is depressingly true that if a lie is repeated often enough it comes to be received as accepted wisdom.  We can see this now when the coalition government is repeatedly claiming that it is "clearing  up  Labour's economic mess" when in truth the "mess" was caused by the collapse of the  financial system as a result of the deregulation introduced by Mrs Thatcher's government and strongly supported by her Tory successors both in and out of power.

Now her death has revived the twin myths that in the 1970s Britain was the "sick man of Europe" and that there was "no alternative" to Mrs Thatcher's abrasive and divisive policies  as a means of  restoring health.

In their parliamentary eulogies David Cameron defined "the British disease" as "appalling industrial relations, poor productivity and persistently high inflation."  Ed Miliband praised her recognition of the the people's aspirations and conceded that "she was right to recognise our economy needed to change."

There is of course some truth in these comments, but the implication that these conditions were unique to Britain  is highly questionable.

Firstly, the high inflation of the 1970s was a worldwide phenomenon owing much to the massive hikes in the price of oil, which OPEC doubled in 1973 in retaliation for US support of Israel in the Yom Kippur war, and then doubled again.  This sparked off in Britain either a  price-wage spiral, by which producers put up their prices to maintain their profit margins and workers were forced to demand  higher wages to make ends meet, (the Labour explanation), or a wage-price spiral, by which workers' demands for higher wages forced producers to put up their prices (the Tory explanation).  You pays your money and you makes your choice.

Poor productivity had and continues to have many causes. Low levels of investment were, and continue to be, a major cause of low productivity.  Harold Wilson had earlier lamented that it was easier in Britain to make money rather than to earn it.  That remained true in the 70s and, alas, continues to be the case.   Short termism, the preference for a "fast buck" now (often achieved by speculation in property)  rather than genuine investment  to  create a productive stream of income in the future, continues to be the curse of  the British economy.

Poor management must share the blame with over-belligerent trade unions for poor industrial relations.  It is surely no coincidence that the British motor industry, then mired in industrial strife, is today, under foreign ownership, investment  and management, now one of the most efficient in Europe.

Unfortunately both the Labour and Conservative parties draw their support, and funding, from one side or other of the "industrial divide":   Labour from the workers' unions and Conservatives from the owners.  Both have either ignored or resisted Liberal proposals of industrial democracy, worker participation and profit sharing, designed to create a common interest and and replace destructive antagonism with constructive co-operation.  This, rather than Thatcherism, is the alternative which could have then, and could still, transform British society.

Now we need to consider whether or not Britain really was such a dreary and hopeless place in the 1970s, where, as Miliband implies, the aspirations of ordinary people found no outlet.  Such balanced evidence as exists shows that the reverse is true.  The New Economics Foundation's Measure of Domestic Progress, MDP, which takes into account, in addition to per capita GDP, 20 additional economic, social and environmental factors, finds that the UK's quality of life reached its highest post war level in 1976, fell throughout the 1980s,(the Thatcher years), rose again in the late 90s, but " has yet to regain its 1976 peak."

Makes you think.


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  2. The author seems to live in a parallel universe with strong disregard for scientific as well as economic facts:

    Back in the '70s, people had to wait six months to get a telephone, were banned from taking more than £50 abroad and were at the mercy of union leaders for jobs.

    The economy was crippled by rampant inflation, punitive taxes and a 98pc levy on investment income that crushed entrepreneurial initiative. In 1977, Britain had to accept a handout from the International Monetary Fund (IMF), like Greece or Cyprus today.

    The Government owned the telephones and railways, but also British Airways (pictured above), Thomas Cook and Pickfords. Each was paralysed by inefficiency and bureaucracy, “customer service” was a little-known skill.

    A once proud industrial base was crumbling with low productivity, over-manning and a reputation for poor quality goods.

    Power cuts were standard and industries were limited to a three-day working week to conserve energy. The candle was almost a unit of currency.

    Quite frankly for a Keynesian liberal your explanation and accusations sound very socialistic - it's not our fault, it's their.

    It always is someone else's fault...