The Economy of the 70s and 80s

[Sibling Zono (anon1mat0)]

From certain exchange in other thread I would like to know what everybody thinks about the economy during the 70s and the 80s. Many contend that the right wing governments of the 80s in the US & UK 'fixed' the high unemployment and inflation of the 70s. Given that I was a kid in the 70s and more worried about girls in the 80s (besides, who can worry about the bloody economy when torture and 'disapparition' are happening all over [in South America]?).

My perception is that the oil crisis is a big factor but I don't really know how corrupt were the left governments of the 70s or which exact policies are blamed for the downturn.

[beagle]

I was fairly youngish then, and can only really talk about the UK.
There were lots of factors here.  It wasn't so much that left wing governments were any more corrupt (though there were the Poulson and T Dan Smith corruption cases then, not dissimilar to ones running at the moment), but that governments of all parties were incompetent and not up to running the country against the wishes of the vested interests.
In that group fell the unions (and to a lesser extent the major City firms).

Industrial "them and us" divisions in industry (going right back to the industrial revolution) were revealed in unions who would call strikes on trivial issues, and managers who simple couldn't manage (British Leyland is probably the classic example of both groups, though in the public sector British Rail was pretty awful too).  In the boom times of the 60s this wasn't a problem, but with the oil price shock and massively increased competition from overseas in manufacturing it was a continuous vicious circle.
High inflation, caused massive wage demands caused strikes, caused declining productivity, caused devaluations caused higher inflation.
Both Tory and Labour governments of the time believed in negotiating with the unions, but the unions were always negotiating from a position of strength, and many of the top union officials were politically motivated rather than looking out for their members (e.g. Red Robbo).

Other factors:

Better company management in the U.S. , Europe and Far East.
Better quality control and design abroad.
Loss of manufacturing to more efficient countries (e.g. shipbuilding to Korea, cars to Japan,  machine tools to Germany).
More efficient capital markets abroad (particularly the U.S.).
Supertaxes forcing entrepreneurs and company owners into tax exile.
Lack of incentive to start new enterprises.
Exchange controls making foreigners wary of investing here.

The main losers were ordinary people (especially pensioners) outside of unions who couldn't demand 30% pay rises, and who had to put up with dreadful services (sometimes from nationalised industries with no competitors allowed) as well as inflation in two digits.

We had a series of Prime Ministers who were clearly totally out of their depth and had no idea how to solve this (Wilson, Callaghan, Heath).  Heath tried to stand up to the miners union but didn't have either the strategic backing or the public will for a long fight. After failing he called an election which Labour won, and Callaghan tried to soldier on with same old failed consensus policies, culminating in the Winter of Discontent.

This time there was a real public appetite for change and Mrs Thatcher got in.  She took on the vested interests, both in the unions, and later in the City of London.  She concentrated on getting inflation down above all else. There was nothing new in that, it had been the cornerstone of the German Bundesbank for decades (due to their horror of Weimar style inflation), but it was new for Britain to be so determined about it.  She was also quite ruthless about letting inefficient or outdated industries fail, and it's the human fallout from that for which she is so hated. People now forget that the "death by a thousand cuts" that was afflicting British Leyland and other propped-up industries was also causing the whole country to suffer. Before she took over one American ambassador described Britain as being like an elderly dowager, just wanting one more quiet drink before bedtime. She certainly shook that situation up.

So I certainly wouldn't say the Left made the mess in Britain on their own, but I'd definitely say it was Mrs T who fixed it. I'd also say that without the Falklands she would have been thrown out after her first term for unpopularity; raising all sorts of interesting questions about whether politicians dare do the economically correct thing when economic and electoral cycles have different periods.

Interestingly, as time goes on, it seems more and more as though her breaking up the City vested interests was even more significant than her union reforms. Without that, and taking an axe to exchange controls, there's no way London would be in its present state of rivalling New York.

As the 80s progressed the UK was less dependent on oil (partly because of declining manufacturing) and there was also a global upturn, all helping to boost the effect of her changes.  Her mistake was to allow herself to be talked into making the pound Sterling shadow the DeutscheMark, as a precursor to ERM membership. This proved untenable and nearly caused  recession until the pound was allowed/forced to break free on "Black Wednesday".
Once out of the ERM, the economy took off again.

The saga did for her economic competence reputation though, and Labour are always going on about it (strange, when so many of them would permanently bind our economy to that of Germany in the Euro, but that's another story ).

Anyway, her denationalisation, "big bang" and other policies have been copied all around the World, not least by New Labour.  They even extended her monetarist stance on inflation by making the Bank of England independent and obliged to keep it down (it has no equivalent remit on unemployment, for example).

[Griffin NoName]

I am not sure I am capable of discussing the economy from a position of economic data.

I have not yet seen any economic arguments that don't stem from the individuals perspective and that's as true of myself as others.

Andrew Marr did a doco that Beagle and I discussed elsewhere. It was heavily biased IMO towards the views of someone who was still not adult in the early to mid 70's. As I remember it concurs quite well with what Beagle has written above.

My views are as biased. From being a young adult in the 70's. I married in 1971, the year we went decimal.

I grew up with world war etc still affecting life. Government was still in the hands of chosen few - the PMs I remember and tend to class stuff by were Eden (aaaargh Suez) and MacMillan (we all know how he got appointed). I grew up with Suez and Korea, with petrol rationing in the fifties and coal fires and fogs, freezing winters -  vividly remembered experience that prepared me for the black outs during power strikes in the seventies. Beeching in the 60's probably had the most effect on my dawning political views. He closed the railways. It was deeply shocking. It is my belief that we are still suffering bitterly from his mistakes.

Wilson, Callaghan and Heath were out of their depth. Not surprisingly since they were the first of the new type of PM.

Thatcher managed to make things worse. She built on nothing that Wilson had achieved (I actually discount Callaghan and Heath completely). What was needed after Wilson was a strong Labour leader to work with the unions. Denationalisation was appalling. She ruined the economy IMO and turned Britain into a must have society.

Tolerant as I am, never mind being Toadfishily tolerant, it is quite odd to hear of Mrs T fixing the mess in Britain because the way I see it is she took advantage of the mess and made life a thousand times worse for the majority of Britains and it was agony living through it and it is still agony when I live surrounded by what to me has been an increasingly selfish society. She destroyed all that was good about Britain and left us sadly stripped of character as a nation. (IMHO of course).

Ok, that's a sort of soft femaleish touchy-feely view perhaps. But I don't think of economics as whether the pound is strong, or many of the other ways it is "measured".

I also don't think numbers of unemployed should be taken as purely an economic snapshot.

etc, etc.

For shame that any of her policies have been copied anywhere.


***** edit It is quite odd that one woman can raise the temperature round here. Blast her !  If Beagle and Goat manage to stay on speaking terms, this site will have proved itself   Luckily you don't have to like Mrs T to like !

[beagle]

What was needed after Wilson was a strong Labour leader to work with the unions.

But they had plenty of chances to do that in the "beer and sandwiches" sessions at No. 10. It had failed, and it took about 20 years more for Labour to find a strong leader.
Until Mrs. T dealt with the closed shop, secondary picketing, and insisted on secret ballots before strikes the government was always dealing with millitants.
A Labour government wouldn't have dared make the union changes, even if it had the intention.

I'll agree that Mrs T has made life harder work and more stressfull than before, but would argue that she didn't cause that, she merely pointed out that increasing globalisation made it inevitable. 

[goat starer]

average inflation

1946 - 1979  (welfare state)                                   6.148484848
1979 - 1990  (thatcher)                                         7.990909091
1979 - 1997  (conservatives 80s/90s)                       6.138888889
1961 - 1978  (17 years before thatcher)                  8.05
1998 - 2007  (tony blair)                                        3.1
Average all Tory prime ministers post 45                   5.165714286
Average all Labour prime ministers post 45                6.292307692

the Tories will always point to the period in the 1970s when inflation briefly became very high. It was already on its way down again from the peak in 1975 (24.2%) to 8.3% in 1978. In 1979 it went back up to 13.4% and in 1980 to 18%. If you look at very short periods you get skewed statistics


Employment

post war unemployment peaked in 1986 at 3million (under thatcher)


Crime

peaked in 1992 after a dramatic rise through the 80s. 11 years of thatchers party of law and order and you get 109.4 indictable offences per thousand population

http://www.parliament.uk/commons/lib/research/rp99/rp99-111.pdf


the ecomomic stats for the UK post 45 make uncomfortable reading for thatcherites because the ONLY justification for her time in office would be a marked economic improvement and there simply isn't one.

[beagle]

Well we've put out our respective stalls (if you'll forgive the market analogy).

People can make their own minds up as to whether 70s Britain was a land of milk and honey, a socialist  Utopia, undermined by a grasping, evil woman, or whether it was the ungovernable sick man of Europe, plagued by disastrous industrial relations, blackouts and fuel shortages.


P.S.  Goat, at some point when I'm not feeling like Michael Caine in "Zulu" we should probably discuss your alarming predisposition to believe government statistics to 9 decimal places.

[Sibling Zono (anon1mat0)]

Let's see if I get this correctly: the basic premise is that the crisis was due to extreme taxation and a bunch of recalcitrant unions willing to kill the enterprises rather than negotiate?

The union thing... well I've seen a few unions like that (sadly) and I imagine it was political suicide for anyone claiming to be on the left to go after them, but was that pervasive?

[The Meromorph]

Yes, it was that pervasive. It was, in fact, much worse than you imagine... The 'militants' referred to almost in passing above had an openly declared objective of establishing a marxist government. They were running the major unions, and could not be removed.  (there was another passing reference to 'secret ballots' above that you may have missed the significance of...)
The union leaders who had the only authority to call strikes, and  the actual power to enforce a call-out, were not elected by a secret ballot of the members. They were elected by a show of hands at the 'Anual General Meeting' of the union. The AGM was required to be announced in three newspapers and all members were to be admitted if they came. It was routine to announce the date, time, and place of the AGM only in three different randomly chosen parish newspapers (circulation approximately 50 copies each), to hold the AGM for a union of 200,000 members (all invited  ) in a (different) parish hall (accomodating approximately 200 people) and to provide at least 200 (or the capacity of the parish hall) hand-picked 'stewards', whose real role was to ensure that any 'real' union member who happened to turn up could not gain entry. The leadership was then unanimously re-elected by a show of hands, and the AGM promptly closed.
I could go on for pages, but let me just point out that the Labour Party was effectively completely funded and controlled by the major unions, including the election of the leader of the Party and thus the Prime Minister, if Labour won a majority in a General Election...

[Griffin NoName]

............ a grasping, evil woman,.............

Oh much much worse. Power crazed and determined to be a man's man.

P.S.  Goat, at some point when I'm not feeling like Michael Caine in "Zulu" we should probably discuss your alarming predisposition to believe government statistics to 9 decimal places.

Beagle, your ability to make me verges on a complete cure for political despair.

Yes, it was that pervasive. It was, in fact, much worse than you imagine... ......

I agree totally. I have the same picture as Mero.

But I don't see the Thatcherite way as having been any kind of answer.

.........the Labour Party was effectively completely funded and controlled by the major unions, including the election of the leader of the Party and thus the Prime Minister, if Labour won a majority in a General Election...

Well it's good that one's been sorted out   link

[beagle]

Let's see if I get this correctly: the basic premise is that the crisis was due to extreme taxation and a bunch of recalcitrant unions willing to kill the enterprises rather than negotiate?

Mero's answered most of this with far more detail (and knowledge) than I could. I would add that bad management was also a factor. When Nissan opened a car factory in Sunderland it rapidly becames the most efficient in Europe, and better than many in Japan. They were besieged with applications from engineers who wanted to work for someone who knew what they were doing.

[goat starer]

P.S.  Goat, at some point when I'm not feeling like Michael Caine in "Zulu" we should probably discuss your alarming predisposition to believe government statistics to 9 decimal places.

Beagle. the 9 decimal places are all Goat... no government interference here. The figures are averaged from average UK inflation rates for the years. They will be somewhat wrong as governments do not start on January 1st so some years have several months of more than one government.

I agree that the Unions were too influential but the response from thatcher was ridiculous. Simply transferring power from Unions to big corporations is no answer at all. Replacing one form of economic tyranny with another is hardly progress.

I am not arguing that the Labour party should have won the 1979 election and we would all be living in Utopia (Chatty knows where this is if anyone wants to visit). I am arguing that the political system we have is intrinsically unable to cope with the realities of economics. You have a choice under this way of working of social justice or a few rich people - and the few rich people inevitably win that one. At least in the 1970s people had things like jobs. subsidised state corporations could afford to employ people in an uneconomic fashion which meant we were not paying out £billions in benefits and did not have to suffer crime, anti social behavior etc. You could get social housing! you could get a dentist!

A quick look at the government spending as a proportion of GDP shows that there was not substantive dip when coal, steel, energy etc were put into private hands. This is because the 'efficiencies' generated by private enterprise in these sectors led to unemployment and social problems which the government then had to deal with. GDP per capita fell in 1991 and 1992 after 10 years of thatcherism by as much as it fell at the end of the 70's. Government spending rose all through the 1980s.

The AGM was required to be announced in three newspapers and all members were to be admitted if they came. It was routine to announce the date, time, and place of the AGM only in three different randomly chosen parish newspapers (circulation approximately 50 copies each), to hold the AGM for a union of 200,000 members (all invited   ) in a (different) parish hall (accomodating approximately 200 people) and to provide at least 200 (or the capacity of the parish hall) hand-picked 'stewards', whose real role was to ensure that any 'real' union member who happened to turn up could not gain entry. The leadership was then unanimously re-elected by a show of hands, and the AGM promptly closed.

Mero. Whillst i would not deign to question the veracity of this statement I would think that it is the kind of thing that could do with a link to some kind of source material. It is certainly controversial.

[The Meromorph]

The AGM was required to be announced in three newspapers and all members were to be admitted if they came. It was routine to announce the date, time, and place of the AGM only in three different randomly chosen parish newspapers (circulation approximately 50 copies each), to hold the AGM for a union of 200,000 members (all invited   ) in a (different) parish hall (accomodating approximately 200 people) and to provide at least 200 (or the capacity of the parish hall) hand-picked 'stewards', whose real role was to ensure that any 'real' union member who happened to turn up could not gain entry. The leadership was then unanimously re-elected by a show of hands, and the AGM promptly closed.

Mero. Whillst i would not deign to question the veracity of this statement I would think that it is the kind of thing that could do with a link to some kind of source material. It is certainly controversial.

This was back in the '70s. there was no 'source material' in the sense you mean and no way of 'linking to it', as the internet had not yet been invented (personal computers were only in their infancy in 1979). There was plenty of 'documentation' in the print media of the day and several reasonably well informed books on the subject in the '70s. (I haven't 'researched' the material to be able to point anyone to online references to it - main reason is I know this stuff, I was there and involved.) I haven't, in fact, said anything more than the most widely known surface 'gloss' of the situtation, so much so I'm slightly surprised anyone could call it 'controversial'. (I'm fairly sure Hansard contains everything I've said above, as it was discussed in the House several times.) That stuff is no more 'controversial' than pointing out that there was a strong movement in the USA for coming into WWII on the German side.
I was the chairman of a small Union for some of the time, a 'policy wonk' in a certain political party (and not one that anyone I knew associated me with) for some of the time. The 'MBR' (Manifesto for a British Revolution) is public knowledge, I will agree that is controversial, and many people don't believe it. Nevertheless, my personal knowledge of it, and my personal knowledge of some of the people involved in it, and the state of detailed planning for it, is not unconnected with my emigrating to the USA in 1979. I was personally very surprised (and pleased) at what happened before and during the next election. I am reasonably sure that some 'government servants' were influential in that outcome.
Thatcher's government, though it didn't look that bad from over here (with limited and biased news coverage), may well have been a bad one. I still think it was a far better outcome than what I was confidently expecting.

[goat starer]

whilst this sort of practice may have occured in smaller unions it is not something that ever cropped up in my study of post war british politics. The larger unions held AGMs that were more like political rallies with thousands of members attending. The view that labour in Britain was unfairly treated in the workplace was not just that of some small minority of union members - witnessed by the overwhealming support in the NUM for the miners strike.

That stuff is no more 'controversial' than pointing out that there was a strong movement in the USA for coming into WWII on the German side.

I would disagree with that. I can find stories about it on the internet (and it happened a long time before the invention of the internet!)-

http://www.britannica.com/eb/article-9082417/Christian-Front
http://en.wikipedia.org/wiki/American_Legionhttp://en.wikipedia.org/wiki/German_American_Bund
http://www.thirdworldtraveler.com/Fascism/Support_Hitler_US.html
http://www.commondreams.org/views01/0508-05.htm

and there were (and still are) nazis in Europe and the states and pro nazi rallies like those of oswald mosely were mimicked in the states. I dont recollect any tales of parish papers and closed meetings in my study of post war labour relations and i cant find any on the net. I will look at my old text books when i get home. It is certainly true that the lack of secret ballot engendered a lean to militancy and it is also true that only people with strong views attend the AGMs of any organisation. So yeah it is more controversial!

now who was lamanting the lack of controversy over here? 

[Sibling Zono (anon1mat0)]

now who was lamenting the lack of controversy over here? 

The starter of the thread...

BTW, while the UK siblings have come to the plate, where are the US siblings with their views of the Carter vs Reagan years? The picture I have is more one of opportunism from the Reps but I would like to hear the 'merits' 80s in US.

[The Meromorph]

Sibling Comrade Goat  ,
It was not a common practice in smaller unions, it was standard practice in large unions. They certainly did hold large 'political rally' type meetings, these were not the ones where elections for union leadership were held, however. It was attempts by the Parliamentary Labour Party (not the Conservative Party) to free themselves (quite properly IMO) from the control of the Union Leaders, by legally mandating secret balloting for Union Leadership, that led to some of the worst strikes in the '70s including the infamous Three Day Week also associated with one of Harold Wilson's most often quoted indiscretions when he mentioned calling Hugh Scanlon to say "Hughie, get your tanks off my lawn!", just before he capitulated.

I certainly agree that British workers (particularly in large and nationalised companies) were treated appallingly badly by British management, who were themselves appallingly incompetent, and that the whole Union movement was crucial in creating a decent society in Britain (for as long as it lasted). By the 'late '60s and '70s, however, the movement had been effectively taken over and was devoted to different ends (publicly touted as being the same ends by different means).


I am viewing what you say you were taught and have researched with great interest (I don't doubt your experience), but where it contradicts my personal direct experience, I am tentatively concluding that a certain level of 'political correctness' has (as usual) intruded into textbooks and universities.  (BTW it's a much milder level than what I observe going on in US institutions...  )
I would also suggest that the reasons (for example) for the NUM members to support the strike may well have been perfectly valid, but were not neccessarily the reasons the NUM Leadership had for calling it at that particular time...

Yes, I'm a cynical SOB when it comes to politics. I have reason to be. 


I'm experiencing this as a 'lively and interesting discussion'  , rather than an argument  , respected and beloved Sibling Goat.



Sibling Zono, I was here in the US for those years, but I lacked the political background and knowledge for an enlightened interpretation...
In the interests of 'lively and interesting discussion', however, let me say that I now regard Ronald Reagans presidency as a major disaster and the root cause of the present debacle, and I refer to Nancy Reagan as 'The Great Traitor'.