Thatcherism Failing (written March 1989)

Thatcherism – coming apart at the seams

by Jack Lane

What is happening in the economy should not be happening – according to the logic of Thatcherism. She came to power because she claimed, and was believed, to have the solution to inflation – the final solution. All that was needed was for the government to have the will to stand up to the unions and stop printing money to meet their demands. There would of course be a lot of moaning and groaning but everybody would see sense after a while and we would all benefit from a self-regulating market economy as her gurus assured us.

How come, then, that 10 years on we have rising inflation again? And even if it was wiped out tomorrow the nagging question would still remain – why did it happen? And if it happened once, could it not happen again? That prospect means that Thatcherism has lost the real basis of its credibility. We are hearing again all those words of the ancient past, the 1970s: overheating, stop-go, and soon we may even hear the words incomes policy.

How has this come about? The fact is that in a democratic society inflation is endemic and can get out of control if any one element of the society, civil or political, gets too free a hand which enables it to get an inordinate share of economic power and abuse it. Trade Unions could do it, the government itself could do it, the “military industrial complex”, the farmers, etc, etc. Also the financial and credit industries can do it very easily as they can in effect create money. They can create as much of it as they are willing to risk through loans.

The impossible crisis

But this cannot happen in the world of Thatcherism where there is no such thing as society, only a collection of individuals. There cannot possibly be corporate interests that can have such influence. After all, if you only look at the behaviour of each individual, he/she is not doing anything that seems so wrong.

Every Trade Unionist could justify his/her wage demand and every boss could justify conceding it. Likewise, every debtor justifies the loan he/she wants, and every creditor justifies giving it to them today.

As an entity such as the credit industry does not really exist and cannot therefore be the cause of the inflation then it follows logically that Thatcherism cannot see any solution to the problem in that direction. Instead the individual debtor is made to pay the price through higher interest rates, which of course makes the credit industry even stronger.

The visible invisible hand

But what happened to Adam Smith’s invisible hand that would have regulated all imbalance between debtors and creditors as it is supposed to do in all dealings between buyers and sellers? Mr Lawson’s action is certainly the most visible and heavy-handed intervention in the economy in years

Even if Lawson’s medicine works, what happens when it is no longer prescribed? Surely we will all go back to our bad old ways. In other words he has no permanent solution. The question poses itself – what is left of Thatcherism that any longer makes sense according to its original assumptions?

Labour’s bad conscience

What of Labour’s reaction?

Gordon Brown has produced scintillating parliamentary performances, but there has been no similar performance in favour of credit controls and compulsory deposits as a solution. Labour has been given a bad conscience by Thatcher in advocating controls of any sort.

These controls would be simply asking the credit industry to obey a new ( or a new-old) law of the land. Any industry that implements the mass of existing credit and consumer law would find these controls one of the easiest to implement. Insofar as interest rates are concerned, Labour should be pointing out that a dramatic lowering of interest rates by the government would put a lot of lenders out of business. And making the credit industry less attractive would have the same effect in slowing down credit as using7″interest rates. Except that the lenders pay the price in one situation and the borrowers pay the price in the other.

As there are more borrowers than lenders Labour could hardly lose in popularity by a policy of credit controls and lowering of interest rates to continental levels.

Coming to terms with the 1970s

But Labour’s leadership has not really come to terms with Thatcherism because they can only see it as some sort of awful Act of God that will inevitably pass. It never seems to occur to them that there is a crying need to re-examine the experience of the 1970s and explain to themselves what the electorate has known for a long time – that Thatcher is in power by default, Labour’s default.

Rhetoric and glossy public relations are no substitute for a realistic assessment of the recent past which is the only way of understanding the present. When the Tory party were in crisis in 1974, Keith Joseph and his friends made a new assessment of their recent past and thereby laid the foundations of Thatcherism. Essentially it was the destruction of traditional Toryism and its replacement by the ideology of economic individual determinism.

Labour needs to do a similar job – a fundamental re-assessment of its recent past. We need to arm ourselves with an appropriate world view that makes sense to the electorate.

Individual policies will take care of themselves if that is done. But if it is not done all new policies and initiatives will be treated with suspicion and will emerge as half-hearted, half-cocked experiments which only serve to highlight the huge vacuum in Labour’s thinking about itself

 

This article appeared in March 1989, in Issue 10 of Labour and Trade Union Review, now Labour Affairs.  For more, see https://labouraffairsmagazine.com/very-old-issues-images/magazine-001-to-010/.

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