The word “stagflation” was first coined by Ian Macleod in 1965, when he was shadow chancellor. But it took off on 7 July 1970 as part of a chastening description of the public finances he delivered as chancellor, a neologism for a Britain embarking on its darkest decade. Since then it has been a useful byword for an overheating and yet static economy – including our own. “NEW ERA OF STAGFLATION” splashed the Daily Mail on Friday (7 February), reporting the simultaneous forecast of an economic growth cut for the year to 0.75 per cent and a rise in inflation to 3.7 per cent. Not for the first time in British history, visions of the Seventies have returned.
Of course, the decade was always more of a half-remembered nightmare than a chronological construction. Accounts differ as to when “the Seventies” began. Conventional wisdom has it that the 1960s only ended when the Yom Kippur War in October 1973 prompted an immediate four-fold increase in the cost of crude oil. At a global level that was certainly the case. Things were never as good again.
But at a national level this looks too crude an interpretation. In the US, there is a case for saying the Sixties came to a halt when Martin Luther King and Robert Kennedy were assassinated two months apart of each other in the spring of 1968. In Britain, I would argue, the “Long Seventies” started with the aborted attempt by Harold Wilson and Barbara Castle at trade union reform in 1969 and ended with the defeat of the miners after a year-long strike in 1985.
The Britain of the mid-Eighties was utterly different from Britain at the time of In Place of Strife, the title of Castle’s soon-abandoned white paper. In 1968, the Trades Union Congress had marked the centenary of its founding with epic self-confidence: commemorative stamps, a Guildhall dinner for 700 guests (including the Queen) and a celebratory concert at the Royal Festival Hall broadcast on BBC One. By 1985, the trade unions were licking their wounds. Among the big shifts during this 16-year period were a much-diminished role for organised labour; the hollowing out of Britain’s industrial base accompanied by the liberalisation of the financial sector; a revolution in the conduct of macroeconomic policy; and the selling off of state-owned industries.
At the end of the Sixties, few would have predicted such a transformation. In Place of Strife was abandoned because the TUC pushed back against the attempt to interfere with free collective bargaining, and they were supported by senior cabinet figures led by the then home secretary James Callaghan. By the time the miners’ strike ended in 1985, union power had been reduced by a combination of mass unemployment and legal curbs on the conduct of industrial relations introduced by Margaret Thatcher. Subsequently, the balance of power in the workplace was tilted strongly in favour of employers, and even modest attempts by the current government to outlaw zero-hour contracts and provide day-one workers’ rights have caused a furore. Union membership has halved since its peak of 13 million in 1979 and the labour market has become more “flexible”. In practice this has meant the arrival of a hire-and-fire culture and an increase in low-skill, low-paid work.
The changing shape of industrial relations mirrored a shift in the economy towards services. At the start of the Long Seventies, Britain was a manufacturing nation, albeit one struggling to keep up with many of its developed-country rivals. The City was a major source of exports and a force to be reckoned with, but manufacturing was pivotal and accounted for more than a third of gross domestic product. By 1985, the UK was well on its way to becoming a post-industrial nation.
Factories closed in their droves in the early years of Thatcherism and today, after a series of painful recessions, manufacturing accounts for less than 9 per cent of annual economic output. The Big Bang reforms of the City in 1986 ushered in two decades of wheeler-dealing and speculation that ended in the crash of 2008. In 1969, Britain was a country that made things; by 1985, it sold things. Economic policy, as Wilson’s first spell in Downing Street was drawing to a close, was still dominated by the need to deliver full employment, with demand management deployed to ensure that growth was neither too strong nor too weak. By the time Thatcher embarked on her second term in 1983 the focus of economic policy had switched to controlling inflation and balancing the government’s books.
This new way of thinking was central to the neoliberal revolution that gathered pace during the Long Seventies. There were three competing philosophies: the embattled postwar status quo; the left’s alternative economic strategy spearheaded by Tony Benn, based on expanded state ownership, planning agreements between the state and big business, industrial democracy and tariff protection; and the right’s alternative economic strategy, which argued for privatisation, deregulation, management’s right to manage, a scantier welfare safety net, and lower taxes to encourage risk-taking.
Five decades on from, aside from a brief period of economic creativity tolerated within Jeremy Corbyn’s Labour, these debates have not truly been reopened, even as it is increasingly clear that conventional attempts to breathe new life into British capitalism have failed. Per capita growth has been weaker in the past 15 years than at any time since the Napoleonic Wars. The flexible labour market has made workers cheap to employ and created disincentives to invest in new equipment. Trickle-down economics was a dud. The economic gap between the south-east and the rest of the country has widened. Just as in the Seventies, the weaknesses of the business-as-usual model are now there for all to see.
In one respect the Bennites and the Thatcherites were in agreement: namely that the problems of the UK were structural and that there needed to be root-and-branch reform of the supply side of the economy. They could make the same diagnosis today – but now it is Thatcherism that seems empty and delusional. Britain needs higher levels of public and private investment, an industrial strategy backed by serious money, a bigger role for trade unions, and a Green New Deal to both provide well-paid jobs and decarbonise the economy. The long 2010s began with the collapse of Lehman Brothers in 2008 and are still going on. But our own period of extended crisis is still shaped by false consensus built half a century ago. As in the Long Seventies, there are competing visions for what should happen next. This time the left needs to win that battle.
[See also: Could John Rawls save the Labour Party?]
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