IInflation in the UK is at a 40-year high, thanks in particular to soaring energy and food prices. This fact caused panic among some commentators and policy makers that Britain was on the verge of reviving the inflationary turmoil of the 1970s and prompted Rishi Sunak to announce a last-minute £15 billion “living package” funded in part by a one-off tax on energy companies. Andrew Bailey, the governor of the Bank of England, was already incensed when he suggested that workers should exercise “restraint” in their wage demands to avoid the wage and price spiral of the 1970s. Currently, with an inflation rate of 9% and employers expecting wages to rise by only 3% this year, Bailey should relax on that front.
Inflation aside, the differences between the UK economy in 2022 and 40 years ago are stark. In 1982, unemployment hit a post-war record of over 3 million as industrial employment declined. Today, Boris Johnson boasts a record low unemployment rate. Union participation was still over 50% in 1982; Today it is less than half and in the private sector almost half again. The inability of most workers to collectively negotiate a wage increase is one of the main reasons Bailey seems so conservative and why comparisons to the 1970s are misleading.
We do not see a repeat of what happened in the seventies and early eighties. But there are other reasons to consider the relationship between the crisis that Johnson’s government now faces and the crisis that Margaret Thatcher faced in her first term. Simply put, today’s crisis is a legacy of how the previous crisis was handled.
It is worth remembering that inflation is representative The The dominant political challenge during most of the 1970s. It was inflation that drove the historical reckoning of Jim Callahan at the 1976 Labor Party convention and proclaiming the end of the Keynesian consensus: “We used to think we could get out of recession and increase jobs by cutting taxes and… increasing government spending. I tell you frankly that this The option no longer exists.”
In the political imagination of the New Right of the 1970s, which emerged from think tanks on both sides of the Atlantic, the problem of inflation was linked to a whole host of broader social and moral crises: the dominance of trade unions, the overly generous welfare state, and the weakness of the new right. Entrepreneurship, family disintegration, contempt for capitalists. The common denominator of all these problems from this perspective is the disregard for the ultimate value of money. Britain will defeat inflation by rediscovering its respect for property, hard work, fiscal discipline and responsibility.
The drug Thatcher gave was a social destroyer. The monetarist doctrine, originally developed by Milton Friedman, which held that governments should target the amount of money in circulation and then set interest rates accordingly, caused interest rates to rise to such punitive levels that Britain had fallen into a deep recession since the 1930s. Inflation eventually subsided, but only after entire industrial regions and cities were dragged along with it. The decline in union membership was as much a result of the destruction of union jobs as it was of anti-union legislation.
What does that mean today? Given the turmoil of this period, many political economists view monetarism as a deliberate political project aimed at restoring the dominance of the wealthy and the financial elite. After all, it was quite clear who suffered the most from inflation and who would benefit the most if it were eliminated: the creditors and the wealthy. Only after Thatcher choked out inflation (and much more) did the city and housing market begin their dramatic rise, which has continued ever since, save for the vicissitudes of the early John Major years and the banking crisis of 2008.
Viewed in this way, Thatcherism was never about “enterprise” or risk-taking, as its proponents had always claimed, but rather the unleashing of capital for the highest possible returns, regardless of the broader social or economic benefits. Socio-economic geographer Brett Christopher showed in his book Rentier Capitalism that the central effect of the Thatcher reforms was to open whole new streams of income that owed little to productivity and much of a grip on those who depended on reindeer.
We can see this in outsourcing professionals like Serco and G4S who hover around government agencies to secure lucrative long-term contracts, using legal means to guard against downsides; In the regression from private equity funds to vital care for adults and children to make extraordinary gains, largely by squeezing an already disadvantaged workforce. We can see this in the fact that housing prices and rents are completely separate from wages. The pursuit of pensions goes far beyond the realm of “market” to generate revenue from – and increase the cost of – the basic necessities of life.
According to traditional economic theory, profit is the reward that a company or investor receives for taking any financial risks, including the risk of bankruptcy. But in a rentier economy like the British one, profits are guaranteed while risks are eliminated by fair or bad means. The 2008 bailout of “too big to fail” banks was emblematic of this kind of pseudo-capitalism, where huge rewards are separated from any real risk. Likewise, the rising profits of energy giants such as Shell now that the retail price of energy has been effectively set by Ofgem should be understood as official policy of the British government, as should the house price inflation that followed the stamp duty holiday in Sunak. despite of The one-time Sunak tax on energy companies mitigates some of the effects of pension power, but does not erode the basic shape of the economy.
Some critics question whether this economic model can be considered “capitalist” at all, having abandoned the risky, productivity-boosting investments that have long been a hallmark of capitalism. To be sure, the liberal language of “citizens” and “consumers”, and the “public” and “private” sectors seems inappropriate to describe a livelihoods crisis in which we are largely trapped in our payment obligations and live by the order of corporations, not politically we still have an incentive Economical to serve our interests.
In Thatcher’s view, the state had been invaded by the working class. The problem today is the opposite: the state now protects certain forms of capital at every turn, to the point that many corporations, trusts, and wealthy elites have forgotten what they feel they are losing. It may well be that much of today’s inflation is caused by geopolitical factors (the war and Brexit), but until a government is elected that represents the economically weak and opposes the power of income earners, bare living will become one for many that remains costly.