Like other post-war Labour and Tory Prime Ministers Mrs. Thatcher is conscious of the long decline of British capitalism as a manufacturing power and anxious to reverse it. The extent of the decline is shown by the place of British exports of manufactured goods in the world total. In 1883 Britain's share was 37 per cent. By 1938 it was down to 21 per cent. Apart from a brief recovery to 29 per cent in 1948 when Japan and Germany were out of the market. it has gone on falling. In 1984 it was 8 per cent and Britain is now, on balance, an importer of manufactures.
While the 1987 Tory Election Manifesto told of "our manufacturers . . . traveling the globe with a new confidence" it would appear that Thatcher has no real hope of a recovery of manufacturing industry, and relies instead on the expanding so-called service sector (tourism banking, finance insurance and technical know-how) which, the Manifesto said, "generates a vast surplus of foreign earnings".
Denationalisation Measures
The same 1987 Manifesto made much of the governments efforts to attack monopolies and encourage competition.
On competition, the argument is that it increases efficiency, reduces cost and prices and thereby enables British industry to capture a larger share of world trade at the expense of other countries. It is the reverse of one of Keynes' arguments. Keynes held that competition for foreign markets was one of the main economic causes of war and advocated that government expenditure be increased so as to (as he believed) expand total demand in the home market and therefore make it unnecessary for British manufacturers to seek markets abroad. In fact, of course, increasing or decreasing government expenditure makes no difference to total demand in a country.
The traditional Tory policy for dealing with private monopolies was to nationalise them in the interest of the rest of the capitalist class. Engels in Socialism: Utopian and Scientific shared the view that governments would be forced to adopt that policy. It was a Tory government in 1884 which passed the Act giving them power to take over the railways, intending to use it as a threat to deter the companies from exploiting their transport monopoly. Among later nationalisations supported by Tory governments were the telegraphs, the telephones cross-channel cables the BBC London Passenger Transport Board, Central Electricity Board and British Overseas Airways Corporation. And as late as 1943 Prime Minister Winston Churchill, who had supported nationalisation all his political life, spoke in favour of extending it, saying in a broadcast:
There is a broadening field for State ownership and enterprise especially in relation to monopoly. (Times, 6 April 1943.)
In the first post-war Tory government, elected in 1951, policy began to change. It declared a halt to further nationalisation, denationalised steel, and greatly strengthened the law to deal with monopolies, in this following the example of American governments since'the beginning of the century.
One of the factors leading to denationalisation by the Thatcher government has been the losses that have been incurred since 1945. While some have made profits most have made losses, and the overall loss has been enormous. D.R. Myddleton, Professor of Finance and Accounting, estimated in 1976 that the total loss on the nationalised industries as a whole since 1945, had been £25,000 million (Financial Times, 19 February 1975). And Professor Walter Eltis, covering the years 1961 to 1977, had this to say:
The financial surpluses of the public corporations have at no point been sufficient to cover the interest costs on their accumulating debt in addition to wages and salaries (Lloyds Bank Review, January 1979.)
The losses have continued since 1977.
Continuing inflation
By the mid-seventies fast rising unemployment convinced the Labour government that the Keynesian belief that increased government expenditure increases employment is a fallacy. Prime Minister Callaghan said at the 1976 Labour Party Conference at Blackpool:
We used to think you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that this option no longer exists (Daily Mail, 29 September 1976.)
At the same time the Tories under Thatcher were likewise rejecting the Keynesian “full employment" doctrine and adopting “monetarism". The present line-up is that the anti-Thatcher Tories, including the Heath faction, have remained Keynesian, as have the Liberals and SDP. and the Labour Party has gone back to Keynes.
Like the Labour Government 1974-79. the Thatcher government has already more than doubled the price level during its ten years in office. Governments in the nineteenth century and many economists (including Marx) knew quite well that the relevant factor in price stability is the amount of money (notes and coin) in circulation. If issued in excess of what is needed to carry out economic transactions then prices go up. If reduced below this level, as in 1920-25, prices go down. If kept in balance, as under the Gold Standard, prices are stabilised. Since 1938 the amount issued has been continually in excess and the present total is more than 30 times what it was in 1938.
When, in 1978, Labour Prime Minister Callaghan said that “the government was not going to print the money to finance inflation", and in 1979 Thatcher said "we will not print money", it may have seemed that they were both endorsing nineteenth century currency theory and practice. It was not so. When they talk of "money supply" they do not mean notes and coin but, predominantly, bank deposits. The government's advisers and most modern economists deny that the amount of notes and coin in circulation governs the price level, and the Bank of England in 1978 and 1979 (and in all the years since then) never ceased printing more notes and putting them into circulation.
Why the Labour and Tory governments have chosen to go in for half a century of inflation does not permit of a simple answer. There are three possibilities. The first is that they have done it out of pure ignorance. An example is the fatuous statement by Professor Milton Friedman to Thatcher that Karl Marx was a monetarist like Thatcher and himself.
The second is that the Treasury quietly points out to each Chancellor that continuous inflation has the great merit that it reduces the real cost of the interest payments on the national debt which have to be met out of the Budget.
The third is the one to which Keynes drew attention. Inflation is good for borrowers because, while interest rates rise when there is inflation, they rise less than the rise of prices. The biggest borrowers are the business community and farmers, both of whom have a lot of political pull and could influence government policy in favour of inflation.
Mid-Victorian values
The Thatcher government takes pride in the success it claims to have had in promoting home-ownership, proft-sharing and the "spirit of enterprise" which makes capitalists and workers willing to stand on their own feet instead of relying on state protection and assistance. What they don't admit is that this is as old as capitalism.
Better-paid workers, partly from choice and partly because rented accommodation was not available, have always aimed at owning their own houses. The first of the early type of building societies was set up in Birmingham in 1775 and there was something of a boom in Yorkshire in the early nineteenth century. In 1890 there were 2,800 such societies. The first reported profit-sharing scheme was in 1829. Their record is one of increase in every boom and decline in every depression.
In 1831 the Society for Diffusion of Useful Knowledge published a piece of pure Thatcherite doctrine in a booklet on the results of machinery entitled The Working Man’s Companion: An Address to the Working Men of the United Kingdom. It advised the workers not to join a union or resist machinery but to prepare in advance to meet possible unemployment. Work hard, keep away from the ale-house and the gin shop and gambling and save part of your wages. When he loses his job the worker then "strikes into some new line of labour, or he resolves to see what his capital and labour together will do as a workman on his own account”:
When there is a glut of labour, go at once out of the market: become yourselves capitalists.
Thatcher may well have imbibed her philosophy from that mid-Victorian bestseller, Samuel Smiles. Among his popular works were Thrift, Workers Earnings, Strikes and Savings, and Self-Help; with Illustrations of Character and Conduct. This last-named sold a quarter of a million copies.
Ups and downs of production
Governments like to be able to show that while they have been in power production has increased at record rates. The 1987 Tory Election Programme had this: “Britain today is in the seventh year of steady economic growth". It sounds impressive until it is remembered that in the first two years of Tory government production fell sharply. At January 1989 the total increase of industrial production since 1979 was less than the increase that took place in the previous ten years 1969-1979. When the next depression comes along it will fall again.
Thatcher however is confident that this time the boom really is here to stay. She has spelled out all the things required to guarantee no more depressions: Free trade, no inflation, low taxation and less government expenditure, weak trade unions and low wages, competitive industry, little nationalisation and of course a Tory government.
Early in the 1870s these guarantees were there. Free trade: highly competitive British industry; no inflation; low taxation (Income tax was 1¼ per cent against the present 25 per cent): government expenditure was only about 8 per cent of National Income against the present 40 per cent: real wages were far below present levels: the unions were small and weak and trade union law more restrictive: not much nationalisation and last but not least, a Tory Prime Minister, Disraeli.
So what happened in 1875? Here is the answer from a government publication, Industrial Relations Handbook, (the 1957 edition published by a Tory Minister of Labour) "A period of trade depression followed the year 1875 and lasted for almost twenty years".
Edgar Hardcastle
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