Magazine | June 03, 2019, Issue

Britain’s Socialist Seventies

British Prime Minister Margaret Thatcher receives a standing ovation at the Conservative Party Conference on October 13, 1989. (Stringer/UK/Reuters)
Before Thatcher, there was stagnation and decline

If you can remember the 1960s, many are said to have said, you weren’t really there. But if Britain fails to remember the 1970s, it may soon find itself in a place where it really should not want to be. Towards the end of the latter, infinitely less entertaining decade, a good number of those at the top of Jeremy Corbyn’s opposition Labour party made their political debut as members of a hard Left that was far less of a fringe than it deserved to be. They have come a long way since, but their thinking has not, and with the Conservatives being broken apart by a botched Brexit, Corbyn’s own ’70s show could be playing in Downing Street soon.

In 1962, former secretary of state Dean Acheson told a West Point audience that Britain had “lost an empire” but “not yet found a role.” By the early 1970s it had found one as Europe’s latest sick man, made sicker still by new Irish woes. In 1960 the U.K. boasted Europe’s most productive economy. Within ten years it had been overtaken by all its major peers. Repeated pressure on its (overvalued) currency signaled that the U.K. was living beyond its means. While Britain’s failure to keep up can be partly explained by improving conditions for some of its competitors — a post-war rebound in some cases, long-term laggards pulling themselves together in others — much of the blame was to be found at home. Complacency, systematic underinvestment, mounting trade-union militancy, and (after a Labour government took over in 1964) ever higher levels of taxation and government intervention in an economy already burdened by too much of both, all took their toll. As elsewhere in the West, there was a marked increase in inflation (in Britain’s case boosted by a significant devaluation of the pound) in the late 1960s. It handed Ted Heath’s Tories a surprise election victory in 1970, but the rising prices were another harbinger that the hitherto chronic British disease was entering an acute phase.

There were early signs here and there, faint foreshadows of what was to come under Margaret Thatcher, that the newly elected Conservatives might be prepared to try something different. Two travel agencies, a brewery, and some pubs were privatized: a start, to be sure, but trivial given that the state-controlled industries still included coal, steel, utilities, and many more besides. There were tax cuts (the top rate of income tax was reduced from 83 to a gentle 75 percent, but — the Tories didn’t want to go too far — an additional surcharge on investment income was retained), public spending was trimmed, and the first attempts were made to allow occupants of municipal housing to buy their homes, a policy that the Iron Lady was later to make her own. But despite some free-market talk and legislation to rein in the trade unions, Heath did relatively little to break away from the right-hand lane of the aging statist consensus that was holding the country back.

Even Heath’s most notable achievement, Britain’s successful application to join the European Communities (the predecessor of the EU), was something that had previously been tried by both Labour and Conservative governments. Heath was a true believer in Europe’s “ever closer union,” but for the most part, support for British membership (where it existed: the country, then as now, was divided) was essentially transactional. Some were attracted by the thought of new openings for British industry and some by the belief that increased European competition would force the U.K. to raise its game. Others were simply beguiled by visions of joining an “abroad” where life seemed more fun. Deeper concerns about where the European project was going were pushed to one side. They would return.

But Brussels could do nothing to save Heath from the increasingly corrosive effect of Britain’s failings on its labor relations. Rising prices, slowing growth, and entrenched class antagonism combined in a way that brought the trade unions new recruits (often, ironically, from across the social divide as white-collar workers looked for shelter from the gathering economic storm) and added a much sharper political edge to their traditional bloody-mindedness (the unions had always enjoyed a powerful position within Labour, a party they helped fund, but this was altogether different). To confront this challenge, the Right needed not only a new approach, but also a substantial constituency to support it. Heath was unwilling to contemplate the first, and the second was several crises away.

With the economy stumbling into stagflation (a new phenomenon by no means confined to Britain), the government turned to an old remedy designed for the stag, but not the flation. It tried to spend Britain’s way out of trouble. This led to a brief, unsustainable boom but poured fuel on an inflationary fire that was never likely to be extinguished by the wage and price controls — yet more meddling in the economy — earlier introduced by Heath’s intellectually exhausted technocrats. And all the while the strikes, sometimes prolonged, sometimes marked by violence, and occasionally involving massive disruption (the power cuts were not fun, trust me), continued. Britain lost nearly 24 million working days to strikes in 1972 (compared with 300,000 in 2017), owing mainly to the coal miners. When the miners returned to the fray two years later, they brought the Conservatives down. With the country obliged to work a three-day week to conserve power (most of the country’s electricity generation was coal-fired), Heath called an election in February 1974 on the issue of “Who Governs Britain.”

A weary electorate replied that it didn’t know. The Tories won more votes but fewer parliamentary seats than Labour, which formed a minority government. In October, after a few months of comparative calm, Labour gained a higher share of the vote than did the Conservatives and eked out a narrow House of Commons majority. Brits had chosen, they imagined, the option of quietly muddling through, an option that no longer existed.

Radicalism feeds upon itself. The question of who governed Britain was not going away. Emboldened by both a struggling economy (capitalism had failed, you see) and the breaking of the Tories, the hard Left stepped up its campaign to drive Labour in its direction. The trade unions, meanwhile, waited to see how they would be rewarded for their contribution to the Conservative defeat. Neither had too much cause for complaint: The Conservatives’ union laws were repealed, taxes on the “rich” reverted to outright looting (a top income-tax rate of 83 percent, rising to 98 percent on investment income), and, at a time when richer, less indebted countries were retrenching in the wake of OPEC’s oil shock, public spending soared.

The mid Seventies were hard on most Western economies, but the U.K. appeared to be in a hell of its own. Inflation shot up from over 9 percent in 1973 to more than 24 percent two years later, GDP fell, unemployment rose, the pound crumbled, the stock market crashed, house prices slumped, industry buckled, and some of Britain’s best and brightest headed for the exit. In response and with a good degree of union support, Labour’s left, including a minister who later would become a mentor of sorts to a young Jeremy Corbyn, agitated for more taxes, more spending, more state control of the economy, and something close to autarky.

Labour’s leadership rejected this path to economic and democratic disaster. Given their political constraints, they did the best they could to connect with economic realism. Spending was cut, a change in direction given wider significance by a speech in which Prime Minister Jim Callaghan appeared to abandon the crude Keynesianism that had characterized so much of British policymaking since the war. Callaghan later claimed that too much had been read into his words, but whatever he meant, spending was slashed still more — this time at the insistence of the International Monetary Fund, the price of a humiliating bailout agreed to in December 1976.

Some have argued that this shift paved the way intellectually and politically for Thatcherism, but it worked so well that for a while it seemed that, despite rising unemployment, the Tories might be held at bay. Inflation fell, tax rates came down (somewhat), public finances improved (low bar), GDP growth picked up (more than a bit). If, as expected, Callaghan had gone to the polls in the autumn of 1978, Labour might even have won. The prime minister balked, but winter — the Winter of Discontent — was coming.

The unions were stirring, pushing back against the government’s efforts to hold down pay increases. When these were undermined by the Labour party’s left, huge pay demands were followed by a wave of strikes across British industry (from truckers to water workers to the auto sector to the railways to ambulance drivers; take your pick, the list is very long). The chaos was accompanied with images so grotesque — the dead unburied, the sick untreated, the trash piling up in the streets — that they were seared into Britain’s political memory for a generation. And so was the government’s eventual surrender.

Just a few months later, Margaret Thatcher was in 10 Downing Street, promising change. The Winter of Discontent had sealed the deal for the Conservatives, even if neither the Tories nor their voters had much of a clue what that deal would turn out to mean.

This article appears as “Before There Was Thatcher” in the June 3, 2019, print edition of National Review.

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