Wednesday, 10 April 2013

Thatcher – A Disaster For Capital A Bigger Disaster For Workers

There is a strand of thought within the Left that sees all political developments as inevitable consequences of the needs of capital. This kind of crude economic determinism has nothing in common with Marxism. It assumes that there is some kind of single capital logic outside of which historical development cannot stray. If we were to take it literally then either we have to conclude that Socialism is hopeless, because all future development is predetermined, and Capital will always win, or else it is inevitable, in which case there is nothing we as socialists or workers have to do, because history will bring it to us on a plate anyway. It confuses the fact, as Marx demonstrated, that all history can be explained in rational terms, after the event on the basis of the struggle of contending forces, which are ultimately motivated by economic interests, with the idea that only one outcome was ever logically possible.

There was no inevitability of Thatcher or Thatcherism. After the event, we can understand how both Thatcher and Thatcherism arose, and we can understand that in rational terms. We can even understand what economic forces created the conditions for her rise, and continuation, but there was nothing inevitable about it. Arguments that she or someone like her was inevitable, because Thatcherism was needed by Capital, are crude determinism, and also contrary to the facts. The reality is that Thatcher is rightly hated by workers, because she was a disaster for them, but she was also a disaster for capital itself.

There certainly was no inevitability of Thatcher personally coming to power. She faced considerable opposition within the Tory Party itself, before she could even become its leader. All of the Tory grandees opposed her. She won the leadership on the basis of rank and file Tory support, that reflected a Party in her own image. A party of mostly, reactionary, petit-bourgeois. Having done so, there was no inevitability that she would win the election. In fact, in 1978, the odds were that Labour would win the next election. Had Callaghan not delayed in 1978, had he not remained attached to the crumbling Social Contract with the TUC, and provoked the Winter of Discontent, its likely Labour would have won.

Having won the 1979 Election, Thatcher's stay in power for long was also far from inevitable. Her position as leader was not secure. She faced a continual threat from the Social Democratic wing of the party, what came to be known as “The Wets”. Moreover, even at the time of the Election Thatcherism as it came to be known did not exist. There was no mention of privatisation, for example, and Thatcher despite the sound bites was quite capable of making U-Turns when required. When it looked like she would lose against the miners in 1981, over pit closures, she backed down.

Moreover, in 1981, what looked inevitable was that Thatcher's stay in power would be very short lived. At that time she went down as the most unpopular Prime Minister of all time. I well remember, as unemployment soared, marching with tens of thousands of others in Liverpool, London and other major cities, on demonstrations headed up by Michael Foot. At that time, the Labour Party stood at more than 50% in the opinion polls that would have seen it home with a huge majority at the next election. The opposition to Thatcher within the Tory party intensified. There was no inevitability of Thatcher or Thatcherism.

Thatcher was saved by the Falklands War, and by other factors. The other factors included sectarianism on the Left, and poor tactics by the Local Government Left in fighting cuts, and linking up their struggle with that of other workers. Thatcher undoubtedly used the Falklands to engage in sabre rattling to gain support by rallying around the flag, but its unlikely that even she decided to sacrifice hundreds of British troops lives, and of Argentinian lives simply for her own electoral success. The War happened because such sabre rattling has a dynamic of its own that can lead to war when neither of the parties really has any desire for it. Its a lesson that should be born in mind today in Korea. But, there was plenty of opposition within even the Tory Cabinet to the war even when it started. Britain was lucky to win the war even against a third rate power like Argentina, because they nearly ran out of ammunition! Had Britain lost, Thatcher would have been out, and probably Labour would have won the ensuing election. There was nothing inevitable about Thatcher or Thatcherism.

Only after the Falklands did Thatcher's position become secure within the Tory Party, yet even then it was not inevitable that the Tories would remain in power. Had the SDP not split from Labour and linked up with the Liberals, Labour would probably have won the 1983 election. Certainly the Tories would have had a much smaller majority. There was nothing inevitable about Thatcher or Thatcherism.

But, nor can Thatcherism be explained in terms of the needs of Capital. The idea that what modern capitalism needs is the kind of small state mentality that Thatcherism represented, and which Cameron today tries to replicate, is absurd. Since its inception, Capitalism has relied on a powerful Capitalist State standing behind it and supporting it. As Marx sets out in Capital, it was the Capitalist State, and in particular the building up of a huge National Debt that played a major role in the process of primary accumulation of capital. It was the State which provided the military force required by Merchant Capital for Colonial expansion, and modern Big industrial capital is highly tied to the State. In the US, in France, in Germany, in Japan and more recently in places like Taiwan, Singapore, Malaysia and China the State has played a central role in supporting capitalist development including picking industrial winners, and helping finance them, or shape economic policy to meet their needs.

Moreover, under Thatcherism, the size of the State did NOT contract, it expanded! That was not just because she built up the bodies of armed men to batter down workers. The aspect of the State that expanded most under Thatcherism was Welfarism, as mass unemployment swelled the payments of benefits for years on end. Moreover, the attempt to massage the unemployment figures via more than 20 changes to the basis of calculation, also brought about the condition that has persisted since, that large numbers of people were moved off the unemployment register, and on to the list of people claiming Incapacity Benefit. From the perspective of Capital, this represented not some kind of inevitable logic, but a huge waste of resources.

It did have a logic for Thatcher, and the section of society she represented, however. Thatcher, like Cameron today represented the interests not of the dominant section of Capital, but of the class she came from, the small capitalists, the petit-bourgeoisie, and middle class, with all its attendant reactionary, narrow minded, and nationalistic views, that is quite antithetical to the needs of big, multinational, industrial capital. It was that, which led to her vitriolic hatred of Trades Unions – who, in fact, the big, multinational, industrial capitalists had long since learned to live with, and make use of. The section of society that Thatcher represented, like the Libertarians and Anarcho-Capitalists today were the enemy of that Big industrial capital. That is why, as the process of de-industrialisation unfolded, Thatcher rather than intervening in the interests of that industrial capital, instead pursued policies that hastened its demise.

Thatcher not only allowed large scale manufacturing industry to rot, she encouraged it, she pursued policies that hastened it. Policies such as the introduction of Enterprise Zones, worked in that direction, because what they were about was providing support for all those small, inefficient capitalists, who like the zombie companies today, could only exist on the back of cheap labour, and oppressive working conditions. Thatcherism encouraged the development of a low wage-high debt economy, which was quite alien to the needs of big industrial capital, which for decades had learned that the most effective means of extracting surplus value, was via investment in equipment that would raise productivity. The proof of that was what happened when large Japanese industrial companies set up car plants in the country, which over night were some of the most efficient in the world, and profitable from day one, despite paying generally above average wages, and providing better than average working conditions.

In order to create a low wage-high debt economy, the economy which has caused most of the problems the UK suffers from today, Thatcher set about allowing all of these old large industries to go to the wall, in order to undermine the strength of workers. Unemployment rose, and welfare spending rose with it, funded by North Sea oil revenues, that were squandered, whereas they could have been used to restructure British Capital towards more efficient, high value production ready for when the new global upturn began. The argument that this strategy was needed for Capital in order to defeat the Trades Unions does not stand up. It turns a Trades Union movement, which in Britain had been the backbone of reformism, of bargaining within the system for more than a century into some kind of revolutionary force. It portrays the British Trades Unions as more of a threat to Capital than were the more powerful Trades Unions in France or Germany, or Italy, where no such strategy was adopted. There was nothing inevitable about Thatcherism.

In Germany, the kinds of reforms to the labour process that Thatcherism is said to have been needed for, were achieved over a longer period, largely on the basis of consensus with the Trades Unions. The Social Contract had demonstrated the way the British Trades Unions could be incorporated into a similar process in Britain too. Had the Callaghan Government had the resources of North Sea Oil, that Thatcherism squandered on Welfare payments in the 1980's, then it is likely that it would have oiled the wheels of a similar transition. But, its possible that a Tory Government led by one of its social-democratic wing, like Heseltine, might have achieved something similar. What stood against that, was not the interests of Capital, but the weight of all those small capitalists, and backward sections of the middle class that made up the ranks of the Tory Party.

The real British disease in the 1970's, was not too powerful Trades Unions and repeated strikes, it was an already decayed industrial structure, whose real decay was being highlighted by the onset of the Long Wave downturn, in a world where new modern, dynamic industrial powers were rising within the global economy. The problem with the British car industry was not its industrial relations, but decades of under investment, and a continuation of plants in unsuitable locations, such as Longbridge, that resulted in higher than average costs, inadequate investment in research, development, and design and whose consequences were lack of competitiveness and profitability, which lazy managements then attempted to resolve on the backs of the workers, which then resulted in the poor industrial relations.

Unlike, what happened in Germany, Thatcherism did nothing to change that underlying reality. In the end, the attacks on the Trades Unions, and the mass unemployment that facilitated them, and the low wages they were intended to facilitate, did nothing to assist British industrial capital, which continued to decline and disappear. Sometimes it disappeared to China, or elsewhere, but frequently it also simply disappeared altogether as a total loss. So, to say that Thatcher's policies of attacks on workers was needed by this important section of capital makes no sense.

That, of course, is not to say that workers should have settled for a social-democratic solution for Capitalism either. Yet, a look at Germany and the UK today, and the experiences of workers in both countries over the last 30 years, shows which model has been better both for workers and for Capital, and it most certainly was not the Thatcherite model. That is despite the fact that Germany did not have the huge benefit of North Sea Oil that Britain has enjoyed. In Germany, workers wages are higher, pensions are higher, the welfare state provides superior benefits, working conditions are far superior, and workers have not gone through the traumas that British workers have endured. Its society is more equal, and stable. Other European countries that followed a similar social-democratic model show the same benefits. Britain by contrast as a result of Thatcherism and the economic and social conditions it generated, created a more unequal, much less stable society. All social analysis shows that such societies by their nature are less productive than those which are more equal and stable.

Germany, has maintained a large productive sector of its economy, and is still the world's second largest exporter, just behind China. By contrast, Britain's economy has been hollowed out, which by no stretch of the imagination can be described as having been in the interests of Capital. A low wage-high debt economy created by Thatcherism, fostered all of those low value, inefficient sections of capital, as well as unproductive sections of Capital, such as in Financial Services. But, that model based on blowing up asset price bubbles, as a means of encouraging people to borrow to consume, could not go on forever. It has led to the current Financial Meltdown.

That model is also what led to the policy of selling Council houses. Of course, today, the news media only talk about those for whom that was a boon, but they fail to mention that in the house price crash and rising unemployment after 1990, thousands of people who had been encouraged to buy their Council house, had to hand it back, because they could not pay the mortgage! And, of course, that very policy is partly to blame for the lack of social housing today, along with the concomitant policy of preventing Councils from using Capital receipts from sales to build new Council houses. The same economic policy is also what led to the encouragement of people to spend large amounts of money on private Pensions, which became next to worthless in the Stock Market Crash of 2000.

The policy on Council houses was merely emblematic of what Thatcherism was, a great Ponzi Scheme, built on debt, which kept the Tories in office for a long period, by giving huge bribes to its electoral base. It did so at the cost of essentially defenestrating the counties economy and social structure. The policy of privatisation was another example. The industries that had been nationalised, had been so because they were already bust due to years of under investment. Nationalisation was largely a policy for providing the needed investment by the taxpayer, whilst the industry was rationalised at the expense of its workers – sometimes rationalised out of existence – ready to be taken over again. When Thatcher began the policy of privatisation, limits were placed on the number of shares that could be obtained. This was a blatant bribe to the middle class. The offer prices were set artificially low. The middle classes, and better off workers were able to buy their maximum amount of shares, sure in the knowledge they would make a sizeable capital gain within weeks when they sold them. When they did sell the shares were picked up by the banks and financial institutions.

This process of making investing all about short term Capital Gains rather than long term investment for income fed into the Thatcherite high debt model. Combined with the deregulation of banks and financial services culminating in the Big Bang, it set the conditions for the subsequent huge bubbles in property and share prices, and thereby for the subsequent bursting of those bubbles. Increasingly, investing and making money became about gambling on such rapid changes in asset prices rather than investing in actual productive activity. That again is what led to the imbalances in the UK economy, and its over reliance on the banks and Finance houses.

When the Tories complain about the imbalances in the economy, and the lack of regulation of the banks, they should blame Thatcher. When they complain about the lack of any large manufacturing sector, they should blame Thatcher. When they complain about the problems of people stuck on welfare for decades, they should blame Thatcher. When they complain about the inability for ordinary people to buy houses, they should blame Thatcher.

But, there is little to be gained from such blame gains. In the end, the only people we can blame for our condition is ourselves, for failing to take control of our own lives, and leaving it in the hands of our enemies. In one respect, Thatcher was right, therefore, that we should not rely on some benevolent dictator in the shape of the state or politicians resolving our problems for us. But, as Marx pointed out, the days when individual peasant producers could do that have long since gone. The only way we today can resolve our own problems is collectively. That is why workers created Trades Unions, it is why they created Co-operative enterprises and stores, and why they established Friendly Societies and other Mutual organisations so that they could collectively provide for their own welfare and social security. In rejecting Thatcherism, we should not go back to the failed statist models that preceded it, but go forward to rebuild and rejuvenate all of those basic organisations of workers self activity, self-help and self government. If we do that, Thatcherism will actually in the end have done us a favour.


George Carty said...

To what extent was the historic problem with British industry down to the mentality of British capitalists, who didn't want to nurture productive business for the long term, but merely to make enough money for themselves to allow them to join the landed gentry? This survival of pre-capitalist thinking may also be the root of the British public's obsession with house prices.

Another problem with many British industrial firms may have been that they didn't realize (due to having captive colonial markets) how uncompetitive they really were, and thus rapidly collapsed once Britain dumped its colonies.

Boffy said...

I think that is right. Once again some Marxists tend to operate with a rather mechanical and determinist model. Marx sets out the objective laws under which capitalism develops and operates, but a look at what he says about the way individual capitalists rejected the view of Malthus and others that they should concentrate all of their efforts into accumulation, and leave the conspicuous consumption to the old ruling classes, shows that Marx's view recognised that there was a great deal of scope for subjectivism too.

As he says, beyond a certain point, and the more they are divorced themselves from the productive process, the more they tend to concern themselves with their own luxurious lifestyle as well as the need to accumulate capital.

But, there can be a similar tendency arising from the development of professional Managers too i.e. the Executives. If you get paid huge amounts of money whether your firm does well or not, and if like a Football Manager, being sacked from one job, simply means you move into another identical job, you will tend to focus on short termism, as well as lining your own pockets.

During the 19th century, and most of the 20th. Britain was able to rest on its laurels and the advantages it had from the Colonies, rather than modernising. In part that was what the debates over Free Trade between the Liberals and Tories were about.

I was also reading a while ago about the way the Taylorists even in the US saw existing professional managers as far from professional. In Britain, that was probably even more true. Moreover, even within the big industrial firms, the professional managers, were and are people who themselves had come from the same kind of small capitalist, petit-bourgeois background as Tories, which is why organisations like the CBI, and certainly the Institute of Directors, are usually closer to the Tories than the interests of big capital would actually suggest they should be.

British Capital had been in decline since the end of the 19th Century, and the continuation of that was inevitable. The post-war boom disguised it.

On house prices as I've said many times I find the mindset puzzling. Who would see large rises in prices of cars, TV's or any other requirement as being a good thing??? Why don't even fairly intelligent people realise that when the most expensive thing you are ever likely to buy goes up in price, it makes you considerably poorer not richer?

George Carty said...

I suppose rising house prices are a good thing for existing homeowners within the context of the Thatcherite debt-based economy, as the extra value can be extracted via MEWing to fund consumption.

I didn't know that Malthus condemned capitalists who lived luxuriously (although come to think of it, that wouldn't be surprising given that he was a clergyman). I only knew of him as an advocate of population control...

Boffy said...

Malthus was an apologist for the old Landed Aristocracy. Most of his ideas were actually plagiarised from earlier writers. His ideas on unproductive consumption was linked to his ideas on population. He believed that the landlord class - and that included its attendant layers like the clergy - fulfilled a useful function in buying up luxury goods, which provided demand for the "productive classes", which combines workers and capitalists, thereby keeping them productively employed. The capitalists he argued should not consume unproductively, however, because that would distract them from their real function of investing in production.

Rising house prices even for existing home owners are still a bad thing for numerous reasons.

1) using them as an ATM to fund consumption only means putting yourself in even further debt i.e. impoverishing yourself further.

2) Most people want to move up to a more expensive house from the one they own, so any given % increase means in absolute terms the more expensive house has become less affordable i.e. you are relatively worse off again.

3) Many people have kids, so the price for them is higher meaning they will be worse off when they come to buy a house. That's why parents are being encouraged to pauperise themselves by borrowing more against their own house to provide deposits on overpriced houses for their kids!

4) Higher prices mean higher costs for house insurance, for repairs and maintenance, and possibly for things like Council Tax.

George Carty said...

Why are house price rises politically popular, if they are a bad thing even for existing homeowners?

Boffy said...

Why do some people like drinking alcohol to excess, or taking recreational drugs, even though they are bad for you? People generally do not act rationally. There is a whole school of finance based on that premise, and profits from being contrarian.

Why do people always race to be the first to stand up to get off an aeroplane, even though it simply means having to stand while you wait for everyone to get their bags, for the doors to be opened, and it then means you are the first on the bus, whereas those who simply sat and waited had a much pleasanter time, and ended up last on the bus, but first off it, able to go to the toilets before everyone else, prior to going through passport control.

In the same way, why do people always tend to wait until prices are high before they think its a good time to buy, when in fact its the time they are most likely to fall again, and the best time to buy is when prices are low!

Why did people think it was great that Tulip bulbs were going through the roof, and rushed out to buy some - until nobody else wanted to buy them? Manias always seem great and exciting, that's what makes them manias. Its the cold turkey people don't like.

George Carty said...

On the subject of high house prices being politically popular, what do you think of the blog comments posted by "Blissex"?

He argues that most voters (due to demographics) are retirees or near-retirees who identify with rentier interests, and therefore want low wages (for cheaper care) and high asset prices, and that is what has driven politicians to the Right since 1980. (A good example of this is America's Tea Party movement, most of whose rank-and-file is made up of retirees.)

He also thinks that continued decline in Britain is inevitable due to the exhaustion of North Sea Oil.

Boffy said...

I haven't studied their comments in detail, as my time is very limited.

I think there is something to the idea put forward. There were a lot of people who bought houses for the first time in the 1950's, 60's, and 70's at what today would seem very low prices. They have benefited from high rates of inflation in the 70's that inflated away the capital value of mortgages. That gives the delusion of wealth.

Amongst that sector, I have no doubt the point has some validity - but those who are taken in by the delusion of wealth, are nevertheless deluded, and in for a nasty shock when these fictitious asset prices collapse. That is no doubt one reason, but only one for why politicians like Osborne are trying to prevent that inevitable collapse.

But, there are even amongst that age group many who never had an income sufficient to buy a house, probably particularly in more expensive locations like London. They just see the effect of high house prices as feeding through into high rents. Even if that is not an immediate problem for them, high house prices are a problem for their children and grandchildren, whether they need to buy or rent, and they are a problem for all those who find themselves paying large amounts of tax to subsidise Landlords exorbitant rents via Housing Benefit.

I don't think anything is ever inevitable. Oil is not the significant factor it once was, and in any case shale is being developed. The roots of Britain's decline are far deeper than a reliance on oil.