Conservative Social Democracy v Reaction (2)
This period of the 1980's can be analysed in the framework of Marx's theory of Historical Materialism. A set of changed material conditions create a set of new social relations, which have their reflection in the political superstructure. The political superstructure then has a feedback on to material conditions.
One of the material conditions that Thatcher faced was high levels of inflation. The policy initially adopted by Thatcher was Austrian School control of the money supply. There is a difference between this theory and that of Friedmanite Monetarism, though the two are frequently conflated, because both are right-wing in nature. Both share with Marxism the correct understanding that inflation is a monetary phenomenon, and results from a depreciation of the currency. In economies with fiat currencies, this depreciation results from printing more money tokens than are required for circulation of commodities, so that each token is devalued, causing prices measured in these tokens to rise. The same effect can be achieved by increasing the amount of credit money in the economy.
But, Friedman argued that the Depression of the 1930's was caused by the Federal Reserve adopting a monetary policy that was too tight. It is that approach that has been followed by Alan Greenspan, and more enthusiastically still by Ben Bernanke. By contrast, Mises argued that it was caused by the Federal Reserve having a monetary policy that was too lax, which lowered interest rates and encouraged a speculative “crack-up boom”. Marxists argue that both are wrong. The crisis that actually began after 1914-20, was due to an overproduction of capital. Capital expanded to a point where the social working day could not be expanded further, so as to produce additional absolute surplus value. On the basis of the existing technologies, nor could productivity be raised fast enough to increase relative surplus value. As the demand for labour-power rises, so wages are also raised, squeezing profits. A point is then reached, as Marx describes in Capital III, Chapter 15, where any additional accumulation of capital causes all wages to rise, so that no additional surplus value is produced, and, in fact, the amount of surplus value even falls. The additional capital has not acted as capital; it has been overproduced, profits fall sharply and a crisis ensues. The solution to this can come neither from raising interest rates, nor from lowering interest rates, tightening monetary policy or loosening monetary. It can only come from raising the rate of profit, which requires a new technological revolution.
In 1979, Thatcher is faced with high levels of inflation approaching 20%. At the same time, throughout the 1970's, unemployment had risen, confounding Keynesian theory, as stagflation set in. Thatcher, to reduce the inflation, adopted the Misean/Austrian School solution, as recommended to her, by Hayek. A similar policy was adopted by Reagan in the US, via the Federal Reserve Chair, Paul Volcker. By the end of 1979, UK inflation was over 17%; in 1980 the rate of inflation actually rose further, because tightening monetary policy does not immediately cause the general price level to fall. What it did do was to ensure that those companies already on the edge went bust. One reason that inflation does not immediately fall, is that, as some of these companies go bust, so the mass of commodities in circulation falls, those companies that do not go bust, in any sphere, have less competition, and take advantage to raise prices, to boost their own profits. Unemployment began to soar towards 3 million.
The Buttskellite conservative social-democrats in the Tory Party, the so called “Wets” had seen it before, in the 1930's. They baulked, and opposition to Thatcher mounted, as it looked like her days were numbered. She had won the leadership by what was effectively a palace coup. A group of Tory MP's, in challenging Heath, had gone around asking MP's to back Thatcher on the basis of her having no chance of winning, whilst having calculated that if they could get enough to support her on this basis, she could actually win. Now, it looked like the Tory establishment would strike back. But, rather like Trump today, Thatcher used the power of the position of Prime Minister, and the fact that she had the support of a majority of Tory rank and file members to brazen it out.
Initially, the collapsing economy and soaring unemployment saw the Tories standing in the polls fall dramatically. As Michael Foot, the new leader of the Labour Party, led marches against unemployment, in cities across the country, Labour soared to 51% in the opinion polls, further weakening Thatcher's hold on power. But, she was rescued by the SDP, which split from Labour. It was not, at this point, that the Tories standing improved, but that the division of the anti-Tory forces, meant that Labour's vote share declined.
The Tories had a plan for taking on workers and undermining their trades unions – the Ridley Plan. It involved deliberately picking fights with unions. But, even in this period of the early 1980's. The Tories had to carefully choose which groups of workers they took on. They took on weakly organised workers, and those in unions such as the steelworkers, which had a history of right-wing leadership, and compromise and betrayal. The Tories took on the steelworkers in 1981. But, in the same year, having threatened a series of pit closures, Thatcher was forced to retreat in the face of a threatened Miners' Strike. Not until 1984, were the Tories strong enough to take on the miners.
In this period, of the early 1980's, Thatcher used tight monetary policy to squeeze inflation out of the system, and thereby forced employers to have to oppose wage rises so as not to go bust. By sending unemployment soaring, she undermined union power, and demoralised workers. The demoralisation was manifest as workers protests increasingly took on a more chaotic and individualistic nature, such as the inner city riots of 1981.
By the early 1980's, North Sea Oil and Gas had started to bring large revenues into the coffers of the state. Instead of using it positively, to invest in the economy, Thatcher used the revenues to finance growing levels of welfare payments, as unemployment rose. Thatcher introduced 20 changes to the calculation of unemployment, to try to massage the figures. During this period, was also seen the start of moves to switch people from unemployment benefit to sickness benefit, as a means of reducing the figures. The oil revenues also strengthened the Pound, putting an additional squeeze on effective money supply, and forcing UK companies to keep a tighter control on their costs, primarily labour costs.
At the time many people called Thatcher a fascist, but that is to use the word as merely a term of abuse, not of analysis, and thereby devalues its meaning. Thatcher was not a fascist. She was, by temperament, and by the nature of the position of Prime Minister, as “an elected dictatorship”, a Bonapartist, though her regime itself still could not be defined as Bonapartist. It was certainly characterised as being a strong state, and Thatcher's role within it, became increasingly authoritarian. That was typified in her dismissive attitude to her Cabinet, and particularly of the “Wets”. In the Spitting Image sketch, Thatcher, out to dinner with the Cabinet, orders steak, and when asked “What about the vegetables?”, replies, “Oh they'll have the same as me.”
But, for millions of workers, life under Thatcher was not funny at all. The period saw all of those things that had been developing in the previous period raised to new heights. The NAFF assisted employers in drawing up blacklists of militant workers who were excluded from employment. In the Miners' Strike, Thatcher showed that she was prepared to use the North Sea revenues not just to pay for rampant unemployment, but to buy in foreign coal from Stalinist Poland. The experience even led arch Stalinist, Arthur Scargill, to temporarily question his admiration for the viciously anti-working class regime in Poland, and the rest of the soviet bloc. Cheap North Sea oil and gas was also used to burn in power stations, often at the cost of the longer-term condition of the boilers. The state had at least 200 leading trades union officials on its books as informants, it routinely, and blatantly opened the mail of labour movement activists, as well as tapping their phones, it sent in agent provocateurs, and bugged the offices of the NUM in Barnsley. It routinely used bully boy tactics to intimidate and arrest pickets; it effectively imposed martial law on pit villages across the country, preventing free movement. At Orgreave it used military personnel in police uniforms, alongside the regular police, who also frequently did not display their numbers on their uniforms to batter the strikers in a pre-planned assault.It should be borne in mind that these are the same Tories that some Labour MP's, including some, like Ronnie Campbell, from mining constituencies, are aligning with, over Brexit, and in whom they are placing faith to defend workers' rights!
At the same time, Thatcher implemented a series of populist policies, such as the Right To Buy programme, introduced in October 1980, which enabled council tenants to buy their houses at up to 60% discounts. Consistent with her Austrian School ideology, this was also a means of dismantling elements of the social-democratic state, but that element should not be overstated. The main purpose of this programme was to win votes as a populist measure. In fact, the reality is that the size of the state increased under both Thatcher and Reagan. The privatisation programme that Thatcher is perhaps most remembered for, formed only a very minor part of her agenda in 1979. It is only after the Tories were re-elected in 1983, that privatisation starts to become a major part of their programme, with the start of it beginning in 1984 with the privatisation of BT.
What really frightened conservative social-democrats, in the 1970's and 1980's, was the potential for rank an file workers, led by militant shop stewards and activists, to take the struggle beyond the normal bounds of social-democracy. Years of experience told them they could rely on the traditional union leaders to compromise, and control their workers. They could not guarantee that, where the rank and file went beyond the limits established by those leaders, or where new leaders of the type of Scargill, themselves went beyond those bounds. The same applied in relation to the struggles against Labour Councils resisting the Tory cuts. The old right-wing Labour Councillors could be counted on to roll over and play dead, and the Labour leadership, now under Kinnock, could be counted on to support them, and oppose any resistance, as Kinnock did both in relation to the Miners Strike, and to the struggles of Labour Councils, such as in Lambeth, Liverpool and elsewhere. But, in many places, those old right-wing councillors had been deselected, or had gone over to the SDP. New radical socialist councillors were in place, who the Tories and Kinnock alike sought to crush, so as to crush any effective resistance.
Thatcher does not set out to destroy the trades unions, but to more effectively incorporate them within the structure of the new conservative social-democratic environment. So, for example, when whole new large-scale capitals are established such as Nissan in Sunderland, Honda in Swindon, Toyota at Burnaston and so on, they are encouraged to do so on the basis of single union agreements. Moreover, Thatcher's government facilitates the incorporation of a whole layer of lay union officials into the union bureaucracy, as convenors become full-time union officials based in the plant, etc. For these capitals, the union is a direct transmission mechanism, which does away with all of the problems of dealing with thousands of individual workers, and their shop stewards, which becomes a controlling mechanism sitting on top of those individual workers, acting against the kind of unofficial, wildcat action that characterised the 1950's, 60's, and 70's.
Thatcher's policies, themselves conditioned by material conditions, thereby feedback on to material conditions, and change them. Thatcher facilitates the clear out of zombie capitals, she undermines the power of unions to resist, she facilitates new technologies being introduced, which further undermine union organisation and wages. The consequence is a rise in the rate of profit. The mass of profit rises faster than the demand for money-capital for new investment, as the economy enters a period of stagnation, and intensive accumulation. This process is facilitated by other material changes. Across the globe a whole series of former colonies, and developing economies reach a stage of development, at least in parts of these economies, where infrastructure, and the existence of other facilities is sufficient to sustain modern industry on a profitable basis. Large scale manufacturing, using very high levels of fixed capital, which requires only unskilled machine minding labour to operate, begins to find it profitable to relocate to these areas, where large amounts of this unskilled, low wage labour is available.
The deindustrialisation of the developed economies then arises for two reasons. Firstly, the period of intensive accumulation means that the same, or greater, output can be achieved with much less labour. Its not that the volume of material production in these economies falls, but that this production now requires less labour, and the value of this output falls accordingly. Secondly, new investments of capital in these old manufacturing industries are increasingly located in developing economies.
Marx describes why interest rates hit their peak in the period of crisis. Now, in the 1980's, as profits rise faster than the demand for loanable money-capital, interest rates start to fall. Falling interest rates cause asset prices to rise. But, now these rising asset prices do so in an environment, where council houses are being sold off at 60% discounts, nationalised industries are being sold off at large discounts that see shares in these companies rise by 50% plus in a matter of days after flotation. The stage is set for asset price bubbles to blow up quickly, and for this to have its own impact on consciousness. The social forces that dominated in the previous conditions, based upon the accumulation or real capital, socialised capital, now fall back, and new social forces come to the fore. On the one hand, those based upon fictitious capital, whose rapid rise in price appears to be the source of wealth, and on the other, all of that small-scale private capital, upon which the Tory Party is based, and around which is based The Myth of the Small Business.
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