Conservative Social Democracy v Reaction (3)
Interest rates began to fall from around 1982, and as they did so, asset prices rose. To give an illustration, let me again refer to my personal experience. Earlier, I referred to the fact that, in 1977, I had bought a house for £5,500. We were lucky that our neighbour was a building worker, who helped us to knock out walls, replace windows and so on. My wife became a competent bricklayer as a result of our work on the house. But, even allowing for this added value, it does not explain the rise in its market price. When we sold it in 1988, we got £22,500 for it, four times what we paid for it 11 years earlier. In fact, throughout the 1980's, house prices soared, quadrupling in price, despite the fact that, after 1980, general price inflation was falling, unemployment was rising, and the economy was stagnating. That can be seen also from the house we bought, which I remember being built in 1974, and was sold, at that time, for £7,500. In 1988, when we bought it, it had risen to £32,000. As an indication of the craziness of this asset price inflation, by 1990, the house we bought had risen to around £60,000, whilst if I had held on to my previous house, until that time, I could have sold it for around £39,000! You can understand why, in such conditions, people began to think that the route to wealth was via this kind of gambling on house prices. Anyone who bought their council house, in the early 1980's, with a 60% discount, and managed to pay the mortgage – which many didn't if they lost their job in the subsequent period of stagnation – would have been sitting on sizeable paper capital gains by the end of the 1980's. 
And, with share prices also rising sharply, as interest rates fell, and people lured into the stock market by the large capital gains from privatisation sales, a whole new industry of financial advisors arose. The first thing the estate agent did, when I came to sell my old house, which, because I'd bought it for cash, initially, I was able to sell after I had bought the new one, was to rush to send their financial advisor to talk to me about investing the proceedings. But, this mad speculative frenzy also necessarily brought with it its concomitant, the bursting of speculative bubbles. 1987 marked a conjuncture from the crisis phase of the long wave to the stagnation phase. The US, under Reagan, followed the insane voodoo economics of Art Laffer, promoted by Larry Kudlow, that Trump is pursuing today, again encouraged by Kudlow. The result, then as now, was the blowing up of huge twin deficits. The US went from being the world's largest creditor country to being its largest debtor. The US budget deficit and trade deficit ballooned. Global speculators began to worry about the US paying its debts. The stock and bond markets took fright, and crashed hard. The Dow Jones fell by 25% in a single day, a greater fall than during the 1929 Wall Street Crash.
Consider what these material changes mean in terms of the social relations between the different classes and class fractions. In the previous period, the owners of fictitious capital looked to the revenues they obtained from these assets. Any capital gains achieved from the slow appreciation of these assets, is a bonus. This is true also of the owners of property. Homeowners during the 1950's and 60's saw one of the benefits of it as being that they did not have to pay rent, which then comes to be seen as an imputed income. Most landlords, were people who had owned land and property for some time, usually actually owned rather than being bought on a mortgage. That begins to change in the 1980's. Now seeing house prices rise rapidly, a number of people become buy-to-let landlords. Many of the council tenants who bought under Right to Buy, find they can't pay their mortgages, and lose their house. The houses are bought up by private landlords, many of them people who have become landlords for the first time, as buy-to let landlords. The consequence of Thatcher's Right to Buy programme was not to turn council houses into owner-occupied properties, but to turn them into privately rented accommodation, and to convert many council house tenants into private tenants, lacking many of the rights and securities that council tenants enjoy. Half the houses sold, are now privately rented, and at much higher rents.
Many of those who became Buy-To-Let landlords were ordinary people who had spare cash, and seeing these easy capital gains decided to speculate, also being attracted to this form of gambling by the age old axiom that nothing is safer than bricks and mortar, and the associated fallacy that house prices always go up. There were many other factors encouraging this speculation. Buy-to-Let landlords, unlike ordinary home-buyers, were able to set off their mortgage interest against income for tax purposes; they were able to count rental income as income for the purposes of obtaining further mortgages and so on. Some of those who undertake such speculation are those who have been made redundant, and use redundancy pay to buy the houses they subsequently rent out; some are people who extend this to other forms of small scale enterprise, renovating properties for resale or rent, or even small-scale building.
There is an explosion of these small capitalists and traders during the period, and their milieu continually overlaps with those who are on the wrong side of the line between legality and illegality. It is epitomised by Del Boy, and the sentiment is portrayed in the words of John Sullivan's theme song “why do only fools and horses work?” This is the class of small capitalists that formed the majority of the membership and core vote for the Tories, but whose interests had been ignored by the Tories during the period of Buttskellism. Now, this class fraction expanded significantly, and, in Thatcher, they found their champion, and under Thatcher, their numbers grow significantly, and their social weight increases accordingly. The NF that had been attracting sections of this class fraction, just as the BNP and UKIP/Brexit Party were to do later, was undermined as Thatcher stole their clothes, tightening down on immigration, as well as accommodating all of the other bigotries in relation to homosexuality and so on. Then as now it was facilitated by the lies spread via the gutter press. This same overlap between support for the Tories, support for Brexit and support for various other forms of bigotry is highly visible today. Around, 75% of the Brexit vote comes from Tories, or those that support parties to their Right. Polls show 60% of those that voted for Brexit believe that gay sex is unnatural, and again this corresponds almost exactly to the percentage of Tories who believe that. It is manifest in support for a return of the provisions of Section 28. But, there is also a high degree of correlation with other forms of bigotry in relation to women's rights, the environment and so on.
All of this class of small capitalists is facilitated by Thatcher, with her policy of deregulation, the same programme of deregulation that the right-wing Tories want to pursue today, once free of the protections for workers and consumers that the EU provides. Its battering ram was the establishment of Enterprise Zones, just as today, the Tories want to introduce Free Ports. The growth of this class fraction, and its associated layers enhances this individualist mentality and demand for deregulation, again the battering ram being the gutter press and its idiotic and mostly made up stories about political correctness, or health and safety, ignoring the fact that hundreds of workers continue to die at work, each year, and thousands more suffer injuries and illness due to inadequate health and safety measures. This class of small capitalists forms the vanguard in the demand for withdrawal from the EU, as a symbol of its drive for such deregulation, and ability to vent its assorted bigotries unconstrained.
It is the vanguard of the reaction. And, its increasing social and political weight is reflected inside the Tory Party itself. But, in the 1980's, and 90's, the Tory Party is still in transition. Thatcher, moves increasingly away from conservative social-democracy and towards reaction. Her move from being an advocate of the EU, at the start of her premiership, to her Euroscepticism at the end of it, is the index of her move across that political spectrum. But, Thatcher's Euroscepticism was her downfall. The turning point was the resignation of Geoffrey Howe. From that point, her fate was sealed.
The 1980's Tory policies facilitated a growth of all those small capitalists that form the core base of the Tory Party, but it also facilitated this astronomical inflation of asset prices. House prices quadrupled during the 1980's; between 1980 to 2000, stock markets soared. The Dow Jones rose by 1300%, compared with just a 250% increase in US GDP, during the same period. These kinds of rises, experienced by ordinary people who saw their house price rise – or alternatively as tenants began to see house prices begin to put home ownership out of their reach – and who saw the shares in the privatised companies they were encouraged to buy, as well as their pension funds, or ISA's, begin to soar in price, had an inevitable effect on their consciousness. The number of people engaged in all sorts of peripheral activity, selling various products at work that had fallen off the back of a lorry, and so on, expanded significantly. I remember one incident, not uncommon, where someone turned up outside a workplace selling TV's on the cheap. When buyers got them home they found they were empty TV cases, with bricks inside them. 
The sequence of events in all of these speculative frenzies is always the same. In the Tulipmania, as the price of tulip bulbs increased sharply, speculators bid up the price to higher and higher levels. When prices get really high, individuals borrow to speculate, some mortgage their houses to raise the funds to buy the bulbs, and this signifies the point where the bubble is about to burst. In 1848, Engels describes a similar frenzy in the Railway Mania. As railway shares rose in price, speculators borrowed money to buy shares. Capitalists took the profits from their own businesses, and used it to buy railway shares rather than to invest in real capital in their own businesses. The same happened in the 1980's, with people remortgaging their own houses, to buy shares, or to buy houses to let, now no longer because they wanted to enjoy the revenues from dividends or rent from these assets, but almost entirely in the expectation that the rampant capital gains of the previous years would continue to drive prices to the Moon. The most spectacular example of that was the rise of technology shares, which for several years rose at 75% a year, until the crash of 2000.
In 1987, after a sharp spike higher in asset prices, as a result of falling interest rates, and the introduction by Thatcher and Reagan of financial deregulation, asset prices crashed. But, here now also come another inflection point, where material conditions determine consciousness, and a reflection of it within the political superstructure. During the 1980's, the end of the long wave uptrend, and the dominance of progressive social-democracy that goes with it, sees small private capital begin to exert greater influence. General wage levels fall, and for the reasons described earlier, this means that capital begins to flow away from the large capitals, where the organic composition is high, and towards the small capitals where it is low. This is reflected in the increase in strength of the Tories, who are based on these sections of capital. But, the British state remained a social-democratic state. Large scale capital was weakened, but it still dominated. The state's future still depended on it. It was this large-scale capital that dominated exports, for example, which is determinant for the state being able to pay its way in the world, to finance imports and so on.
Moreover, capital is international. It was not just the fortunes of British capital involved, but the fortunes of international capital, as reflected in the multinational companies that dominate global trade and finance. The capitalist class itself long since stopped being a national class, and became an international class. In fact, the same division, between large-scale capital and small scale capital is mirrored here. The large-scale socialised capitals not only operate across the globe, but the shareholders in these capitals themselves come from across the globe. Shareholders in companies can buy and sell shares in any company, anywhere in the world, at the touch of a button. The small-scale private capitals do not trade outside their own national borders, and the smallest of them, do not even trade outside their own local neighbourhood. The ruling class, is made up of millions of small private capitalists, many of whom have standards of living no better than that of many workers, but is dominated by a tiny number, perhaps just 0.01% of the population, of very rich people, multi-billionaires, who dominate the ownership of fictitious capital, of shares, bonds, property, and derivatives of them. It is the interests of this class fraction, that the capitalist state continued to represent, and which constrained the actions of Thatcher. It was with the interests of this class fraction that Thatcher ultimately came into conflict, as she turned more and more towards reaction, and turned increasingly Eurosceptic. It is what destroyed her, and led to her being replaced by Major, who was a more clear representative of the interests of the top 0.01%.
In essence, Thatcher stopped being a Thatcherite representative of conservative social-democracy, and became the representative of reaction. She was a Bonapartist, who never managed to establish a Bonapartist regime, but who was forced by circumstance to adopt its methods, undermining democracy, introducing increasing authoritarianism and attacks on bourgeois democratic rights and freedoms. She was forced to do so, because, initially, the social forces on which she rested were not strong enough to defeat the social forces opposing them. On the one hand, she rested upon the dominant section of the ruling class, the top 0.01%. Their size makes them ineffective as a social force on their own. On the other, she rested upon the 5 million or so small capitalists and their families, but the interests of this group are not only, like the peasantry in general, so heterogeneous as to prevent them having a common agenda, but to the extent they do have a common agenda, it is frequently hostile to the interests of the top 0.01%, for the reasons Marx describes in Capital III, Chapter 27. Thatcher is increasingly forced to rest upon the forces of reaction, but to also do so by the use of a strong state, to use more and more the bodies of armed men, to suppress revolt, to use the power of the law, as class law, and of the courts, as the courts of the ruling class, to impose order.
But, the period after 1987, also brings about another shift related to the conjuncture. That shift once more reduces the power of the small capitalists and increases the power of the top 0.01%, and thereby of conservative social democracy resting upon it. Thatcher gives way to Major, who in turn gives way to Blair, Brown, and Cameron, all of whom continue to rest upon this conservative social-democracy, which is based upon a delusion. The delusion was exposed with the financial crash of 2008. I will examine that, and how that brings us up to date, in Part 15, which will appear on Friday.
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