Economic disaster blights Major's election hopes
Socialist Outlook newspaper1990sPaul ClarkeTranscribed or corrected by hand from the printed page.
THE CITY went into deep gloom after Norman Lamont's budget, both because it was not an election winner and because it does nothing to get British capitalism out of its slump.
The economic figures are catastrophic. There are now officially 2.6 million people out of work, and in reality many more.
Two thousand people lose their jobs every day. Investment is at an all-time low, making eventual recovery much more difficult.
The recession is estimated to have cost £100 billion in lost production. And in a few years the public borrowing account has gone from a surplus, to a deficit of an astounding £28 billion.
The real balance sheet of 13 years of Tory government can now be seen. When the Tories came to power in 1979, unemployment was just over one million, or 4.1 per cent, as opposed to 9.4 per cent today. Average economic growth has been a meagre 1.7 per cent per year.
These figures have to be seen in the light of two things. First, during the mid-1980s the economy went through a speculative boom, as a result as the expansion of the US economy and world trade.
Oil revenue
Without that the economic figures would have been truly catastrophic. Second, Britain has been the beneficiary of North Sea oil, bringing in billions of tax revenue each year.
The Tories can claim to have achieved two things. First, productivity per worker has increased dramatically. But this has been achieved mainly by cutting the number of workers, and not by expanding production.
Between 1979 and today the number of workers in manufacturing industry has declined from 4.7m to 2.4m.
But the Tories have achieved one thing – a drastic cut in the number of days lost through strikes. Last year it was 800,000 days, as opposed to nearly 30 million in 1979.
What all this adds up to is that the successive Tory strategies – privatisation, anti-union laws, monetarism, tax cuts – none of them has stemmed the decline and crisis of British capitalism.
Overall Tory economic policy has been deeply recessionary. This was disguised in the mid-1980s by the financial and housing boom, itself dependent on the US debt-led economic expansion.
But once that receded, after the November 1987 stock market crash, the recessionary character of government policy re-emerged.
Britain is unlikely to re-emerge from slump in the foreseeable future.
Tory attacks on unemployment and social security benefits have made each downward shift worse. When people become unemployed they have been thrown into ever-deeper destitution, with much less unemployment benefit to spend than they did in 1979.
Thus consumer spending and industrial production have been forced down.
British membership of the Exchange Rate Mechanism reinforces pressures towards slump. By being in the ERM Britain is forced to maintain the value of the pound by attracting overseas financial deposits.
To do that it has to keep interest rates high, which make borrowing for investment and spending very expensive, thus holding back economic recovery.
The mid-1980s boom made sure that the downturn which followed would be very severe. Because it was based on low interest rates, huge borrowing and the house price boom, public and private debt rose to enormous proportions.
Debt repayment is now an enormous burden for national and local government, firms and countless individual households. Once again, the burden of debt inhibits economic expansion.
If the Tory economic experiment has led to greater slump and decline, what is the underlying reason?
Of course, Britain has suffered from economic crisis world-wide, in 1975-5, 1979-81 and again since 1989. But that is the not the essence of the matter. British capitalism has been in decline vis-a-vis its main capitalist rivals for a century.
Indeed Thatcherism emerged because it proposed a radical new way for the capitalist class to break out of that decline, but a combination of social engineering and economic restructuring, all based on inflicting big defeats on the labour movement.
John Major is in trouble because the balance sheet of Thatcherism is economic failure.