Nigel Lawson’s economic ‘success’ was an oil-fuelled illusion
OPINION: Lawson’s legacy is of a climate sceptic indebted to Big Oil. Refusal to accept that is making the UK poorer
How we remember the 1980s matters. Along with its twin-decade, the 1970s, it acts as a lesson, in British media-land, for how the economy works.
The conventional story goes like this: in the 1970s, there was too much social democracy. The rich were taxed too much, workers were paid too much, too many industries were nationalised and the unions were too powerful. Inflation got out of control and everyone got poorer.
In the 1980s, supposedly, Margaret Thatcher and her wizard chancellor Nigel Lawson came along. They slashed taxes, smashed the unions, and dashed nationalised industries on the rocks of privatisation. The City of London swelled in what was dubbed ‘The Lawson Boom’ and ‘the Big Bang’. Suddenly, so the story goes, the country got richer.
Tory chancellors have been trying to emulate this ever since. George Osborne cut corporation tax and sold off the Royal Mail. During his brief spell in office last year, Kwasi Kwarteng promised a ‘Big Bang 2.0’. Rishi Sunak has spoken several times – including when Lawson’s death was announced this week – of having a portrait of the now late chancellor placed above his desk when he took on the job. (Lawson repaid the favour by endorsing Sunak in the pages of The Daily Telegraph during last year’s Tory leadership election to replace Boris Johnson.)
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Even the banking collapse of 2007/8 doesn’t seem to have stopped right-wing writers from pressing this nonsense. A spectacular example is in today’s Spectator, of which Lawson was editor from 1966 to 1970. As columnist Ross Clark puts it:
“The statist economy of the 1970s, with its wretched labour disputes and under-performing nationalised industries had still not been fully dismantled. It is a tribute to Lawson that, when he left office in 1989 after six and a half years running the economy, Britain had been reborn as an enterprise economy.
“Growth hadn’t been bought with high levels of public spending, as many economists seem now to think is essential: the government was running a surplus of £4.1bn.”
This narrative has shaped so much of British policy debate over the subsequent decades that it’s hard to measure its impact. We’ve had nearly four decades in which the British economy has fallen further and further behind its peers, to the point that the poorest Britons are around 20% poorer than their French counterparts. Again and again, chancellors have tried to repeat Lawson’s trick, only to find the table won’t levitate.
There is a simple reason for this: the whole thing was always an illusion. The ‘Lawson boom’ – the burst of economic growth in the mid-1980s – wasn’t so much delivered by the policies of the chancellor, as by hard-hatted offshore workers drilling in the North Sea.
How the revenue from oil was spent – squandered on under-priced privatisations and tax cuts for the rich – is the real Lawson legacy
Whatever the likes of Clark want to tell us, the crisis of the 1970s wasn’t a product of Britain’s economy being ‘too nationalised’. It was a global crash, produced by two main factors. On the one hand, oil-rich former European colonies, having shaken off their imperial masters, had formed the OPEC cartel and raised the price of oil.
On the other, the costs of the Vietnam War to the US, and the rise of the German and Japanese economies after WW2, led to a surge in inflation, which Richard Nixon dealt with through a set of policies known as the ‘Nixon shock’. This effectively ended the global financial system established after WWII, with reverberations around the world.
By the end of the 1970s, though, North Sea oil started to come on stream. By the mid-1980s, when Lawson was chancellor, 10% of annual government revenue, or £18bn a year, came directly from North Sea oil.
Just as significantly, the oil boom played a vital role in delivering the Big Bang in the City of London, for which Lawson usually gets both credit and blame, with money flooding in to invest in Britain’s new hydrocarbon glut. Of course, his radical deregulations played a role, too, allowing banking whiz kids to build these new investments into the vast credit-card houses which came tumbling down in 2008. But without the oil, it’s hard to see why that money would have been flowing in in the first place.
As The US Department for Energy said in 1989, “the growth of North Sea oil revenues is the most important fiscal development in the British economy in the 1980s”.
How the revenue from that oil was spent – squandered on under-priced privatisations and tax cuts for the rich, buying Tory election victories rather than investing in long-term prosperity – is the real Lawson legacy we should be talking about. But, outside Scotland, that conversation always seems to be missed.
Not by Lawson himself, of course. He seemed to retain a gratitude to the oil industry over the decades after he resigned as chancellor. A leading figure in the movement to deny the science of climate change, he led the climate-denying lobby group ‘the Global Warming Policy Foundation’, using his significant media presence and reputation across Tory Britain to sow doubt about atmospheric physics and delay much needed action on climate change.
When we remember him, it shouldn’t be for the endlessly repeated false history about his time as chancellor. It should be for his own lies, since then, and the damage they have done.
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