Back to the Seventies?

As we head into an era of transition, a Labour MP is struck by a familiar feeling.
Denis MacShane
4 December 2011

Anyone remember England in the 1970s as the national and world economy turned topsey-turvey? Then, capitalism had its "unacceptable face" - multinational conglomerates. Today the hedge funds and city traders who are held responsible for all our ills.

After the 25 years of mixed economy, with state-ownership and a welfare state society, that was put in place in 1945, the 1970s became an era of transition from one socio-economic era to another. Similarly, the long cycle of liberalised, globalised growth since 1980 came to a shuddering stop in 2008. We are again in a transition period between one economic model and the next - as yet undefined - economic model.

The same symptoms of the 1970s are in place. A new Tory prime minister full of contempt for his predecessor. A promise for a new way of governing the country. A desire to introduce more rigorous control of state expenditure.

The Edward Heath/David Cameron parallels go further. Heath was disliked by his party base just as Cameron is not trusted by his. Both were haunted by the European question - Heath wanting to take the UK in, and Cameron not sure whether to take Britain out, as many of his MPs and advisers now say should be done.

Tony Barber was Heath's lieutenant as chancellor. To begin with he insisted that the state lessen its presence in the economy and cut spending. Within two years, as unemployment and business closures soared, Barber was forced to revise his philosophy. The U-turn, as it came to be called, saw public spending and debt go up and efforts to support business, just as George Osborne announced this week.

There is social unrest. In the 1970s it was the post-1968 generation of radical activists who fanned out into unions, especially the white collar ones like the NUJ and NUT as well as the public sector. Like the Occupy movement today there were endless campus occupations. There were giant national strikes led by miners which caused Britain almost to shut down, just as the UK Heathrow border controls for the world had to struggle to stay open.

The Labour party in the 1970s was uncertain. It did not know whether to defend or move on from the Wilson era government of 1964-1970. Modernisers grouped around Roy Jenkins squared up against statists headed by Tony Benn.

Today it is the eurozone crisis. In the 1970s it was stagflation. Purchasing power is depressed today as debts have to be cleared and, other than for the top bosses, there is pay standstill which given the rise in fuel and food costs actually means a pay cut for most people. Then it was 30 per cent inflation that destroyed pensioner and other fixed-income purchasing power.

Today it is a shaky ConDem coalition. In the 1970s, it was minority governments. In fact, in the nine years 1970-1979 there were four elections and five administrations as politics was febrile and uncertain.

In the 1970s there was a great fear about immigration from Pakistan. Today there is a great fear about immigration from Poland. Enoch Powell's incantations found echo then, just as Maurice Glasman's 'Blue Labour' calls for bans on EU workers resonate today.

China is hailed as the coming world economic power today just as Japan was in the 1970s.

The loss of confidence in British ability to control the nation's destiny was palpable 40 years ago just as it is today. America was seen as weak and badly led by Gerald Ford and Jimmy Carter after the Nixon years. Until 1975, the US was bogged down in Vietnam just as America is mired in Afghanistan, under a president who is contested and without clear national authority.

The 1970s transition era ended with the arrival of Margaret Thatcher and Ronald Reagan and, in their different ways, Francois Mitterrand and Helmut Kohl. The world economic model stabilised around a more open, individualised, get-rich style. Paradoxically, the state grew in this liberal era. It exchanged ownership for regulation and was called upon to create new structures and interventions.

Unions gave up confronting capitalism and instead become concentrated in the public sector where fellow working-class taxpayers had to pay for any union advances. In the postwar welfare state era, it was largely centre-right governments who held power - Macmillan, Adenaur, de Gaulle, or the eternal Christian Democrats in Italy. The 1980-2008 globalisation era saw the left take over government for long periods. 21 years for the Spanish Socialists. 14 years for Mitterrand. 13 years for Labour and 10 for Social Democratic German leaders.

Whitehall  did not understand then what was happening to the national and global economy. Heath liked to blame Nixon's decision to break up the Bretton Woods system just as Cameron likes to blame Europe or, in an earlier time, Wilson blamed the gnomes of Zurich and Callaghan had to call in the IMF to bail out Britain. Sheltering behind an external bogey-man convinced few then - just as the OBR and OECD says Britain's problem stem from British decisions and should not be laid all at the Eurozone's door.

What was not clear in the 1970s and is not clear now is how a transition era ends. But end it will and the only question is which political-economic set of ideas will emerge triumphant. So far there is no sense that anyone is working on the next era's political philosophy so the current transition era could last as long as that of the 1970s....

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