Remember that her own party got rid of her in the end because she even became a liability to them. She was always a liability to the prosperity of the British people and despite her obsession with incentives and individual action, she undermined both by wrecking the macroeconomy in Britain. The news today is all about the death of the former British PM. There will be a lot of revisionism going on. I don’t plan on a chapter and verse discussion of the legacy of the shopkeeper’s daughter. Apart from the cruelty that was imposed on individuals, particularly the poor, her policies hollowed out the British economy and opened up the door for the parasitic financial sector to take centre stage, with the disastrous consequences that are now for all to see. I could talk about all of that. But to me the biggest impact of her period in office was that it marked the beginning of the end of the social democratic parties. Labour and the Tories became neo-liberal lookalikes. Sure enough, the Tories spoke better and had better table manners. But when the economic policy positions were distilled to their essence, the Labour Party, like so-called progressive parties everywhere, started to sound more right-winged than the Tories themselves. That is what I think is her grim legacy for the weak and the poor of the world.
I lived in England for part of her period in office and was there during the coal miners’ strike, at the height of the union bashing and the attacks on workers. I lived just around the corner from Eddie Shah’s Stockport Messenger factory, which Thatcher used as the stalking horse to destroy the print unions.
Thatcher’s new anti-union laws were first unveiled at this little local paper in the North of England (Warrington). The National Graphical Association (the union) were fined £50,000 for defending their workers.
There were mass pickets of the Warrington plant and the police were brutal in the way they dealt with the workers.
The laws allowed for the full sequestration of its assets. By the end of the dispute the NGA had been fined around £650,000 (which was the largest fine in British legal history to that date) and the publishers had claims for millions of pounds of writs outstanding against them.
The print unions sought support from the peak body, the TUC which by then was dominated by right-wing leaders from the Iron and Steel Trades Confederation (Bill Sirs) and the AUEW (Terry Duffy). The TUC was compliant with the pernicious new laws and kept a distance. Eddie Shah had a phalanx of conservative and monied interests behind him and the police muscle to physically intimidate the workers.
The union lost. Thatcher had the first victory in her campaign to divide and conquer the representatives of labour and to drive down working conditions. The NGA struggle was the first of many in that sector, which eventually led to Murdoch’s News Limited’s decampment from Fleet Street to Wapping, with all the ramifications that followed for workers and their job security.
I lived there in England when unemployment soared and public infrastructure was run down. I lived there when privatised bus services cut “unprofitable” routes into the Pennines and an old lady died because she could not get to her clinic anymore. It was an awful time in Britain.
I lived there when she attacked a small island off Argentina at a time she was about to lose office. The little two-up-two-down working class terraces in the grimy streets that I lived in up in Manchester were adorned with British flags and the working class tories impoverished by Thatcher’s Monetarist assault on them multiplied and she won the next election. An amazing sense of denial of reality was in the streets – similar I think to the tea party morons who will suffer the most materially from the policies they are supporting.
Mass delusion is very hard to explain when drugs are not present. At least in the late 1990s etc, the neo liberals were able to run amok and cut this and that and transfer massive amounts of real income to the top-end-of-town because they opened up the credit tap and we all happily sedated ourselves bingeing on consumption goods bought on the never never.
However, despite all that personal hurt and loss of public dignity, one of the most significant consequences of this era was that it was marked the beginning of the end for the social democratic parties – such as British Labour, Australian Labor Party, etc.
It was during this period – under the onslaught of Monetarism – that these parties all abandoned the ideals of social democracy and public purpose that had shaped their policy platforms since their inception.
Instead, they adopted neo-liberal narratives about individual incentives and private endeavour and today represent a pathetic version of the great ideals they used to profess.
While the politicians railed against Madam Thatcher’s claims about there being no such thing as society, they embraced her message wholeheartedly and stopped understanding or refused to listen to those who did understand that systemic constraints overwhelm individual choice in a macroeconomy.
The lessons of the Great Depression were forgotten. The 1930s were redefined by compliant conservative historians. Even today that is going on. I was talking with someone last night and we laughed in that tragic sort of way when we reflected on the claims by conservatives that the CCC and WPA programs in the US during the Great Depression did nothing to reduce unemployment. Sure enough that is true if you count the millions of workers who toiled for pay under those programs as being still unemployed!
These social democratic parties fell prey to the basic fallacy of composition that Keynes and others had pointed out during the Great Depression – that what might work at the individual level may well have the opposite (negative) impact if the same strategy is employed at the aggregate level.
They thought it was smart politics to adopt the economic policies of the right – mostly without really understanding that the basic propositions of neo-liberal macroeconomics are myths. They also didn’t realise that by adopting these policy positions they would change the public debate so much that the substantive policy issues that defined their existence – recognition and care for the collective – would become unpalatable to an increasingly indoctrinated public.
The so-called progressive politicians started mindlessly mouthing off about the need for budget surpluses as if they are an end in themselves. They started to quote public debt ratios as if they had some independent relevance to anything. They started to tell us that the markets had to be calmed and obeyed without realising that the bond markets are just another public welfare recipient and will go cap in hand to government on whatever terms the latter offers should it have the economic gumption to realise who is in charge.
I suspect hardly any of the Labour-type politicians had a clue about anything they were talking about. But the damage they caused to society has been immense.
In the 1980s, we began to live in economies rather than societies or communities. It was also the period that unemployment persisted at high levels in most OECD countries. The two points are not unrelated. Unemployment arises because there is a lack of collective will. We have been indoctrinated to believe that government is somehow an impost on us rather than being the essential facilitator for economic well-being.
We support governments, which deliberately constrain aggregate demand below the level necessary to maintain jobs for all. Then we turn our scorn on the victims of that shortfall as if they are all to blame. We have been schooled to think individual and ignore the collective.
We have been dumbed down to ignore systemic constraints. The lack of collective will in the public setting has been the principal casualty of the influence of neo-liberalism.
The solidaristic or collective approach to problems is sometimes called the All Saints approach. Collective will is important when a nation goes into recession because it provides the political justification for sharing the costs and benefits of economic activity more generally.
More generally, collective will is a state where the citizens empower the sovereign government to use net spending (deficits) to ensure there are enough jobs available for all those who want to work. We used to think that governments had an obligation to create work if the private market fails to create enough. That was one of the lynchpins of a progressive social democratic agenda.
It reflected a sophisticated understanding that when system constraints are imposed individuals become powerless. If there are not enough jobs then 5 or 10 into 1 wont go (in integer units).
That sophisticated understanding led us to demand that the Government use its fiscal capacity to generate enough jobs!
The neo-liberals hate collective will. Remember Margaret Thatcher’s famous epithet while being interviewed by Women’s Own Magazine (published October 31, 1987) was:
I think we have gone through a period when too many children and people have been given to understand “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and … there are families and no government can do anything except through people and people look to themselves first. It is our duty to look after ourselves and then also to help look after our neighbour and life is a reciprocal business and people have got the entitlements too much in mind without the obligations, because there is no such thing as an entitlement unless someone has first met an obligation and it is, I think, one of the tragedies in which many of the benefits we give, which were meant to reassure people that if they were sick or ill there was a safety net and there was help, that many of the benefits which were meant to help people who were unfortunate—“It is all right. We joined together and we have these insurance schemes to look after it”. That was the objective, but somehow there are some people who have been manipulating the system and so some of those help and benefits that were meant to say to people: “All right, if you cannot get a job, you shall have a basic standard of living!” but when people come and say: “But what is the point of working? I can get as much on the dole!” You say: “Look” It is not from the dole. It is your neighbour who is supplying it and if you can earn your own living then really you have a duty to do it and you will feel very much better!”
There is also something else I should say to them: “If that does not give you a basic standard, you know, there are ways in which we top up the standard. You can get your housing benefit.”
But it went too far. If children have a problem, it is society that is at fault. There is no such thing as society … There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.
You can read more about this interview and its context at – Interview for Woman’s Own.
I think that mentality infested the progressive parties who were starting to struggle because they failed to make the transition from the fixed exchange rate, gold standard system to the fiat currency system. The ridiculous requests from the Callaghan government in the 1970s to the IMF for funds, which paved the way for Thatcher, exemplified this confusion.
Things went downhill after that.
The recent evidence of my thesis is found in the article published in the UK Guardian at the weekend (April 6, 2013) – Labour plans radical shift over welfare state payouts – which reports that the British Labour Party is considering a “radical shakeup of the welfare state, under which benefit payments to those out of work or on low incomes will vary according to their past contributions to the state”.
There was a rather tawdry surge in welfare bashing last week in Britain with the Philpott case being used by the Chancellor in an opportunistic and disgusting manner to further his own mindless ideological attack on the weak and the poor.
I am not being politically partisan here. Remember when Tony Blair was shadow homesecretary and he thought he could score a point or two against the Conservatives (in the period just after Thatcher’s demise as leader) – by claiming that the slaughter of little James Bulger was somehow due to the conservative economic policy.
In both cases, it was innocent children that had died. But that seemed to escape these politicians.
The trend over this period is for the right to come out with some outrageous proposition that they backup with a massive media campaign courtesy of their stooges in the media. In response, the Labour Party (or equivalent in whatever country you like) comes out with something to counter the attacks.
They have stopped questioning the agenda and, instead, try to trump the conservatives on their own ground. In macroeconomic policy, for example, it becomes a battle of who can promise the biggest budget surplus. Hang the consequences. The surplus becomes the only goal even though neither side of politics seems to understand that the government cannot control the fiscal outcome that emerges anyway because it depends on the state of the cycle and the spending and saving decisions of the non-government sector.
The government can influence the outcome but not control it. In that sense, it is a mindless and counterproductive goal to pursue.
The real agenda is what does a budget deficit or surplus mean in the context of other spending aggregates and the state of capacity utilisation in the economy. That agenda is lost in the “battle for the biggest surplus”.
The British Labour Party are trying to leverage off the latest conservative attacks on welfare recipients at a time when unemployment is obscenely high and the economy is going backwards.
Apparently, they want to address the:
… “something-for-nothing” culture.
So, falling into the trap of the false premise. Those who receive unemployment benefits don’t do “nothing”. They endure – every day – the alienation and dislocation from the distribution system. From work. From their social networks (which increasingly shrink). From their dignity. They endure massive personal costs. That is a big “something”.
In return, they get a pittance and are harassed by bureaucracies which seek to deny their rights as citizens to expect their governments will honour international human rights’ treaties, which say the government will create work for all.
The Guardian article reports that British Labour’s shadow work and pensions secretary, Liam Byrne wrote in the Observer that Labour is committed to a:
… return to the “old principle of contribution” championed by William Beveridge after the second world war. “There are lots of people right now who feel they pay an awful lot more in than they ever get back,” Byrne writes. “That should change.”
Yes it should change. If this character really understood the historical reference he was invoking he would realise that the Beveridge Report, which defined the modern welfare state in Britain (Australia, New Zealand, Canada etc), was cast in a time when the prevailing macroeconomics paradigm was very different to what the British Labour Party is proposing to maintain now.
If British Labour really wants to recast its welfare policy then it has to start by recasting its macroeconomic policy.
Beveridge was writing immediately after the Great Depression which only really ended when government spending associated with the prosecution of the Second World War accelerated.
The Great Depression taught us that, in the absence of government intervention, capitalist economies are prone to lengthy periods of unemployment, the Second World War experience proved that full employment could be maintained with appropriate use of budget deficits.
The employment growth following the Great Depression was in direct response to the spending needs that accompanied the onset of the War rather than the failed Neoclassical remedies that had been tried during the 1930s. The problem that had to be addressed by governments at War’s end was to find a way to translate the fully employed War economy with extensive civil controls and loss of liberty into a fully employed peacetime model.
That was the context that Beveridge was working within.
The Post World War 2 economic and social settlement in most Western countries was based on three main pillars. First, the Economic Pillar was defined by an unambiguous commitment to full employment.
Second, the Redistributive Pillar was designed to ameliorate market outcomes and defined much of the equity intervention by government. It recognised that the free market was amoral and intervention in the form of income support and wage setting norms was a necessary part of a sophisticated society.
Third, the Collective Pillar provided the philosophical underpinning for the Full Employment framework and was based on the intrinsic rights of citizenship. We accept that our depiction is a stylisation and that there were many individual nuances in particular countries over the period considered.
William Beveridge’s work in the 1940 (noted above) was entirely consistent with the emerging Keynesian orthodoxy of the time, which saw unemployment as a systemic failure in demand and moved the focus away from an emphasis on the ascriptive characteristics of the unemployed and the prevailing wage levels.
Beveridge (1944, 123-135) said that:
The ultimate responsibility for seeing that outlay as a whole … is sufficient to set up a demand for all the labour seeking employment, must be taken by the State.
Welfare support for the unemployed was conceived as short-term support rather than a permanent source of income support. It was taken for granted that the state would use its fiscal policy capacity to ensure there were enough jobs available.
Governments used a range of fiscal and monetary measures to stabilise the economy in the face of fluctuations in private sector spending and were typically in deficit.
Please read my blog – Back to William Beveridge requires a commitment to true full employment – for more discussion on previous spurious contributions from Mr Byrne.
The point is that the “Labour Parties” around the world keep harking back to their glorious roots as if they will lull traditional voters into supporting them. However, the modern politicians haven’t a complete grasp on the historical context or the full suite of policies that have to be proposed and implemented to be faithful to the “glorious past”.
If you want to return to an unemployment benefits system, which was always only meant to provide very short-term support to workers who were in between jobs in an otherwise fully employed economy, then you have to restore true full employment.
No-one was meant to live on unemployment benefits for very long. The fact that workers have now eked out (diminished) lifestyles on income support in the face of a massive shortage of work doesn’t signal to me that there is some sort of deep moral decay.
It signals what it is – there are not enough jobs because macroeconomic policy is unnecessarily constraining aggregate demand, and unemployed workers and their families are powerless to relieve that systemic constraint.
And … they have to eat and put a roof over their heads. And perhaps even smile once in a while. But then the scarcest sign that they might be enjoying a moment of their life is evidence to these socio-path policy makers and would-be Labour politicians that they are getting “something-for-nothing”.
Margaret Thatcher was an important cog in the mentality changes that have led to these politicians being able to peddle such myths and nonsense but still command the public stage.
Warren Mosler is staying in Darwin with me at present. We are off to the Northern Territory Treasury this afternoon to present a workshop on how federal government policy constrains the choices of state and territory governments and leaves them picking up for the unemployed etc.
While I am in Darwin I have agreed to give a monthly workshop on macroeconomic matters to help build capacity in the Treasury department. It is a very receptive audience and we are going to have a lot of fun over the next year or so.
I would never shed any tears for Margaret Thatcher.
That is enough for today!
(c) Copyright 2013 Bill Mitchell. All Rights Reserved.