Friday, September 10, 2010

Tory cuts: 1979 all over again?

"The same processes that have offered the Tories the chance of office could also sideline them for a generation. For, as resourcefully and ruthlessly as they exploit the opportunities they are presented with, the alliance of shifty neocons, Tory 'wets’ and upper class Thatcherites-in-drag that currently hold precarious tenure over their party are as apt to be ground under the wheel of history as they are to be elevated by it." - The Meaning of David Cameron, Zero Books, 2010, p. 1

The UK trade deficit has hit a new record. The OECD is revising down its global growth estimates, thus indicating that the market for UK exports isn't about to grow. EU austerity measures and the absence of a robust recovery Stateside strongly add to these woes. As Paul Krugman and Robin Wells write, the slump goes on. Thus, the coalition's idea of export-led growth, in an economy that really hasn't done export-led growth for several decades, is threadbare. Now the OECD reckons that the coalition has to stop and reconsider its austerity measures, a shift from its earlier support for austerity measures, and perhaps another shift in a volatile global ruling class opinion. Certainly the US, which has been least comfortable with the austerity agenda, will use its clout to press for delayed cuts and continuing stimulus. Obama is currently pushing for another stimulus in the US in advance of the mid-terms. So, amid a global crisis of rarely precedented reach and scale, the Tories will be under increasing pressure even from sections of international capital to relent on its austerity programme.

But the Tories may say "we've been here before". Indeed, the last time a Conservative government was elected on an explicit agenda of deep, and permanent, public spending cuts, was in 1979. The Tories, looking at relative British economic decline, the failure of expansionist investment, the lame ducks of corporatism, the inability of incomes policies and social contracts to contain wages and prices, declared themselves against the old corporatist order. They would get rid of collective bargaining, throw out the incomes policy, and free up the dynamism of the private sector by cutting spending and denationalising public utilities. Mass unemployment and bankruptcy, rather than statist intervention, would be the disciplinary tools used to counter inflation. And, of course, there was a plan for dealing with the unions - though the Thatcherites kept this as quiet as they could, since they did not want to make the same mistake as the incoming Heath government had in bragging about its plans, thus giving the unions an issue to mobilise around. In toto, they would "work with the grain of human nature, helping people to help themselves".

Not everyone was happy about this. Many members of Thatcher's first cabinet were committed to the Keynesian policy mix that had been hegemonic in the Conservative Party since Macmillan and Butler - Jim Prior, Frances Pym & Lord Thorneycroft among them. Many of them did not favour a socially destructive battle with the trade unions. In opposition, Norman Tebbit looked with disgust on the 'wets' who were soft on the unions, comparing them to Laval and Petain - Nazi collaborators. They were not at ease with monetarist dogmas, and, as the recession that began in 1979 began to bite, many cabinet departments resisted Thatcher's drive for spending cuts. They thought it was lunacy to be slashing spending amid a recession. In truth, Thatcher didn't achieve much in the way of cuts across the board, though she made cuts in specific departments. But she made up for it to some extent by refusing to raise the personal tax allowance in line with inflation, thus still reducing incomes during the recession. Divisions in Thatcher's cabinet were rife, and there were many oblique and not-so-oblique criticisms of her policy in public.

Geoffrey Howe's first budget was seen by many of his party colleagues as extreme. It sought to lower the rate of inflation with a severe monetary and fiscal squeeze, which it achieved by doubling VAT, cutting some areas of spending, and raising NHS prescription charges. At the same time, it initiated a restructuring of the tax burden that was to continue throughout the Thatcher era, by raising the personal allowance on tax, reducing income tax and cutting the top rate of income tax from 83p in the pound to 60p in the pound. The signal sent by this was that the government would incentivise personal success, enterprise, higher profits, higher salaries, and work. When the government's insistence on fiscal austerity, far from going with the grain of human nature, appeared to produce the lowest popularity ratings for any government in the post-war era, Thatcher et al turned it into a virtue by saying that they were pursuing a politics of conviction that would not compromise with transient opinions. They were macho; their opponents were either indecisive, dithering wets, or Muscovite menaces. When riots broke out in Toxteth and Brixton, Thatcher insisted that it was not a social issue, but a public order issue, part of the serious long-term breakdown of civil order that had been facilitated by the old, lax corporatist regime with its liberal, lily-livered policies.

Labour's vote recovered considerably, and the Bennite left acquired a new stimulus from the flood of grassroots activist recruits. Even when the SDP was first founded, after Michael Foot was elected as Labour leader and the left won some of its preferred constitutional changes in the Labour Party, the divisions in the opposition didn't automatically help Thatcher. It looked for a while like the SDP could seriously eat into the Conservative vote. They recruited one Tory MP upon their founding, and took two Conservative seats in 1981 bye-elections. At some points, SDP support was as high as 40%. The climate of opinion had shifted to the right in the late 1970s, out of disillusionment with a supposedly radical Labour government, but most people were not convinced Thatcherites. If anything, the majority favoured conserving some form of social democracy.

The Tories were heading for an electoral nosedive until the recovery in the global economy in 1982 and the reinvigoration of the Thatcherite politics of "the nation" during the Falklands war. The growth period that followed, ensured that Thatcher kept the same electoral coalition going until the financial crash that followed the 1987 election. The global economic recovery had precious little to do with Thatcher or the government's fiscal policies. It had principally to do with supply-side stimulation in Washington, and a new financialised accumulation regime kicking off with its centre in south-east Asia. But the government could claim the credit nonetheless, and win about 44% of the vote on the basis of that. Similarly, Thatcher could claim to have reasserted British sovereignty in a postcolonial age where even Zimbabwe was being run by its black population (the result of a process that Thatcher bitterly disapproved of), even though she was the beneficiary of Washington largesse and the Cold War climate that made the UK a valued ally. It was a remarkable turnaround for the least popular government since the war. It ensured that a Thatcherism that so many imagined would be flash-in-the-pan would set the terms of parliamentary politics for ensuing decades.

David Cameron, were he inclined to talk to us, might say that first of all the Tories were vindicated by the economic revival and the absence of renewed inflation, and secondly that the Conservatives, and the political class as a whole, are far more united today than they were back in the early 1980s. This time, Cameron would say, we have the SDP and the Liberals on board. This time, our opposition is a Labour Party that actually prepared the ground for austerity, and whose dominant faction fundamentally agrees with us. If and when the world economy picks up, as it must surely do at some point before our five years is through, we can claim the credit for having done our part, restored monetary and fiscal discipline, encouraged self-reliance and mutualism, cut irresponsible waste programmes such as the NHS and pensions (do I really exaggerate by that much?), and so on, thus relieving the private sector of an intolerable drain on its dynamism. And when growth resumes, and our programme has succeeded, we will have won the loyalty of many of those middle class voters and skilled workers who had previously deserted us, no longer trusting us as the part of economic efficiency. Look at the polls, already. The Liberals look weak, but the Conservative Party is once again topping 40% for the first time since the EMU crisis. We're on the way to re-establishing ourselves as the dominant ruling party in British politics.

That would be the sell, perhaps, but the differences between 1979 and 2010 tend to rack up on the negative side for the Conservative Party. First of all, the intellectual backbone of this government is far weaker than that of the Thatcher government: from Hayek to Phillip Blond? Seriously. Secondly, in 1979 the Tories could plausibly position themselves as a solution to a set of profound social problems that free market capitalism had not created. Inflation was the number one problem that they mobilised themselves against. In 2010, no one can sensibly claim that social democracy, and not free market capitalism, caused this recession.

Thirdly, Thatcher et al could be relatively open about their agenda in 1979. And they could stick by it, and denounce the soppy compromises of the 'wets', because they had a convincing story of relative British decline and their solutions were plausible. They did not have to pretend to be nice people. They did not have to pretend to care about the losers in a market society - their Hayekian predilections made a virtue out of letting people lose, and lose badly, flushing inefficiencies out of the system. In 2010, the Cameronites like to the pretend that they are the 'wets'. They have to, because while many Tories don't like to hear it, no one can stand on an explicitly Thatcherite programme and win these days. Not since the poll tax riots. Hence, all the blather about 'big society' and social justice, and poverty reduction. The Tory base is objectively narrowing, and Cameron offers a pneumatic solution, pumping up the vote with hot air. This is not a sustainable approach, especially as the austerity starts to bite - as can be seen with the already negative approval ratings for the coalition government.

The ruling class does not have the kind of ideologically cohesive, combative leadership faction that it did with the Thatcherites. If anything, the Cameronites need the unions to be on side, hence all their serenading, their efforts to coopt public sector workers into a pre-determined 'debate', their selection of a former Labour MEP to be their trade union 'envoy', etc. The Tories may have a secret Ridley Plan part II up their sleeves to tackle the unions. Perhaps all this apparent diplomacy is a decoy. But I don't think so. The Thatcherites were very careful and strategic about where and when they provoked strikes, and it was part of a political goal of breaking organised labour. The Tories might want to further weaken and demobilise the unions, but the best way to do that might not be to pick a fight with them, especially when their austerity programme hands the unions an issue around which to mobilise. What's more their agenda doesn't allow them to pick and choose when to provoke strikes, isolate opponents, build up spare capacity, etc. They have to move urgently and immediately to implement the broadest and deepest cuts that are politically possible, and they'd rather not have to defeat the unions to see the programme through.

Lastly, the global economy of 2010 is not the same as that of 1979. There are no promising vistas opening up. There are no great geographical or sectoral areas that can lead a new phase of global accumulation. Least of all is there the prospect of basing renewed growth on exports by a manufacturing sector where employment has been allowed to be cut by more than 75% over the last thirty years. The basic Tory pledge is that they will make the City boom again, and make the housing markets boom. People will be able to borrow again, and start buying again. Middle class families will be able to run their own schools outwith local democratic accountability. They can pay a bit more for private or semi-privatised healthcare, with nobs on, so that they don't have to share the superbug ridden hospitals that ordinary people go to. Savings, and investments, will start to pay off again. But that pledge doesn't appear to be based on any realistic account of the potencies within the global capitalist system. If anything, we're probably headed for a more autarkic, polarised global system. Cameron's efforts to bolster and revive the social power of finance capital, most recently signalled by his appointment of the HSBC boss Stephen Green as trade secretary, may prove futile in the face of that.

This is not 1979 all over again. If anything, this crisis could be the anti-1979.