The Iron Lady and the iron-lite economy

maggieThatcher came from a petit bourgeois background which is where she obtained her radicalism. She put the UK firmly on the path of de-industrialisation and her sale of council houses appealed to the petit-bourgeois/peasant mentality. The big bourgeois failed in their attempt to take on the organised working class in 1974 when Ted Heath came crashing down and without somebody possessing such radical right wing ideology at the helm of the Conservative party, history may have been different. “Cometh the hour, cometh the woman”, as one of her eulogizers recently proclaimed. Shakespeare however remarked that life is but a stage upon which we are all actors.

Marx sums it up rather better when he says: Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past”.  Thus the personage of Thatcher is inseparable from the given historical circumstances in which she came to prominence. She was a piece in a jigsaw puzzle that included The economist Hayek and another very relevant personage of Sir Keith Joseph. What we now have to deal with is not the hate figure of Thatcher but the ideological legacy of Thatcherism.

Thatcher didn’t set out to de-industrialise the economy. She was confronted by striking Steel workers in 1980 and backed down but in the next period the steel industry was rationalised to make way for privatisation. It was this rationalisation, aimed at improving productivity, which started the whole process of plant closures and job losses. The whole edifice of the industrial economy followed suit, since it was steel on which such an economy depended.

Again in 1982, Thatcher was confronted by a miners’ strike but she settled. Two years cavalrylater the process of pit closures began, culminating in the miners strike of 1984 for which she was well prepared. The miners’ strike of 1984 resulted in a loss to the exchequer of 2.5 billion pounds but this was no mere industrial dispute. Ten years earlier the question asked by Ted Heath had been: ‘who rules the country’ and this time the answer was expected to be different. This was knaked class war of the kind that’s played out by mass pickets confronting mounted police in cavalry charges.

Amongst the left of the time it was well known that British capitalism had become uncompetitive and the finger was correctly pointed at the extent to which profits were paid out in generous dividends whilst investment in new machinery lagged behind. This underinvestment started long before the period under discussion, perhaps because of the antiquity of British (first to industrialise) capitalism and perhaps combined with the chauvinistic mentality that the sun would never set on the empire.

In the war years: steel, coal, shipbuilding and railways (the stuff of heavy industry) were indispensable to the war economy but come 1945 they were moribund. They were nationalised not out of ideological fervour but out of necessity. Private capital was incapable of taking them forward or even sustaining them. Clement Attlee was a reformist socialist not a revolutionary.

Upon this was built the post-war consensus of the ‘mixed economy’, the social contract of the welfare state, redistributive taxation and the economic strategies of John Maynard Keynes. It was as if the figureheads of class struggle had met one day and decided ‘let’s call it a draw’.  This situation was contingent upon the separation of the world into two hostile camps, nominally ‘free’ on the one hand and nominally ‘communist’ on the other. It was a practical solution to the problem that ‘free market’ capitalism just wasn’t working without massive state intervention and it also reflected a lack of confidence on the part of the ruling class in their ability to continue as they were before the great depression of the thirties.

Nevertheless an interlude in the struggle between classes can only last for so long, as inflationindeed can the separation of the world into two hostile camps. The long postwar boom was grinding to a halt by 1970 prompting an increase in the money supply, as banks were deregulated in their ability to lend.  Inflation occurs whenever the money supply exceeds the availability of goods for which there is a demand. On the one hand producers attempt to increase prices in response and on the other hand workers attempt to compensate by lodging wage increases. Class struggle is therefore reignited.

The logic of capitalism is premised upon an expanding market because it’s not directed at use value. Very rich people can consume in some very disgusting ways but the objective is accumulation not consumption. The dream and motive of every capitalist is to accumulate and to sustain that motivation their market must expand. Thus after the gross destruction of warfare, there were markets into which to expand but the limits of that expansion were met some 25 years after the world war ended.

Thatcher therefore enters the stage at a time when the post war consensus had been broken on the back of a reignited class struggle, when the left in Britain was moving towards a revolutionary solution and the ruling class, if it was to survive, needed a counter-revolutionary solution. The logic of Keynes was replaced with the logic of Friedman and Hayek. State support for heavy industry was abandoned but rather than bounce back through the ‘invisible hand’ of the market, it spiralled into decline. British steel became the property of Dutch firm Corus which continued in the downward spiral into oblivion.

The average rate of profit in the UK was in steady decline prior to the 1980’s but recovered significantly under Thatcher. With the power of the Trade Unions curtailed there was a general rise in the rate of exploitation (fewer workers and increased output).  Increasing the exploitation rate is also the real economic effect of deregulation and privatisations. Despite more than trebling the rate of unemployment to more than 3 million, there was a an annual GDP growth of around 3%.  However the net growth was in the service sector which grew rapidly despite the loss of heavy industry. The bonus of North Sea oil and gas assisted the recovery but also helped fund the subsistence of the huge new reserve army of labour

Contrary to myth, Thatcher did not personally demolish the Berlin wall and bring about the fall of the Soviet Union. Whilst historically the Russian revolution of 1917 resulted in its own mythology and divided the world ideologically, it was always on a journey towards capitalist restoration because it wasn’t sufficiently developed at the outset to go it alone. By the time that it had fully industrialised, the repression had become too entrenched for it to realise the extension of democracy inherent in the transition to the higher stage of real communism. It collapsed on straws (that break a camel’s back) through bureaucracy,  militarism, the war in Afghanistan, but essentially because it contained the inner dialectic between theory and practice. This had a thoroughly demoralising effect on the left internationally and especially those who had illusions in its validity.

Here we meet the grotesque emulation of Thatcher in the personage of Tony Blair. The collapse of the two world model opened up markets for a new expansion of capitalism.  Resources to plunder without fear of nuclear war,  monetarism, deregulation (empowerment to private capital) all aggressively underwritten by the US military and the new world order. Tony Blair remarked that the class struggle had ended and the left retorted with the question “who won”?

Where Thatcher had blundered into de-industrialisation, Blair made a virtue out of it. The architects of New Labour imagined that Britain was now entering a glorious post industrial age where the provision of financial services and high tech innovative ventures would replace the dirty old factories in a golden new future. Under Blair there were more privatisations and average house prices doubled in real terms. The boom was centered on the city of London and new jobs created in the provinces were all in retail.

However although de-industrialisation helped to diffuse the class struggle for a long period of history, it didn’t remove the essential dialectic. The economy shifted into services, particularly financial services but severely damaged the ability of the UK to generate real wealth. The chickens came home to roost in 2008 when the fictitious capital of the financial bubble burst. Also the sale of council houses has exacerbated an already existing housing shortage and in the South East has lead to the crazy rents supported by housing benefit that the Tories are now intent on clawing back.

What had really happened was not a miraculous revival of British capitalism, ‘the end of boom and bust’ as Gordon Brown declared, but a huge shift of manufacturing to the far east. Inflation has remained low not because of monetarist policies but because the huge expansion of credit underwritten by high property prices, which would normally fuel inflation, has been matched in the availability of consumer goods which were actually falling in price.

Ironically what made this situation possible was the sharp turn in policy by Chinese leader Deng Xiaoping. Unlike their counterparts in the Soviet Union the Chinese communist party remained in control but opened up their economy to market capitalism.


This is not an illustration of the merits of capitalism over a genuine democratic socialist economy. China was predominantly agrarian and economically isolated.  China’s ‘communism’ was based on the peasantry not the proletariat. Whilst this started out as inward investment it created a new middle class in China with their own source of capital who would later join the ranks of the super rich.  The falling price of goods arises because the composition of capital has been changing rapidly. Initially labour intensive it became more mechanised and rapid growth also allowed for economies of scale.

However what the financial crisis of 2008 revealed is that there is now a substantial imbalance between production and services across the globe from west to east.  You can run a service economy only on the basis that real material goods that make up modern life: cars, buses, bridges and the infrastructure that comes from steel can be exchanged for what the producers of these commodities want for themselves but there are limits to the extent that tourism, restaurants,  insurance and financial services can maintain a balance of trade.

The Chinese are now redirecting their economy towards their own consumers and wage levels must rise in order to provide the purchasing power for this consumption. At the same time what they are also creating is their own proletariat and in time this class will come into collision with the new owners of industry.

But an appreciation of the existence of the differentiation of society into classes is a prerequisite to seeing things as they are not just how you would like them to be. The old semi-aristocratic Conservative party were conscious of class and wary of confrontational Thatcherism.  Class consciousness among the elites in Britain is bound up with status and inheritance, particularly so because of the historical merger between the aristocracy and bourgeoisie, as opposed to the guillotine.

Workers gain awareness of class through their own experience of struggle but in the minds of many people, class is either an irrelevance or an outdated anathema. Many would argue that Thatcher had a high level of class consciousness and lied maliciously in her speeches but there’s no evidence for this. There are so many instances of ordinary people expressing an opinion about what “we” should do (when meaning society as a whole) to dismiss the idea that most people are not acutely aware of how society is divided.

When we hear expert opinion from economists these opinions can swing wildly between Keynes and Hayek or Friedman, before veering off to the obscure Austrian school but none of them appear to know what they are talking about.  One of the interesting legacies of Thatcherism is to hear the likes of Max Keiser contrasting real wealth with fiat currencies and the renewed interest worldwide in the writings of Marx. Where Karl Marx differs from all the twaddling economists and their ludicrous metaphors is that he placed class struggle at the centre of his economic theory.

Another great myth of Thatcherism is how she made Britain great again and recently many lay people have expressed this opinion. Although this should perhaps only matter to flag waving idiots, it patently isn’t so.  Under Thatcher the British forces only just recaptured the Falklands and under Blair became the minor partners in America’s military adventures.  In any serious conflict Britain doesn’t have the manufacturing capacity to compete unless it boiled down to cutting the enemy’s hair or serving them a nice meal.

At some stage in the not too distant future, there will be a need to rebalance the economy but since it is flat-lining it’s difficult to see where the inward investment will come from.  Perhaps ironically from the China. One distinct possibility is the abolition of the minimum wage but the Tories are only moving cautiously in that direction. The public sector cuts will create a social backlash and an increase in class consciousness but this needs to be matched by the left resolving its own internal conflicts and presenting a united front. The other pressing concern is of course the environment and a sensible direction into which to expand would be the green economy.

Some argue that the only alternative the left have to offer is Keynesian ‘tax and spend’ but in the same way that Hayek and monetarism was employed in the shift of the balance of class forces in favour of capitalism, Keynes should be used not only to shift things in the opposite direction but to complete the transition from a profit based to a needs based economy. Once all needs are met by productive capacity, there is nobody to pay back, since needs are guaranteed and the separation between rich lenders and poor borrowers no longer exists.

So the grocer’s daughter from Grantham is now dead. She was despised by the left because she brought huge amounts of misery to many working communities. But let’s not get carried away in moral condemnation because then there’s a danger of losing sight of the movement that she was part of and the neo-liberal agenda which we still have to deal with. From her humble origins Thatcher achieved a bourgeois renewal, some say a revolution and her greatest legacy was probably New Labour. There is now much to be done in exposing the myths and illusions of current state of consciousness beyond our inner circles.

There is such a thing as society and it is composed of different classes with divergent interests. The huge and grotesque gap between rich and poor is growing. Social mobility is at an all time low and though few might take the trouble to read Marxist economics, the slogans “people before profit”  or “the 99% versus the 1%” are powerful and true.

Joanne Telfer

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4 Responses to The Iron Lady and the iron-lite economy

  1. syzygysue says:

    The irony of Mrs Thatcher’s ‘economic miracle’ being subsidised by North sea oil, when she assured John Gummer that Climate Change was a priority for her. Think how renewables could have been subsidised with the estimated 450bn sovereign wealth fund that the UK could have had, if she had not sold it off… the jobs, new manufacturing, apprenticeships, end to fuel poverty, replacement of the oil-based economy….

    • admin says:

      Well yes indeed but the accepted wisdom of the time was markets, markets and markets, not the needs of either people or the planet. There is much to do to reverse that ideology.

  2. I have a hard time with use of the term ideology in reference to anything Thatcher, Blair, Cameron – or Clinton, Bush, Obama – have done. None of it’s associated with ideals – only with greed.

    Strange that so much destruction against a country could be produced by one person, and have that person’s successors want to do honor with a state funeral, rather than having dragged her to prison for crimes against the state.

    It’s a terribly twisted culture in which we’re living.

  3. People can have an ideology which is totally at odds with ours Heidi. Of course the establishment wants to honour Thatcher and stage a public event because the capitalist class were the benefactors of her deeds. Many of the thirty odd percent who voted Tory in the last election will be waving their flags on Wednesday. Robert Tressel’s “Ragged Trousered Philanthropists” (1914) is still one of the most powerful commentaries on this sort of thing. The answer is the same as it was back in Tressel’s time: to build a mass movement for socialism.

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