2013년 4월 4일 목요일

[발췌: Thatcher & Thatcherism] chapter 2: Elections and depression, 1979-81

출처: Eric J. Evans, Thatcher and Thatcherism: The Making of the Contemporary World, 2nd edn., (Routledge, 2004)
자료: 구글도서

차례
  1. explanations and origins
  2. Election and depression 1979-81
  3. Thatcher triumphant 1982-8
  4. Thatcherism and the Conservative Party
  5. The attack on the government ethic
  6. The attack on the professional ethic
  7. Europe
  8. defence and the Americas 
  9. the bringer of freedom? Principle
  10. The fall
  11. politics Thatcherism after Thatcher
  12. economy society and ethos
  13. Guide to further reading
* * *

※ 발췌(excerpts), 

of which: chapter 2. Elections and depression, 1979-81


The Significance of 1979

Good fortune contributed at least as much to Margaret Thatcher's becoming Prime Minister in 1979 as it has to her winning of the Conservative leadership four years earlier. Not surprisingly, this crucial element was given little emphasis by Thatcher herself. Her clear, but simplified and determinist, explanation of the victory allowed for luck only in terms of how sensibly the public would react to a demonstrably superior Tory message:

The Government's defeat in the confidence debate symbolized a larger defeat for the Left. It had lost the public's confidence as well as Parliament's. The 'winter of discontent', the ideological divisions in the Government, its inability to control its allies in the trade union movement, an impalatable sense that socialists everywhere had run out of steam ... The Tory Party, by contrast, had used its period in Opposition to elaborate a new approach to reviving the British economy and nation. Not only had we worked out a full programme for government, we had also taken apprenticeships in advertising and learnt how to put a complex and sophisticated case in direct and simple language. We had, finally, been arguing that case for the best part of four years, so our agenda would, with luck, strike people as familiar common sense rather than as a wild radical project. [1]

That Thatcher' explanation contains considerable truth is not to be doubted, but how 'new' was the Tory approach and how consistently, and insistently had it been put across since Thatcher became leader? Thatcher, quite rightly, laid great stress on the electoral consequences of the winter of discontent. She might have had to put her 'complex and sophisticated case' across in less favourable circumstances. With the International Monetary Fund's 1976 stringencies fading from the memory, and an election to win, the Chancellor of the Exchequer's spring budget of 1978 had been reflationary. One author has called it 'Healery's last Keynesian fling'.[2] Healey was providing the Prime Minister with the normal platform for electoral recovery, while the party attempted to re-establish some semblance of unity behind a realistic pay policy.

Although Healey's budget can be seen in retrospect as storing up trouble by encouraging expectations that the government could not meet, in the short term his financial manipulations opened up a window of electoral opportunity. Despite the traumas of the past three years and unemployment at nearly 1.4 millionㅡin post-war terms, damagingly highㅡsigns were appearing by the summer that the government of a speciality of commonsensical television 'fireside chats', booked himself an appearance in early September. The general expectation was that, in the course of one of his standard-issue avuncularities, the Prime Minister would announce a general election to be held the following month. Unsure how robust Labour's partial political recovery would prove to be during the rough and tumble of an election campaign, however, he confided that there would be no immediate election. Perhaps a leader who had held a longer lease on power (Callaghan had been Prime Minister only since the spring 1976 and loved the job, particularly his weekly audience with the Queen) would have taken the risk. As it was, during the winter that followed, the fates, the Scottish nationalists and, above all, the unions combined to bring crashing down that rickety edifice that was Labour's election chances. The loss of a confidence motion in the Commons (see Chapter 1) also deprived Callaghan of the most valuable perk available to a Prime Minister: the ability to choose an election date to maximize his party's chances of victory. Thatcher ^might^ have won in October 1978; she could hardly have lost in May 1979.

How united were the Tories? Thatcher and her advisers, notably Keith Joseph and the economist Alfred Sherman, had indeed long planned her 'new approach' for reviving the economy. A new right-wing Center for Policy Studies had been set up in 1974 to challenge financial and other orthodoxies. It was, however, far from clear that her party was willing to swallow their bitter medicine of savage deflation and free market determination of wages that the right advocated with increasing stridency during the years of opposition. The Shadow Employment Secretary, James Prior, certainly was not. ^The Right Approach to the Economy^, published in October 1977 as the basis of the party's programme for the next election, demonstrated clearly enough the battle that was being waged for the soul of the party. Crucially, the question of whether it believed in incomes policy was fudged in generalities about consultation with both employers and unions.

Thatcher had beaten Heath for the leadership in 1975, but this did not mean that she could do as she wished. Nearly all of her initial Shadow Cabinet had voted for Heath. Even after she had dismissed six Heathites, replacing them with more congenial right-wingers such as John Biffen and Angus Maude, most of the Shadow Cabinet remained in the centre, or centre-left, of the party. Someㅡsuch as Prior, Maudling and Hailshamㅡwere too senior to sack. Many had inherited wealth and had been brought up to old-style traditions of service. They distrusted ideology, believing it to be inimical both to the proper practice and to the electoral prospects of Conservatism. Their most elegant writer, Ian Gilmour, had been delivering a waspish and snobbish, if coded, warning about the dangers of leadership by the defensive lower middle classes as early as 1975:
We cannot really believe that this is the moment for the party of Baldwin and Churchill, of Macmillan and Butler, of the Industrial Charter and the social advances of the 1950s to retreat behind the privet hedge into a world of narrow class interests and selfish concerns.[3]
In 1977, Gilmour published ^Inside Right^, a developed statement of his centre-leftist philosophy of Conservatism. Replete with historical and theological allusions, it savaged Thatcherite economics, denouncing 'the ^sans cullotes^ of the monetarist revolution'. Gilmour also cheekily attempted to distance the Conservative Party from any contamination with ideology: 'British Conservatism is not an "-ism". It is ... not a system of ideas. It is not an ideology or a doctrine.'[4] The leader had, indeed, marked him down for the tumbril but she could not afford to sharpen the guillotine just yet. After all, she had still to pass her own acid test: winning a general election. She knew perfectly well, as she told the television interviewer and ex-Labour MP Brian Walden, that the still entrenched party elite would allow her only one chance at that.[5] As the election approached, Edward Heath made a speech to the party conference of 1978 in which he advocated the continuance of pay policy under an incoming Conservative government. In her reply, Thatcher made clear her own strong preference for free collective bargaining. As so often, she spoke directly to the minds of the party faithful, who cheered her to the rafters. She knew, however, that many Shadow Cabinet colleagues remained unconvinced and were unsure whether she could sell her message to the electorate. The winter of discontent changed the political landscape dramatically, making it much easier for Thatcher to argue that her view must prevail. Conciliation, accommodation and consensus had all been tried, yet the winter's rash of damaging strikes, particularly in the public sector, demonstrated their futility.

The Conservative Manifesto, which had been planned almost one year earlier, underwent minor revisions largely to exploit the public's anti-union mood. It promised to tackle the problem of secondary picketing, whereby those not directly involved in a strike turned up, often in threatening large numbers, to 'offer support' to their fellow workers. The manifesto also contained a pledge to help more people buy their own homes. Overall, however, it looked little different from the 1970 manifesto on which Edward Heath had won. Pledges to improve education and health services found a prominent place, as did support for the police and a commitment to strengthen Britain's defence systems. The Tory manifesto of 1979 offered some evidence of Margaret Thatcher's distinctive sense of mission. It promised to rebuild the economy and offer fresh hope to 'a divided and disillusioned people'.[6] Specific statements about economic policy, however, were rare. For example, no mention was made of privatisation, which was to be the central plank of Thatcherite economic policy during the 1980s.

During the campaign, also, Thatcher reined in her natural combativeness. She took lessons in speech delivery and presentation from the Tory Director of Publicity, Gordon Reece; she lowered her voice, learned to speak more slowly and generally softened her image. ( ... ... )


The Courage of Her Convictions?

Winning general elections is one thing, using the power they bestow to effect change is quite another. In Thatcher's view, although Harold Wilson and Edward Heath had achieved the former, they had spectacularly failed in the latter. Thatcher was determined not to repeat their mistakes. It was her rooted conviction that the biggest mistake they had made was in trying to preserve a played-out consensus. She was also aware that the profound economic destablisation of the 1970s had affected most Western democracies. Everywhere, so it seemed, high-taxing, big-government administrations were in trouble. Thatcher had some justification for believeing that the great experimet she now intened to launch could become part of a change that would affect the whole of the developed world.

Great thoughts are, however, often belittled by practicalities. Thatcher the free market visionary yielded place in important respects to Thatcher the hard-headed politician. Large pay rises were immediately granted to the police and armed forces. After all, a visionary government might need to defend itself and, in any case, Thatcher knew well enough how well redemption of this election pledge would play with her natirual constituents. A second pledge, however, was much more tactical and much more costly. The Conservatives had agreed during the election campaign to honour any recommendations that mght be made by Hugh Clegg to rectify pay anomalies that had opened up in recent years between workers in the public and private sectors. The general tendency during the 1970s had been for worker with muscles to bludgeon and threaten their way to large pay awards and for those without to lag behind. Callaghan had appointed Clegg, an academic but an old Labour man and sympathetic to the unions, to reintroduce elements of fairness into the process. Instinct told Thatcher that this type of redistributive activity conflicted with her vision of Conservatism; political reality, however, told her that it would lose the support of too many floating voters who were not members of powerful unions to renege on Uncle Jim's promise of largesse. Through 1979 and 1980, the bills for public-sector pay awards kept piling up and, with them, inflation. After one year in office, inflation stood at 22%, more than double what it had been in the last days of Labour. A government pledged to rebirth and renewal by squeezing inflation out of the system had not got off to a good start.

It was because the government knew of inflationary pressures building up that the first budget of the new Chancellor, Geoffrey Howe, actually raised taxes. This was done, however, in ways of which most Conservatives approved since Howe initiated a radical shift from direct to indirect taxation. The top rate of income ta was, therefore, reduced from 83% to 60% to give wealth creators that was deemed the necessary incentive to chase markets and engender elusive economic growth; at the same time, the standard rate went down from 33% to 30%. The key indirect tax, VAT, was almost doubledㅡfrom 8% to 15%. Although VAT did not apply to food and some other necessaries, taxes on consumption nearly always hit the poor hardest as they mut spend a large proportion of their income on the basics. Thatcher knew well enough how controversial the measure would be. She later explained that a government could only get away with it 'at the beginning of a parliament, when our mandate was fresh'.[11] Her overriding concern, however, was to use this structural shift 'to boost incentives'. Interest rates were also raised to 14%, and would reach 17% by the end of the year. Most who reflected on its implications concluded that the budget helped the rich at the expense of the poor.

Year 1 of the Thatcher revolution also saw other moves towards the achievement of economic freedom, notably the abolition of restrictions on the import and export of capital. Although overseas investment was very attractive for the wealthy, its effect were more than counterbalanced by foreigners' desire to buy North Sea oil, the most important new energy resource of the time. James Prior, rather to his surprise confirmed as Secretary of State for Employment, had introduced a new bill to outlaw secondary picketing and restrict the operation of the so-called 'closed shop'. It became the Employment Act(1980) and was roundly criticised by right-wingers, who wanted much more aggressive measuresㅡsuch as compulsory ballots before strikes could legally be held and the abolition of sympatheric strikes. In coded messages during television interviews and through carefully placed leaks from her private office, Thatcher contrived to convery the impression that she shared their frustrations.[12]

In year 2, the gloves came off. Thatcher learned fast how government works and felt ever more sure of her ground. This security was at least matched by her furious frustration that more had not been achieved during Keith Joseph called 'the lost year'.[13] The solution was an unprecedentedly fierce attack on public spending. What was mysteriously called the 'medium-term financial strategy'(MTFS) was revealed during the 1980 budget. This set targets to control the growth in the supply of money. Financial journalists had to master new pieces of jargon, M0 through M3, as various means of calculating the amount of money in circulation. No one could satisfactorily explain how you measured money supply, why one measure should be favoured over any other or, indeed, whether any measure actually meant very much. Even its main implementor, Nigel Lawson, then a junior minister at the Treasury, soon admitted that 'too much hope was invested in the whole idea and ... to much ... claimed for it at the outset'.[14] Monetarism, as implemented, appeared the ultimate triumph of ideology over common sense. It made Ian Gilmour's flesh creep.

While the quality newspaper spread esoteric monetarist references lavishly, and sometimes uncomprehendingly, over their financial pages, the thinking behind it was brutally simple: restrict the supply of money and reduce government borrowing needs and you squeeze inflation out of the system. As inflation was, by 1980, identified as the most potent dragon to be slain, any measures to achieve this, including raising taxes and cutting public spending, could be represented as the lances of St George. In simple terms, Howe and Thatcher were prepared to create an economic slump in order to kill inflaton and resurrect the simple notion of 'proper money' for the benefit of the British people.

Nowe's 1980 budget, the direction of which was confirmed by its successor the following year, achieved its deflationary ambitions with spectacular gruesome effect. In 1980-1, manufacturing production fell by 14%, gross national product actually contracted by 3.2% and unemployment rose to 2.7 million. Adult unemployment rose more rapidly in 1980 than in any single year since 1930, when the world absorbed the consequences of the Wall Street Crash.[15] Britain lost approximately 25% of its manufacturing production capacity in 1979-81, making the nation ever more dependent upon the provision of services. Had North Sea oil and gas supplies not increased by more than 70% during this very period, it is hard to see how the government could have avoid bankruptcy. The Thatcher inheritance depended critically on North Sea oil.

Silver linings could be glimpsed by those intrepid enough to search for them amid the encircling gloom. It was some comfort that the productivity of those who remained in work during this period increased sharply. This was a key element in the government's drive towards greater international competitiveness. Inflation also began to come down; by the spring of 1982, it was back in single figures. However, this had little to do with monetarism, at least directly. The value of the pound sterling in international markets had appreciated so much in a suddenly oil-rich nation that manufacturers were finding it ever more difficult to sell abroad. The price of imports, which those British who could afford them were still avid to consume, was commensurately low, while the huge rise in unemployment was reducing workers' bargaining power and reducing the rate of wage rises.


As ever with the Thatcherite experiment, the effects of the slump were felt unequally across the country. Old manufacturing areas were hardest hit; those that specialised in services, and particularly financial services, got off more lightly. Inequality began to be institutionalised. Meanwhile, despite the government's best endeavours, public expenditure continued obstinately to rise. It reached 44.5% of GDP in 1982. An important reason for its growth was the huge increase in unemployment benefit payments. Taxes were also still rising. The overall burden of taxes, direct and indirect, was calculated at 34% of GDP in 1978-9; by 1982-3, this had risen to almost 40%.

The effect of what Denis Healey wryly termed 'sado-monetarism' caused convulsions both within the Conservative Party during 1981 and outside. A number of riots took place in the inner-city areas of London, Liverpool, Manchester and Bristol. The rarity of such events in ( ... ... )

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