The release of UK cabinet papers from 1984 show that Margaret Thatcher lied about the number of mines she planned to close, and reveal her government's deep belief that a certain level of unemployment was not only necessary but good. 

I went to school in England and as a teenager in the 1980s, stood on the picket lines during the miners strike with badges which said ‘Coal not Dole’. Not because we were pro coal mining, but because we were pro jobs. I grew up in a small village based around farming. We were the only New Zealanders who lived there. Some of my friends grew up in villages and towns built around the pits. Closing the mines with no plan of how to save those communities was cruel and totally unnecessary.

Neither did it make the economy better or improve productivity by heralding in new industries to replace coal.

That’s because the Thatcher government didn’t think it was their job to invest in industry. Creating new industries and therefore jobs was the role of the free market, they said.

(It’s ironic that today young left radicals are more likely to stand outside a mine with a ‘Keep the Coal in the Hole’ badge. But that’s another story.)

The 1984 UK Cabinet papers have just been released. They reveal that Margaret Thatcher lied. Apparently there was a secret deal to close about 75 coal pits - not the handful of pits publicly proposed at the time. 

That would have seen the lose of 64,000 jobs. But the papers show that Thatcher and her cabinet were perfectly comfortable with this massive increase in unemployment. For the first time in western political history, a certain level of unemployment was even deemed a good and necessary thing:

“.... Milton Freedman’s still used and still untested theory of there being a “natural rate of unemployment” was coupled with the belief that government should not intervene in industrial policy. The free market would create the new industries and jobs for workers who, being unfettered by powerful unions, would move, retrain and ultimately be redeployed by the constant flux of the perfect market.”

We know it didn’t work out like that.

Unemployment continued to rise under Thatcher, peaking at over 9% before Labour was re-elected. 

Those new Milton Freedman jobs never came. 

Productivity continued to be about 44% lower after 1979 (when Thatcher came to power) and after the miners stirke, compared with the decades before she was in power.

Compare that with the German government of the 1980s which took the opposite track. They decided it was the job of governments to invest in new industries, because no other private player in the market at the time could match the government for the scale of investment required. 

When faced with the reunification of the much poorer East, they made a decision to stem the decline and invest. Today the former Eastern German states are world leaders in solar power technology because of that decision.

German unemployment is about 5%, much less than the UK.

The lesson from this is simple. Government’s that don’t invest aren’t productive. 

“Free-market economics failed before through trickle down economics and has failed again in its new clothing of austerity. Like the Marxist who faced with the horror of Soviet Union could not accept the fundamental failings of their ethos, so the free-marketers of today suffer the same blind obedience to their ideology.”


Comments (16)

by stuart munro on January 15, 2014
stuart munro

Yep - you get the same pattern throughout history & when a rare good government pops up - they create or support fledgeling industries. Harris Tweed was one such -still going strong hundreds of years later.

It is not that there is no merit whatever in free markets. But to get desirable ends you have to support industries that will deliver them. Compare the productivity of a well-tended garden with one in which the weeds have free rein. The latter exhibits poorly regulated competition, it delivers for the weeds but not for the more productive or desirable crops. Speculation, vice industries, exploitive zero-sum enterprises cannot be allowed to dominate without significantly reducing productivity.

by Andrew Osborn on January 16, 2014
Andrew Osborn

I left the UK just before Thatcher came into power having been made redundant twice. I assure you, Britain was already broken before Maggie got into No10 - due to mixture of Labour governments & lack of capital due to war repayments (which I think ended in 2000 only).

As for the Germans: The money being sent to the US to pay Britains war loans was being reinvested in Germany and Japan so both were being retooled whilst we struggled with pre-war equipment. The Germans were also smart enough not to nationalise their mines.

In Britain, the nationalised industries: British Rail, British Steel and the Coal Board were a nightare of incompetence. They had to go.

by stuart munro on January 17, 2014
stuart munro

"They had to go."

They needed to be fixed, not necessarily sold off. Certainly the miner's unions had reached a level of control that was problematic for governments. Thatcher's solution was neither an economic nor a democratic success. Forte Main - shame no-one did it back to her - the guillotine would have done her good.

The current ongoing privatisation of British rail is not a process that any competent government would care to emulate.

One of Thatcher's big draws was selling off social housing to the occupants. It had some merit, but to really make it work she should have continued to build more. That would have been more than her haphazard collection of far-right prejudices could bear. Darwin had some good observations on the economic effects of home ownership in his journal on Patagonia. If folk like the current incompetent finance minister knew such things then Christchurch would have been rebuilt speedily. Notice how quickly Japan moved after Fukushima - they have a political culture with long experience of coping with such catastrophes. Ours is more devoted to troughing.

by Andrew Osborn on January 17, 2014
Andrew Osborn

It's important to remember what came before her. I was actually working in industrial Britain before Thatcher. So this is not academic theory from a book.  

I remember:

The 'show of hands' strike votes in the factory car park where anyone daring to vote against the motion stood a good change of a beating or getting their tyres slashed.

'Flying Pickets' in busses armed with pickaxe handles driving around 'persuading' people to strike.

Being forced to join the TGWU whose Marxist convener at our factory openly stated his objective was to destroy the economy and bring about a Marxist revolution.

The three day week during the first miners strike. The power cuts, the economic collapse.

I saw the results of Socialism - It just had to change. The unions stranglehold had to be broken. You can argue about the details but change was necessary. The subsequent beneficiary was the Blair government - who chose to continue her good work in cutting taxes and privatising. 

by stuart munro on January 17, 2014
stuart munro

Well you see that's where we differ. You, and Blair, have no open licence on anything you declare to be socialism. Sometimes unions get out of hand - and sometimes employer groups do. When was thelast time agovernment reined them in?

Blair had no mandate - but his greatest economic crime was that all this painful privatisation failed to generate the growth upon which it was predicated. He might have been forgiveable if he had made any of it work. But no, and economic refugees such as yourself are the result.

 

by Andrew Osborn on January 17, 2014
Andrew Osborn

Stuart: Blair had no mandate - but his greatest economic crime was that all this painful privatisation failed to generate the growth upon which it was predicated

I would love to know how he managed sell his about-turn to the Labour party. Quite a feat of salesmanship! I'm no fan of Blair (a Creationist Catholic in disguise) but he did drag the UK Labour Party back into political relevance.

As for "failing to generate growth", it depends what you're comparing it to. I compare it to what might have been. Until the 80's Right Turn came along, the UK was heading toward an economic abyss - I know this because I witnessed the decline. Much the same as Rogernomics saved NZ at the absolute brink of total economic collapse, Thatcher prevented the UK becoming a basket case.

In many ways NZ is still out of step with this sea-change in belief. The whole world has moved to the Right. So much so that I would guess that the NZ National Party is, in some respects to the Left of the UK's Labour party today! As for the UK Conservatives, UKIP and National Front....well! You can see my point.

As for reining in some Multinational Corporates - I'm not disagreeing, but have you got any practical ideas as to how to do this? Because from my perspective they've won. Game Set & Match.

by stuart munro on January 17, 2014
stuart munro

Interesting - I'm with Unger in being a little sceptical of arguments of false necessity - the more so because Rogergnomics is actually a textbook example of how not to privatise assets. I actually have a textbook that went into it at the bottom of one of my book boxes somewhere. I didn't witness Blair's misappropriations first hand - but I was in England last January - all is not happy, even the Afghan migrants want to leave.

Certainly the same corrupt forces are still in play at present in England, with the public not seeing a respectable fraction of rail asset values. US asset sales tended to realise about 80% of their book value. The Rogergnomic thefts only realised between twenty and thirty. When a process becomes that corrupt even a pretty inefficient public sector is to be preferred. The same kind of looting is still happening across Russia, and one imagines is the impetus behind NZ Inc.'s new-found interest in China.

Multinationals are easy enough to control if you reject the Friedmanite rhetoric around 'economic nationalism'. The nation state being the unit of political and economic accountability, it must reserve the right to partiality in its own interests. Free markets are never absolutely free, and especially small states that are, like NZ, vulnerable to capacity loss need mechanisms to protect some kinds of industries. That could be through tariffs or quotas.

My example would be South Korean rice. Queensland can produce a respectable Oryza sativa japonica crop considerably cheaper than Korea's small farmers. But let there be any kind of economic or natural calamity, and if Korea had lost that capacity the country would be in extremely serious trouble. So unlimited globalising by government would be highly irresponsible. 

Mind, as someone who lost his industry to Russian slave workers I'm not altogether neutral on such issues. The slave workers are still working in NZ waters, it is we locals who were displaced.

by Andrew Osborn on January 18, 2014
Andrew Osborn

Stuart: ...because Rogergnomics is actually a textbook example of how not to privatise assets.

It is NOW, but when they did it they were writing the textbook. From what I've been told (by people very close to the action) it was done in haste and rather naively.

As regards the price they got for various assets, sure with hindsight they were sold on the cheap. But instead try looking at it from the perspective of the times. Most (all?) of those state owned businesses were bleeding vast amounts of cash so it took more than a little courage to pay large sums for what started off as losers. Only later did we see the transformational effect that private ownership can have on an industry.

I recall my sister in the UK moving house just after BT went private. She applied for a phone connection and was stunned to have someone arrive on her doorstep that same morning, do the work and show her a catalogue of handsets she could chose from. A year earlier a new phone connection had a 3 month waiting list and no choice of handset - any colour as long as it's grey.

I had the same experience on holiday in the UK when British Rail was flogged. I was accosted by a man in a smart pressed uniform with a white linen napkin over his arm offering me a menu of snacks on the train to Birmingham. I thought it was a joke at first - but no, those slovenly, impolite BR scum had somehow all been replaced by people who took pride in their work and could cook!  :D

by stuart munro on January 18, 2014
stuart munro

Yes - great claims are made for the efficacy of Telecom, but these are mostly spurious in NZ. I had same day connections several times under the old model, and the profitability of the new mostly relates to the maturation of technologies not developed here. The private model in NZ is responsible for the lousy internet speed - Telecom deliberately suppressed internet speed at first so as to reduce competition with its lucrative long-distance phone call business. State monopolies can cause problems, but in the provision of essential services they are infinitely superior to feral privatised monopolies.

British rail is extraordinarily expensive. I could traverse Seoul all day for less than the price of a 5 station trip on the London underground. With no adjusted wage growth in three decades, kiwis are getting pretty price sensitive.

by stuart munro on January 19, 2014
stuart munro

"done in haste and rather naively" Naive? The founders of ACT? The most cynical sons of bitches ever to walk the earth. Prebble knew exact values of a number of state properties he glommed - boasted of it in fact. Fact was he was unconcerned with the public interest. It's hard to define, and open to abuse, but abandoning the public interest is what has wrecked NZ's productivity, and for many New Zealanders, our way of life. The Rogergnomes make Thatcher look like a plaster angel - and Thatcher had more than feet of clay.

by Andrew Osborn on January 19, 2014
Andrew Osborn

If you have a link for that boasting, I'd like to see you post it. Otherwise it's defamation...

But getting back to the facts: This was an incoming LABOUR govt who were faced with NZ falling off an economic precipice because Muldoon had just about bankrupted the place. They had no choice and little time with regard to the first of the asset sales.

ACT only came into existence a decade later. 

by stuart munro on January 19, 2014
stuart munro

ACT existed in Treasury long before a political vehicle was ready for the dogma.

In fact they had plenty of choices but fell for a facile tongue and arguments of false necessity. An analysis of the handling of public equity would damn everyone involved.

The numbers are in, NZ lost parity with Australia because we followed the failed Neo-liberal dogma. We've lost 8 OECD places since then, and with growth not even averaging 2% under the incompetent Bill English, are poised to lose another. We have about 40% of lost ground to make up, so lazy non-performing governments like this simply won't do.

NZ's position relative to Oz will improve shortly however as Abbott demonstrates his consumate unfitness to lead by wrecking their economy.

 

by Andrew Osborn on January 20, 2014
Andrew Osborn

Stuart, come on! Even you don't believe that. NZ is currently being lauded as the "rock star" economy for 2014. Business and consumer confident are at multi-decade highs. The manufacturing index is at a 30 year high. Clearly you're just posting spam on behalf of the Labour Party. Man-up when you're wrong or you lose all credibility.

As for Tony Abbot, I feel sorry for him. He's won a hospital pass from the previous Labour govt. It will take years for Aussie to recover from the disaster that Gillard presided over. Qantas is both a symptom and the lastest victim that was a long time coming. Infested with recalcitrant unionism it is now unable to compete without being propped up by government hand outs. I hope Abbott cuts the cord.

 

by stuart munro on January 20, 2014
stuart munro

Try not to be so obtuse. NZ is being lauded by the HKSB because it is a poorly regulated bubble market that they can exploit. Empty spin.

An economy as thoroughly ruined by neo-liberalism as New Zealand's will consistently post growth in the 4-7% range if it ever begins to recover.

Growth has not picked up - it's only technical - which is why the cash rate won't be moved.

I'm not too keen on Labour as it happens - they're not good enough at delivery.

Australia has prospered until now by not gouging the low end of their economy. Economies are basically pyramidal, they do best off a broad base. Abbott doesn't know anything about economics, he'll make a complete bollocks of it if he tries to reform it.

Perhaps you can explain why our 'rockstar economy' is not producing GDP growth? Or why our balance of payments is consistently negative? Neo-liberal shills are surprisingly uninterested in good economic fundamentals. Before Rogergnomics, Christchurch would have been rapidly rebuilt without hesitation. The delays have not served NZ, and if the government were hoping for pre-electoral stimulus from the construction activity they are going to find that delay costly.

9.1% real unemployment is usually enough to see a New Zealand government out of power. Frankly McGillcuddy Serious had better and more coherent economic policies than Key.

The reality of declining outcomes like child poverty and stagnant or declining real median wages is going to burst the bubble of pretension that is the only thing this government has ever actually produced.

I guess it puts the oil drilling into perspective - a hail Mary attempt in the last quarter - bound to make up for five years of sloth, corruption, and duplicity.

by Andrew Osborn on January 21, 2014
Andrew Osborn

Yes of course - it's all a vast web of conspiracy

 

 

by stuart munro on January 28, 2014
stuart munro

Yes of course - it's all a vast web of conspiracy

No, it is merely the banal and commonplace combination of greed and incompetence.

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