Five years ago the Tories won the last election, claiming that 4888 economic 'miracle' had taken place. Now the picture is very different. What has really hap pened to the British economy since 1979?
When the Thatcher governto do two things. First, to defeat the labour movement and allow profits to be raised.
Second, to provide conditions for stable capitalist growth and realise those profits in the market. This was to be done through 'monetarism' - control of the money supply and public expenditure.
Monetarism was designed attack the working class by signalling that wage rises would not be matched by printing money. Unprofitable firms would not be rescued.
Workers would have to adjust and accept wage cuts and worsening conditions. Through lower taxes and withdrawal from the economy the conditions would be laid for renewed profitability and ac cumulation.
Failed strategy
The current economic crisis stems from the failure of this strategy.
The Tories have not succecoco in acreatne the labour movement in the way they nope. keal wares nave risen since they came to power, by 2.8 per cent per year from 1980-88 as compared with 0.9 per cent profits in national income ac Fallen idol. Yesterday's upper class heroine has hit the dust sutput (GDP) in the UK 1980-1991 Annus percontage change it tote ually fell from 19.5 per cent i 979 to 16.3 per cent in 198° This meant that any rises in profitability have been dependent on rises in productivity. This rose faster in the 1980s than in the 1970s.
But this is largely because has risen as the number employed has fallen and the least profitable firms have shut down. It cannot be sustained in the long term.
So while the profit rate rose toa peakof 11.3 percent in 1987, this was not significantly higher than in the late 196lk From 1987 onwards the profit rate arti productivity growth have fallen sharply. The Tories have not decisively changed the conditions for creating profits in the workplace.
Neither have they created a stable environment for capital. The initial attempt to control the money supply, from 1979 to 1981, led to a collapse in profits as demand was cut while wages continued to rise.
Foreign currency flowed benefits of high interest rates, pushing the exchange rate up and hitting exporters. There was a huge recession, particularly in manufacturing. And the targets for controlling the money supply were not met.
Abandoned
Gradually the policy of targeting the money supply was for the debt-fuelled boom of the late 1980s.
As interest rates fell and profits rose after 1981 there was no corresponding rise in investvestment in 1987 was 9.5 cent lower than in 1979. The capital stock in industry and agriculture grew by only 1.2 per ent per year from 1979 to 1987 excluded.
But investment in banking and finance rose by 122.1 per cent over this penco and in business services the figure was 85.9 per cent. With manufacturin led take blance payled to a large balance of payments deficit as imports were sucked in.
Interest rates
Increased demand began to raise inflation and wages began to follow. was to put up interest rates, but with debt levels so high this has led to a massive slump.
he monetarist project failer organisation or to provide for growth on firm foundations. By 1987, as the Tories swept back to power, monetarism as defined in 1979 was dead.
Their reaction was to look for another way to threaten the labour movement and stabilise the economy. Joining the European exchange rate mechanism (ERM) providesthis alternative.
If sterling is tied to the German mark, it means that wage rises and productivity must keep up with German rates. If wages rise faster and produc tivity slower than in Germany, profits will fall and unemployment will rise.
But for a weak capitalism such as Britain, this policy is fraught with difficulties. raises the possibility of increased foreign competition and a continued slump. Tories since 1979 has been their inability to intervene decisively in the restructuring of British capitalism. Where they could The policy of deregulating nationalisation British capransm ana taken i our or government control. Increased foreign investment has British firms vulnerable to recession in Europe or the USA.
Monetarist policies failed partly because control of the money supply is not possible in highly integrated financial Intervening in the labour market through anti-union laws has weakened resistance to closures in contracting industries.
But it has not yet led to sustained increases in productivity across the economy. Produc manufacturing. but is of decreasing importance for British capital. In 1989 only 16.8 percent or business income came from manufacturing profits.
Speculation
The rise in profits under the Tories did not lead to renewed investment, but increased competition and financial speculation. This explains why the Tories cannot put forward a coherent economic programme for this clection.
The process of European Monetary Union (EMU) is Ilkely to rule out a boom such as 1987 She dever at proper pot GDP for 1992-93. Even in recession the balance of payments deficit is still significant.
Tory policies no longer ever renewed capitalist profitability they centrate on limiting the labour movement's ability to challenge the initiatives of private capital. current bosses' offensive.
Throwing the Tories out of office is not just important be cause of their mismanagement of the economy. It is also the first step in the fightback against this offensive - an offensive which has its roots in the tallure o transform British capitalism in the last decade. No. 19 April 4, 1992
ION HERE leaders.
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