Margaret Thatcher at Chequers

The woman who went to war for her class

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Few other former national leaders would have the wall-to-wall media coverage that Thatcher has received on her death. There is a reason: she performed a vital service for the ruling class in Britain for over a decade. Fittingly, her last months were spent at the Ritz Hotel – suites available at £3600 a night – courtesy of the millionaire Barclay brothers. No privatised nursing home run by low paid staff for Thatcher.

Much of the media emphasis is on Thatcher’s supposedly humble origins. In fact, she was a well-off grocer’s daughter, married to a millionaire. She was only humble in comparison to other leaders of the Tory party, who traditionally came from the landed or business elite, educated at Eton and Oxford. Her election to the leadership in 1975 was not some feminist spasm but a measured decision by the Conservative Party. They recognised that her policies and determination were what was needed by a British capitalism in desperate straits.

Britain in decline

By the late 1960s both major parties had recognised that British capitalism was increasingly uncompetitive on the world stage – its industry was underinvested, its productivity poor and it was losing market share to countries like Japan, Germany and France. Both major parties – Labour under Harold Wilson and the Tories under Edward Heath – tried to make British capitalism more competitive by increasing productivity. Both had turned to pay restraint or wage freezes, both had given incentives for investment and research to little effect, and both had attempted to shackle the trade unions by some form of legal restraint.

Heath mounted the most serious attack on the unions in the early 1970s but he came up against a well-organised and militant movement, including a shop stewards’ organisation numbering between 250,000-300,000. Militant strike action led by the miners and the dockers effectively destroyed Heath’s trade union policy and forced his government to do a U-turn. The 1974 “who rules Britain” election, following a devastating miners’ strike against pay restraint, saw the Tories being flung out of office.

It was out of this debacle that Margaret Thatcher and the group around her – including people like Sir Keith Joseph and Norman Tebbit – came to lead the Tory party. Their recipe for reviving British capitalism was simple: break the power of the unions through legal restraints and mass unemployment, cut state expenditure and reduce the size of the public sector, lower taxes for business and the rich, and encourage successful business by letting competition rip, forcing uncompetitive businesses to the wall. It was summed up in Keith Joseph’s 1979 pamphlet entitled “Solving the Union problem is the Key to Britain’s Recovery”.

It was going to be painful and risky, which was why a resolute class warrior was needed to see it through – in fact “resolution” became a Thatcher slogan – a pointed contrast to Heath’s backtracking. It meant taking on a trade union movement that now organised 52% of the workforce as well as sections of employers in manufacturing (those that benefited from state subsidy and protection). But Thatcher had the support of the most important part of British of capitalism: banking and finance centred around the City of London. It was this sector that was to thrive under her governments.

A programme implemented

The story of Thatcher’s governments has been told many times and much of the media attention since her death has been directed at her “lasting legacy”. One important element of this is the shackling of trade union action, which continues to this day.

Unlike Heath, Thatcher did not risk introducing restrictions on union activity all in one go. Five anti-trade union laws were passed, in 1980, 1982, 1984, 1988 and 1990, each one adding more restrictions than the last. The last two, the most draconian, were implemented during her second term after she had defeated the miners, printers and dockers. Smashing the most militant and well organised sectors had the effect of demoralising the movement as a whole.

All strikes now have to be preceded by a secret ballot and the giving of notice to employers. Walkouts and unofficial strikes are unlawful. Unions can be sued by the employers for unlawful acts of their members, sympathy strikes with other workers are unlawful, all-union shops are illegal. These measures, once described by Tony Blair (admiringly) as the most “restrictive in the free world”, have made taking action to defend wages and conditions very difficult and have strengthened the hand of the trade union leaders in obstructing or preventing action – one of the intentions of the laws.

Mass unemployment was the other chosen weapon to drive down wages and push up profits. Thatcher’s policies of control of the money supply (monetarism), high interest rates and a massively overvalued pound during her first term led to a deep recession that destroyed whole sectors of industry – particularly steel, shipbuilding and textiles in the north, Wales and Scotland.

Mass unemployment, of 1930s levels, returned to Britain. In May 1979 when Thatcher came to power unemployment stood at 1.3 million. By 1982 it was 2.7 million. In 1983 it broke the 3 million barrier – nearly 13% of the workforce – where it stayed until 1987. And these were the fiddled figures. The unemployment count was altered no less than 28 times under Thatcher’s governments to massage the numbers. Real unemployment was probably four million plus.

This “slump politics” left a lasting legacy. Thatcher and the Tories are hated by the working class in the major cities of the North, Wales and Scotland where whole communities were laid waste by the scourges of unemployment and poverty. Politically, the Conservative Party has never recovered in these areas, becoming ever more a southern-English party. Under Thatcher manufacturing as a share of total economic output fell from about one third to less than one quarter, and the economy became ever more reliant on banking, finance and the profits returned from investments overseas.

After the recession of the early 1980s Thatcher was deeply unpopular. Despite this she managed to win a massive majority in the 1983 election.

One reason was that the war over the Malvinas/Falklands enabled her to harness a wave of “Britain is great again” patriotism. When Argentina invaded the Falkland Islands in 1982, Thatcher was able to show her “resolution” as a wartime leader and to whip up a military/patriotic frenzy with the help of the Tory press. In this she was aided and abetted by the Labour Party, led by the so-called left Michael Foot, who supported her warmongering at every step. Having won the war she sprung an election on the back of it, sweeping to a 144-seat victory in 1983.

This triumph was aided by the split in the Labour Party that had occurred in 1981 – those who left formed the Social Democratic Party (SDP). In the 1983 election the SDP-Liberal Alliance took 25% of the votes, Labour 28% and Thatcher 44%. There is no doubt that the continued existence of this Alliance (it took 23% of the votes in the 1987 election) siphoned votes from the Labour Party and helped Thatcher to stay in power throughout the 1980s.

Popular capitalism

During her terms in office, Thatcher set out to build an electoral coalition that included not just the middle classes and the rich but important sections of the working class as well.

For the well-off there were massive tax cuts; corporation tax was slashed, the top rate of income tax for highest earners was cut from 83% to 60% and pushed down progressively to 40% in further administrations. The basic rate of tax was also cut (from 33% to 30%) in her first term, supposedly to appeal to better off workers. But in fact this was immediately clawed back by raising VAT, a regressive tax, from 8% to 15%. For all the talk of Thatcher leading a low tax party, this was only for the rich and businesses – the working class ended up paying a larger proportion of their income in taxes.

Popular support was further garnered by pushing through the “right to buy” council houses, a policy designed to appeal to better-off workers. If this had been accompanied by a massive municipal house building programme to replace the lost rental accommodation it would not have been so damaging. In fact it was combined with a cut in the housing budget by three quarters, ensuring that very few new council houses were built. This “populist policy” merely contributed to a growing housing crisis while allowing a lucky few to benefit from rising house prices.

A second populist measure was the privatisation programme. The selling of state companies like British Telecom, British Steel, Rolls Royce, British Airways, Jaguar, British Gas – to name a few – was a policy of Thatcher’s second term. Privatisation was conducted under the guise of “rolling back the state” as well as the ideological banner of “popular capitalism”. It extended share ownership both to workers in companies and to the population at large. The Thatcherite belief was that once workers owned their own houses and had shares in capitalism they would become immune to militancy and anticapitalist movements.

These state assets were sold at knock-down prices so that millions of small and large investors would make immediate gains. The fact that the number of shareholders increased from three to nine million (20% of the population) was trumpeted as a great triumph for popular capitalism. But 40% of the small shareholders quickly sold off their stock and the real beneficiaries were of course the big City firms and the managers of state enterprises who walked off with large shareholdings and stock options. The National Audit Office would later estimate that “sell cheap” privatisation policy had cost tax-payers some £2.4 billion in lost revenues.

Nevertheless it left a lasting legacy, with all political parties shifting away from any idea that the state should run any industries – even natural monopolies like water, gas and rail – as public services. It also developed one of the major tenets of neoliberalism, that a whole new arena of profit-making could be opened up by taking over the public services. Thatcher may have started it but Blair and New Labour later developed Private Finance Initiatives on a monumental scale.

Thatcher’s second term was dominated by two themes. First, the defeat of the miners in the monumental year-long strike of 1984/85 – a defeat that signalled a major offensive against the unions across the board. Second, the growth of unbridled and unregulated capitalism based in the City of London.

Much of this second trend came from the deregulation of the City introduced by Thatcher in 1986 – the so called “big bang”. It broke up the cosy public school elite that ran the Stock Exchange and allowed 100% foreign ownership. US merchant banks like Goldman Sachs quickly moved in and the City rapidly became a leading world centre for trading, speculation and quick profits.

It was the era of “loadsamoney” and the huge City bonuses that went alongside the massive privatisation programme and house price boom. The contrast between the “haves and have nots” had never been so stark – millions were unemployed, industry lay idle and rusting, drugs and hopelessness became rampant in the inner cities and at the same time City traders were flaunting their wealth in public as never before.

City deregulation, banking based on speculation, executives and traders taking tens of millions in pay and bonuses: all these were bequeathed to the modern economy by Thatcher’s neoliberal revolution. It was a legacy that finally came to fruition in the 2008 financial crash.

A belated downfall

By the late 1980s it looked like Thatcher reigned supreme. She had defeated the trade unions, improved productivity rates, pushed up profits, seen off a rebellion by Labour councils against council tax rate capping and had won her third general election in a row. She strode the world stage arm-in-arm with Ronald Reagan, denouncing the USSR as the “evil empire” and espousing the virtues of unregulated capitalism and free enterprise.

But problems were building up in the British economy, which was increasingly unbalanced and dependent on finance and the City. Monetarism had proved useless in controlling inflation and the economy and the pound remained under pressure. This in turn produced growing tensions within the cabinet over linking exchange rates to more stable European currencies; pro- and anti-EU Tories took opposite sides.

The stockmarket crash in October 1987 was the first sign of a new recession. Unemployment shot up to 3.3 million, alongside soaring public expenditure on welfare payments. Nigel Lawson initially cut taxes and lowered interest rates – policies that fuelled credit expansion, a house price bubble and a spike in inflation. He then had to slam on the brakes, raising interest rates to 15% and causing a mortgage payments crisis and a house price slump. A deep recession ensued and Lawson was sacrificed, being replaced as Chancellor by John Major. The miracles that Thatcher was supposed to have worked on the economy were proved to be a sham as Britain suffered a more serious and longer slowdown than any other European economy in 1989-92.

Not only had Thatcher lost support amongst her middle class supporters, who had seen share and house prices collapse, but she had further alienated whole sections of the population by pushing through the hated Poll Tax. Deciding in a fit of hubris that local council rates were a property tax that should be got rid of, Thatcher replaced it with the Community Charge, a tax charged per head so that large families would pay the most in local taxes. It produced a mass protest movement across the country. The movement centred around a non-payment campaign, with marches, protests and demonstrations often turning into mini-riots. It culminated in a mass riot in Trafalgar Square in March 1990.

The government was forced into a retreat. Important sections of the parliamentary Conservative Party decided that Thatcher had become an electoral liability and a leadership challenge by Michael Heseltine showed she was losing support. Thatcher resigned following the first round of balloting in November 1990, after eleven and a half years in office. John Major, who replaced her, quickly abandoned the Poll Tax and went on to win the next election.

Thatcherism then and now

Thatcher is being hailed as a politician of conviction. Tory, Labour and Liberal Democrat leaders are lining up to sing the praises of Britain’s longest-serving Prime Minister.

Some are even claiming her as a feminist, a role model for women seeking high office. Yet Thatcher spat on equality – for both women and men. She destroyed more womens’ jobs than perhaps any other Prime Minister than the current one. She was renowned for surrounding herself by admiring and subservient men and only allowed one other woman into the cabinet over her 11 years in office.

She certainly was a conviction-based politician. She took the leadership of the major party of British capitalism to do a job: restore profit rates by defeating the trade unions and use the weapon of mass unemployment to undermine wages and conditions. Much of today’s low paid and precarious employment, the part time working and zero hours contract culture, are down to the defeats she inflicted on organised trade unionism in Britain.

Roy Hattersley declared that she was one of the few British Prime Ministers who “changed the political weather”. What he means by this is that she shifted the entire political spectrum to the right, especially the Labour Party. Tony Blair was undoubtedly the product of Thatcherism, and proud of it. Today’s trade union leaders, for all their criticism of Thatcher, are quietly content with the anti-union laws she introduced and certainly have done nothing to challenge them. They enshrine their power over the members and lead to a quiet life with few strikes.

New Labour was a response to what Blair and Gordon Brown declared was the new “middle ground” consensus in British politics – that the private sector should be drawn into the heart of delivering public services, that competition should be introduced into the NHS, education and local government, that capitalism is at its best if it is lightly regulated by the state. Blair and Brown’s governments were in no sense a break with Thatcherite neoliberalism, but rather its continuation under Labour guise.

When the political right bemoan that David Cameron is not a “conviction politician” like Margaret Thatcher they express the frustration of their class and their annoyance that the Tories did not win a clear majority at the last election. Faced with the collapse and bankruptcy of their banking system, only saved by a state sponsored bail-out, they want another Thatcher solution to the ongoing stagnation.

They want faster and further attacks on public expenditure – they are fed up with paying for things like pensions, unemployment pay, child and invalidity benefit. They know that Thatcher was economically constrained by rising benefit payments caused by mass unemployment. Now they want to be able to benefit from mass unemployment without having to pay for it. While Thatcher undermined the NHS by starving it of funds, the new Tory right want to dismantle it in stages, turning it, and the rest of the welfare state, into an independent insurance-based system. Then the state will wash its hands of healthcare provision and it will be up to the individual – if you don’t pay in, you won’t receive benefits.

In other words, they want a real ruling class warrior like Margaret Thatcher, someone who will give no quarter to the old, the poor, the disabled. It is therefore quite appropriate that Thatcher is being given a funeral with “full military honours”. The ruling class always honours its class fighters.

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