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fpbWhen I first came to England, the great Seventies crisis was in full swing. It is my view that historians will eventually agree that this crisis had been caused by, one, the collapse of the Bretton Woods system under the pressure of American war spending in Vietnam, and, two, the two oil shocks of 1973 and 1979. (Which had, in turn, partly been caused by the collapse of Bretton Woods. About the politics of Vietnam and their results I shall have more to say elsewhere, if my laziness ever allows me.) However, it brought out a number of problems which had grown intractable in the West during the prosperous Sixties. Unable to do anything about the real issues - oil prices and the uncertainty caused by free-floating currencies - politicians focused on these significant but secondary issues, under the pretence that to settle them one way or another would be the way to solve the economic crisis.
Even then, I knew at least enough to ask who was fooling who. If the price of oil rises fourfold from one day to the next, I do not think there is any need to look for other causes for the crisis: oil is totally fundamental to our civilization, and was even more so at the time - not only do we burn it for heat and travel, but it is the basic ingredient in most plastics (so far as I know, I am no chemist), a material which has become fundamental to producing cheap and durable goods. To increase its price means to unleash a round of price increases that will eventually touch every area of economic activity. Nevertheless, the rise of inflation and the (perceivedly) new phenomenon of stagflation, inflation without any economic growth, was treated as some kind of great mystery. The answer to the mystery, it began to be said, was that inflation is caused by wage increases in line with inflation, such as most workers had managed to achieve thanks to union pressure. That seems to me nonsense; no doubt, in a perverse situation where inflation is out of control, wage linking will work as a multiplier, but to make it the cause of inflation begs the question of what would start the so-called wages-inflation spiral in the first place. Nevertheless, this has become orthodoxy, with disastrous and positively repulsive results: listen to a so-called Labour government denying impoverished public workers wage increases and telling them that it is up to them - the lowest-paid - to make sacrifices for the sake of the economy. It would take a Chesterton to fully excoriate such behaviour.
The truth is that unions, come to the zenith of their power after a century of evolution, had spent the sixties and seventies throwing their weight about. IN the process, they had gained plenty of hatred - hatred that was personal rather than rational, although it expressed itself in terms of economic theory. And here I want to state something important: economics is not and cannot be a science. At best, it is a variant of collective psychology; at worst, a pathology dressed up in numbers for the purpose of justifying someone's activities. That is why I tend to refuse explanations presented in terms of economic as a science - that is, as compulsive and unanswerable descriptions of human behaviour, as inevitable as the mathematics behind planetary motions. I do not believe in their unchallengeable status; and just as conservative circles today are used to throwing out the whole subject of sociology as a mere excuse for ideological impositions, so I am suspicious of their use of "economics" for that very purpose. Neither sociology nor economics are sciences; nothing can be a science in which the human subject reflects on itself, since it lacks the necessary distance between subject and object. Objectivity, when humanity contemplates its own behaviour, is not possible to the same extent with which it is possible when it calculates mathematical problems or contemplates the structure and behaviour of invertebrates. And economic theory is mankind reflecting over itself; its subject is never, never, anything else but human behaviour. Therefore it is easily the victim of every kind of wilful self-blinding to which the human soul is subject. To show just how much economic theory could be used as an excuse, I will just have to cast our minds back to some union-backed and left-wing theorizing of the seventies, where wages were actually defined as "an independent variable" as compared to profit!
If economics can be perverted so far in one direction, it can certainly be so perverted in the other; and what I believe happened in the eighties was just that. To the government which came to power in 1979 Britain, the memory of the hideous humiliation of 1974 - when a coal strike had been followed by an electoral defeat, proving them less powerful than union barons - was a recent and scarring memory, which they were determined to avenge at all costs. Not that they admitted it: to the contrary, their leader recited the Franciscan Prayer ("Where there is strife, may I bring peace... O Lord, grant that I may never wish so much to be consoled as to console, to be understood as to understand, to be loved as to love...") upon taking office. Well, after all, what better way to bring peace to Britain than to destroy the unions - the only cause of strife in the country?
In the years 1979-1981, Britain was brutally and purposefully deindustrialized. The one-time Workshop of the World was deprived of immense swathes of industry, including the whole shipbuilding industry - which one would have thought central to an island country. The Tories had won the election on the slogan "Labour isn't working", underlain by a picture of a queue of unemployed men; but once in power, they deliberately and with no remorse whatsoever pushed unemployment from less than two million to five million. It was not an economic crisis that did this; it was government policy, and everyone including the government accepted this. If Labour wasn't working, evidently, the problem was that it was not doing enough "not working".
Underlying this was a perverse economic theory - the kind of theory I have just described as an excuse to indulge personal inclinations and desires. It was that manufacturing industry was a thing of the past (the insulting expression "rust-belt" was coined at the time), and that in modern, advanced economics, the focus of operations shifted from manufacturing to services - retail, finance, personal services, and so on. This theory is sufficiently answered by the example of Germany, Europe's strongest economy and the world's second largest exporter of manufactured goods. Certainly competition is difficult, as it always has been; but there is nothing fated, inevitable, or scientifically proven, about the need to deindustrialize advanced economies. It was a human decision taken for human motives.
And indeed, their motives were easy to see. It was the old, old story - rebellion against their fathers' and mothers' world. The very language spoke of it - describing all the things that they were against as "old", "outdated" and so on. It was not that they needed reform or destruction because they were damaging or inefficient, but because they belonged to an unloved old world. Someone said, I don't know with how much truth, that Margaret Thatcher associated trains with the military transports of World War Two and with the subsequent time of misery and disarray. Whether that is true or not, I think that the instincts of the Thatcher movement (which was intensely opposed by a large number of Tories) were against anything old, established, unchanged.
What conservatives do not wish to understand about the Thatcher phenomenon is that it was not conservative at all. It was both revolutionary and destructive. Like Tony Blair after them, they were "modernizers"; and God have mercy on us. The word "modernizer" in British politics represents a constant pathology, a disease that has struck the souls of politicians for half a century, leading to successive waves of destruction. It is, alas, the predominant strain in both parties. In the name of modernity, Macmillan jettisoned Britain's whole imperial past, including the still very vital and important connections with the older Dominions; Australia, Canada and New Zealand experienced this as a rejection from the Mother Country, and it left them embittered and - especially in the case of Canada - without a clear role in the world. Wilson, the apostle of modernity, dotted Britain with hideous, jerry-built estates loved only by the architectural profession, in which social problems festered; and in general was the worst Prime Minister Britain has had in centuries. Heath "modernized" the Tory party, but otherwise failed at everything he undertook. The curse of modernism for its own sake dominates the whole British political class since 1956.
Margaret Thatcher was fully in that destructive tradition. Her touch was for destruction of established institution, and there is nothing surprising about the fact that the Queen was known to loathe her. (One amusing anecdote. One day, the Queen and the Prime Minister appeared at a function with almost identical dresses. Later, the Prime Minister's office sent along a suggestion that, in future, Her Majesty might perhaps favour them with information about what she was going to wear. Back came the answer: "Her Majesty pays no mind to what other guests wear.") She was no conservative: she consistently supported abortion, rewrote the Gospel to suit herself, and outrageously denied that there even was "such a thing as society". So her plan to demolish the unions and the destructive passion for "modernity" joined together in the perfect storm, devastating the industrial landscape of the world's oldest industrial nation.
That the unions had to be trimmed back is beyond doubt. In fact, nothing in recent British history makes sense without the memory of the great union revolt of 1978-79, known as the Winter of Discontent. And nobody denies that Margaret Thatcher was elected with a mandate to deal with the union problem. But she went about it in a way that was as destructive, divisive and aggressive as it could possibly be made. Her long-planned destruction of the coalminers' union in 1984-85 had overtones of civil war, and she was rebuked by the elderly Macmillan in Parliament for describing the miners as "the internal enemy".
In fact, Margaret Thatcher was a leader made for wartime and suited only to war. The one time I looked on her with admiration was after the IRA Brighton bomb of 1984, when, with several colleagues dead and injured, a monstrous hole in the hotel where the Conservative Party representatives were staying, herself routed out of bed in shocking circumstances and at unearthly time, and clearly having survived murder by sheer luck, she turned up in front of the cameras with not a hair out of place and said: "the conference goes on". But this same spirit, rightly defiant against Irish terrorists and Argentinian tyrants, meant that anything she disliked in domestic politics was simply scheduled for destruction. Humourless, self-important, and, like all humourless people, in the dark about herself, she could not distinguish between personal dislike and objection on principle. The worst example of this is her destruction of London's local government County Council, which meant that for a decade Britain's capital and one of the world's leading cities had no coherent administration and suffered from the squabbles of thirty-three separate local bodies. Margaret Thatcher did this quite simply because she was annoyed that the clownish left-wing leader of the council, Ken Livingstone, delighted in twisting her tail by such stunt as posting the day's total of unemployed people in Britain. Neither he nor the London local authority could really do anything against her; she had them voted out of existence simply because she did not like them.
In this spirit, then, she went about the destruction of Britain's old industrial heritage. She fell upon the country's industrial north like a whirlwind, destroying whole industries and condemning the cities those industries had built to irrelevance and mass unemployment. She neutered the unions and demolished their area of influence. In doing so, she destroyed Britain's manufacturing base. Now, this asks a question: if you are not MAKING things, where are you going to get economic growth from? After all, wealth is, roughly speaking, the sum of human work and of the things made by that work. Money, as such, is merely a counter for that wealth. A country that becomes heavily deindustrialized has, prima facie, lost a considerable amount of work and production, that is, of production of wealth. So where is growth to come from?
In the mid-eighties, however, the British economy began to grow again. That was one of the many points of my life when I started to wonder whether I was wrong. I often am; but not that time. The realization came only a little while later, when I noticed how everyone, but everyone, was talking about rising house prices. A sort of thrill started spreading from London outwards; there was a virgin feeling that anyone could, by buying a house, improving it, and sitting on it a few years, make a small fortune. This was in the mid-eighties. Many of my friends are too young to remember when it began.
This was the beginning of the infernal cycle. Thanks to uncontrolled house price inflation -at the same time when most other prices were stable or falling - a large part of the population in the eighties, nineties and early oughties were effectively receiving a second source of income - the price increase on their partially or wholly owned house. That was not the only way in which people were in effect offered free money. For instance, before privatization became a purely private source of income for government insiders, it began as an attempt to create "a nation of shareholders", that is, to entice millions of savers into the stock market. Some of us still remember the slogan used to sell the shares in privatized water companies - the most ignoble and immoral of privatizations: "don't tell Sid" - in other word, try to get in before your neighbour does (Sid was a stereotypical working-class name at the time). The Thatcherite tabloid The Sun came up with an even more vulgar suggestion: "Fill yer boots" - in other words, here's free money for all. Then there was the fad for privatizing cooperative companies - like Britain's once ubiquitous "building societies", savings bank owned by their own account holders and dedicated to helping them purchase homes. In a couple of years, most of these had been turned into public corporations, including the two largest, the Halifax and the Woolwich. This particular bit of whimsy went out of fashion when one too audacious adventurer, Andrew Relgan I think his name was, tried it with Britain's own venerable Cooperative Society - and not only was beaten off, but ended up in jail for some rather creative practices he had employed in his assault on the giant. The remaining building societies and cooperative companies put severe legal obstacles in the way of further raids, and no more were attempted. (Amusing concluding note: all those among thee privatized building societies - Halifax, Bradford and Bingley, Northern Rock, etc - which were not absorbed by larger bodies, were among the worst hit by the banking disaster. The strongest of the surviving building societies, the Nationwide, has not only survived it but grown. You work it out.)
All these, however, were episodes at best; and they only serve to illustrate the fact that the so-called period of prosperity that began in the last years of Margaret Thatcher were built, from the beginning, on sand. Having driven manufacturing pretty nearly into the ground, the governing classes began to pump up the economy artificially by effectively putting money in people's pockets. A symptom of this was the sudden appearance of a whole new way to speak about the economy. Remember productivity? That was the mantra of the fifties, sixties, seventies. In the eighties, nobody in Britain remembered it. What mattered - what, everybody said, kept the economy going - was retail spending. For the economy to keep going, everyone agreed, the public had to keep spending regularly.
What this meant in effect was that the economy had been reorientated towards selling people things rather than making them. What kept the country going was shopping. For this reason, credit policies were kept as lax as reasonably possible. One of the constant complaints of the period, heard continuously from the eighties to the oughties, was the scary ease with which one could fall in debt. Credit cards became ubiquitous, each store or financial company having one to offer at the first excuse. The result were regular horror stories of people in debt for multiples of their annual wage, when they indeed had a wage at all. These were one of the regular features of the post-Thatcher age; and from time to time, some newspaper or other would suggest that something had to be done about banks or stores (the worst offenders) practically driving people into debt they could never meet. But, in general, these ripples of alarm left the landscape as they had found it. The agreement on the importance of spending was too universal to make this more than a little, worried side phenomenon.
Neither the change from Thatcher to Major nor that from Major to Blair made any difference at all in the basic thrust of public policy. The theorem was that the visible outwards flow of capital to the countries that actually made things would be balanced by "invisible imports" in the financial and services sector. This was a very convenient theory for the City of London, which could present itself as a fundamental industry.
I never fitted in. I lived pretty much on the margins of this society, watching its onward rush with disbelieving annoyance. It cannot last, I would tell myself; you cannot have a society built on the outward rush of spending, the suppression of saving and the absence of manufacturing. And yet it went on. Every time I thought that punishment had come - with the panic of 1987, the housing collapse of the early nineties, the great Russian crisis, the dotcom bubble - the growth, after a short time of uncertainty, picked itself up and went on. The change of government, in this, meant nothing; this was a wholly bipartisan effort, with Labout following faithfully the Thatcherite script.
This had an effect on me. I started doubting my views. In the eighties and nineties I had confidently and repeatedly said that the fraud of a growth built on free money from rising house prices could not last; and I have the letters to prove it. As time went on and the growth seemed to overcome all obstacles, my faith in my own views wavered. A symptom of it is in my A plague on both your houses essays, written a couple of years ago, when I treated the rise of the New Aristocracy, that had been one of the most visible features of the age of free money, as an unwelcome but accomplished fact that had to be dealt with. What a difference two years make. Now we see the former masters of the universe being deliberately humiliated by their former political cronies, and the culture of bonuses and excess being excoriated - as I was doing years ago, and in the end gave up doing because I could see no end to it.
Well, the end has come. It is a bitter, antiseptic, burning end, and it brings home once again the old, old truth - the truth of Adam Smith and Warren Buffett: that wealth is the sum of human work and its products, not of artificial manipulation of prices; the truth of the first article of the Italian Constitution, which says that Italy is a democratic republic established upon labour.
Even then, I knew at least enough to ask who was fooling who. If the price of oil rises fourfold from one day to the next, I do not think there is any need to look for other causes for the crisis: oil is totally fundamental to our civilization, and was even more so at the time - not only do we burn it for heat and travel, but it is the basic ingredient in most plastics (so far as I know, I am no chemist), a material which has become fundamental to producing cheap and durable goods. To increase its price means to unleash a round of price increases that will eventually touch every area of economic activity. Nevertheless, the rise of inflation and the (perceivedly) new phenomenon of stagflation, inflation without any economic growth, was treated as some kind of great mystery. The answer to the mystery, it began to be said, was that inflation is caused by wage increases in line with inflation, such as most workers had managed to achieve thanks to union pressure. That seems to me nonsense; no doubt, in a perverse situation where inflation is out of control, wage linking will work as a multiplier, but to make it the cause of inflation begs the question of what would start the so-called wages-inflation spiral in the first place. Nevertheless, this has become orthodoxy, with disastrous and positively repulsive results: listen to a so-called Labour government denying impoverished public workers wage increases and telling them that it is up to them - the lowest-paid - to make sacrifices for the sake of the economy. It would take a Chesterton to fully excoriate such behaviour.
The truth is that unions, come to the zenith of their power after a century of evolution, had spent the sixties and seventies throwing their weight about. IN the process, they had gained plenty of hatred - hatred that was personal rather than rational, although it expressed itself in terms of economic theory. And here I want to state something important: economics is not and cannot be a science. At best, it is a variant of collective psychology; at worst, a pathology dressed up in numbers for the purpose of justifying someone's activities. That is why I tend to refuse explanations presented in terms of economic as a science - that is, as compulsive and unanswerable descriptions of human behaviour, as inevitable as the mathematics behind planetary motions. I do not believe in their unchallengeable status; and just as conservative circles today are used to throwing out the whole subject of sociology as a mere excuse for ideological impositions, so I am suspicious of their use of "economics" for that very purpose. Neither sociology nor economics are sciences; nothing can be a science in which the human subject reflects on itself, since it lacks the necessary distance between subject and object. Objectivity, when humanity contemplates its own behaviour, is not possible to the same extent with which it is possible when it calculates mathematical problems or contemplates the structure and behaviour of invertebrates. And economic theory is mankind reflecting over itself; its subject is never, never, anything else but human behaviour. Therefore it is easily the victim of every kind of wilful self-blinding to which the human soul is subject. To show just how much economic theory could be used as an excuse, I will just have to cast our minds back to some union-backed and left-wing theorizing of the seventies, where wages were actually defined as "an independent variable" as compared to profit!
If economics can be perverted so far in one direction, it can certainly be so perverted in the other; and what I believe happened in the eighties was just that. To the government which came to power in 1979 Britain, the memory of the hideous humiliation of 1974 - when a coal strike had been followed by an electoral defeat, proving them less powerful than union barons - was a recent and scarring memory, which they were determined to avenge at all costs. Not that they admitted it: to the contrary, their leader recited the Franciscan Prayer ("Where there is strife, may I bring peace... O Lord, grant that I may never wish so much to be consoled as to console, to be understood as to understand, to be loved as to love...") upon taking office. Well, after all, what better way to bring peace to Britain than to destroy the unions - the only cause of strife in the country?
In the years 1979-1981, Britain was brutally and purposefully deindustrialized. The one-time Workshop of the World was deprived of immense swathes of industry, including the whole shipbuilding industry - which one would have thought central to an island country. The Tories had won the election on the slogan "Labour isn't working", underlain by a picture of a queue of unemployed men; but once in power, they deliberately and with no remorse whatsoever pushed unemployment from less than two million to five million. It was not an economic crisis that did this; it was government policy, and everyone including the government accepted this. If Labour wasn't working, evidently, the problem was that it was not doing enough "not working".
Underlying this was a perverse economic theory - the kind of theory I have just described as an excuse to indulge personal inclinations and desires. It was that manufacturing industry was a thing of the past (the insulting expression "rust-belt" was coined at the time), and that in modern, advanced economics, the focus of operations shifted from manufacturing to services - retail, finance, personal services, and so on. This theory is sufficiently answered by the example of Germany, Europe's strongest economy and the world's second largest exporter of manufactured goods. Certainly competition is difficult, as it always has been; but there is nothing fated, inevitable, or scientifically proven, about the need to deindustrialize advanced economies. It was a human decision taken for human motives.
And indeed, their motives were easy to see. It was the old, old story - rebellion against their fathers' and mothers' world. The very language spoke of it - describing all the things that they were against as "old", "outdated" and so on. It was not that they needed reform or destruction because they were damaging or inefficient, but because they belonged to an unloved old world. Someone said, I don't know with how much truth, that Margaret Thatcher associated trains with the military transports of World War Two and with the subsequent time of misery and disarray. Whether that is true or not, I think that the instincts of the Thatcher movement (which was intensely opposed by a large number of Tories) were against anything old, established, unchanged.
What conservatives do not wish to understand about the Thatcher phenomenon is that it was not conservative at all. It was both revolutionary and destructive. Like Tony Blair after them, they were "modernizers"; and God have mercy on us. The word "modernizer" in British politics represents a constant pathology, a disease that has struck the souls of politicians for half a century, leading to successive waves of destruction. It is, alas, the predominant strain in both parties. In the name of modernity, Macmillan jettisoned Britain's whole imperial past, including the still very vital and important connections with the older Dominions; Australia, Canada and New Zealand experienced this as a rejection from the Mother Country, and it left them embittered and - especially in the case of Canada - without a clear role in the world. Wilson, the apostle of modernity, dotted Britain with hideous, jerry-built estates loved only by the architectural profession, in which social problems festered; and in general was the worst Prime Minister Britain has had in centuries. Heath "modernized" the Tory party, but otherwise failed at everything he undertook. The curse of modernism for its own sake dominates the whole British political class since 1956.
Margaret Thatcher was fully in that destructive tradition. Her touch was for destruction of established institution, and there is nothing surprising about the fact that the Queen was known to loathe her. (One amusing anecdote. One day, the Queen and the Prime Minister appeared at a function with almost identical dresses. Later, the Prime Minister's office sent along a suggestion that, in future, Her Majesty might perhaps favour them with information about what she was going to wear. Back came the answer: "Her Majesty pays no mind to what other guests wear.") She was no conservative: she consistently supported abortion, rewrote the Gospel to suit herself, and outrageously denied that there even was "such a thing as society". So her plan to demolish the unions and the destructive passion for "modernity" joined together in the perfect storm, devastating the industrial landscape of the world's oldest industrial nation.
That the unions had to be trimmed back is beyond doubt. In fact, nothing in recent British history makes sense without the memory of the great union revolt of 1978-79, known as the Winter of Discontent. And nobody denies that Margaret Thatcher was elected with a mandate to deal with the union problem. But she went about it in a way that was as destructive, divisive and aggressive as it could possibly be made. Her long-planned destruction of the coalminers' union in 1984-85 had overtones of civil war, and she was rebuked by the elderly Macmillan in Parliament for describing the miners as "the internal enemy".
In fact, Margaret Thatcher was a leader made for wartime and suited only to war. The one time I looked on her with admiration was after the IRA Brighton bomb of 1984, when, with several colleagues dead and injured, a monstrous hole in the hotel where the Conservative Party representatives were staying, herself routed out of bed in shocking circumstances and at unearthly time, and clearly having survived murder by sheer luck, she turned up in front of the cameras with not a hair out of place and said: "the conference goes on". But this same spirit, rightly defiant against Irish terrorists and Argentinian tyrants, meant that anything she disliked in domestic politics was simply scheduled for destruction. Humourless, self-important, and, like all humourless people, in the dark about herself, she could not distinguish between personal dislike and objection on principle. The worst example of this is her destruction of London's local government County Council, which meant that for a decade Britain's capital and one of the world's leading cities had no coherent administration and suffered from the squabbles of thirty-three separate local bodies. Margaret Thatcher did this quite simply because she was annoyed that the clownish left-wing leader of the council, Ken Livingstone, delighted in twisting her tail by such stunt as posting the day's total of unemployed people in Britain. Neither he nor the London local authority could really do anything against her; she had them voted out of existence simply because she did not like them.
In this spirit, then, she went about the destruction of Britain's old industrial heritage. She fell upon the country's industrial north like a whirlwind, destroying whole industries and condemning the cities those industries had built to irrelevance and mass unemployment. She neutered the unions and demolished their area of influence. In doing so, she destroyed Britain's manufacturing base. Now, this asks a question: if you are not MAKING things, where are you going to get economic growth from? After all, wealth is, roughly speaking, the sum of human work and of the things made by that work. Money, as such, is merely a counter for that wealth. A country that becomes heavily deindustrialized has, prima facie, lost a considerable amount of work and production, that is, of production of wealth. So where is growth to come from?
In the mid-eighties, however, the British economy began to grow again. That was one of the many points of my life when I started to wonder whether I was wrong. I often am; but not that time. The realization came only a little while later, when I noticed how everyone, but everyone, was talking about rising house prices. A sort of thrill started spreading from London outwards; there was a virgin feeling that anyone could, by buying a house, improving it, and sitting on it a few years, make a small fortune. This was in the mid-eighties. Many of my friends are too young to remember when it began.
This was the beginning of the infernal cycle. Thanks to uncontrolled house price inflation -at the same time when most other prices were stable or falling - a large part of the population in the eighties, nineties and early oughties were effectively receiving a second source of income - the price increase on their partially or wholly owned house. That was not the only way in which people were in effect offered free money. For instance, before privatization became a purely private source of income for government insiders, it began as an attempt to create "a nation of shareholders", that is, to entice millions of savers into the stock market. Some of us still remember the slogan used to sell the shares in privatized water companies - the most ignoble and immoral of privatizations: "don't tell Sid" - in other word, try to get in before your neighbour does (Sid was a stereotypical working-class name at the time). The Thatcherite tabloid The Sun came up with an even more vulgar suggestion: "Fill yer boots" - in other words, here's free money for all. Then there was the fad for privatizing cooperative companies - like Britain's once ubiquitous "building societies", savings bank owned by their own account holders and dedicated to helping them purchase homes. In a couple of years, most of these had been turned into public corporations, including the two largest, the Halifax and the Woolwich. This particular bit of whimsy went out of fashion when one too audacious adventurer, Andrew Relgan I think his name was, tried it with Britain's own venerable Cooperative Society - and not only was beaten off, but ended up in jail for some rather creative practices he had employed in his assault on the giant. The remaining building societies and cooperative companies put severe legal obstacles in the way of further raids, and no more were attempted. (Amusing concluding note: all those among thee privatized building societies - Halifax, Bradford and Bingley, Northern Rock, etc - which were not absorbed by larger bodies, were among the worst hit by the banking disaster. The strongest of the surviving building societies, the Nationwide, has not only survived it but grown. You work it out.)
All these, however, were episodes at best; and they only serve to illustrate the fact that the so-called period of prosperity that began in the last years of Margaret Thatcher were built, from the beginning, on sand. Having driven manufacturing pretty nearly into the ground, the governing classes began to pump up the economy artificially by effectively putting money in people's pockets. A symptom of this was the sudden appearance of a whole new way to speak about the economy. Remember productivity? That was the mantra of the fifties, sixties, seventies. In the eighties, nobody in Britain remembered it. What mattered - what, everybody said, kept the economy going - was retail spending. For the economy to keep going, everyone agreed, the public had to keep spending regularly.
What this meant in effect was that the economy had been reorientated towards selling people things rather than making them. What kept the country going was shopping. For this reason, credit policies were kept as lax as reasonably possible. One of the constant complaints of the period, heard continuously from the eighties to the oughties, was the scary ease with which one could fall in debt. Credit cards became ubiquitous, each store or financial company having one to offer at the first excuse. The result were regular horror stories of people in debt for multiples of their annual wage, when they indeed had a wage at all. These were one of the regular features of the post-Thatcher age; and from time to time, some newspaper or other would suggest that something had to be done about banks or stores (the worst offenders) practically driving people into debt they could never meet. But, in general, these ripples of alarm left the landscape as they had found it. The agreement on the importance of spending was too universal to make this more than a little, worried side phenomenon.
Neither the change from Thatcher to Major nor that from Major to Blair made any difference at all in the basic thrust of public policy. The theorem was that the visible outwards flow of capital to the countries that actually made things would be balanced by "invisible imports" in the financial and services sector. This was a very convenient theory for the City of London, which could present itself as a fundamental industry.
I never fitted in. I lived pretty much on the margins of this society, watching its onward rush with disbelieving annoyance. It cannot last, I would tell myself; you cannot have a society built on the outward rush of spending, the suppression of saving and the absence of manufacturing. And yet it went on. Every time I thought that punishment had come - with the panic of 1987, the housing collapse of the early nineties, the great Russian crisis, the dotcom bubble - the growth, after a short time of uncertainty, picked itself up and went on. The change of government, in this, meant nothing; this was a wholly bipartisan effort, with Labout following faithfully the Thatcherite script.
This had an effect on me. I started doubting my views. In the eighties and nineties I had confidently and repeatedly said that the fraud of a growth built on free money from rising house prices could not last; and I have the letters to prove it. As time went on and the growth seemed to overcome all obstacles, my faith in my own views wavered. A symptom of it is in my A plague on both your houses essays, written a couple of years ago, when I treated the rise of the New Aristocracy, that had been one of the most visible features of the age of free money, as an unwelcome but accomplished fact that had to be dealt with. What a difference two years make. Now we see the former masters of the universe being deliberately humiliated by their former political cronies, and the culture of bonuses and excess being excoriated - as I was doing years ago, and in the end gave up doing because I could see no end to it.
Well, the end has come. It is a bitter, antiseptic, burning end, and it brings home once again the old, old truth - the truth of Adam Smith and Warren Buffett: that wealth is the sum of human work and its products, not of artificial manipulation of prices; the truth of the first article of the Italian Constitution, which says that Italy is a democratic republic established upon labour.
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Cannot be?
Date: 2008-10-14 02:10 am (UTC)If so then every opinion anyone has about economic phenomenon -- including yours -- is merely an unscientific speculation at best, or "an excuse to indulge personal inclinations and desires." -- including the opinions given in your article here.
If we take you at your literal word, you impeach your own testimony.
Economics can be a science if and only if that are invariants in human behavior, categories of action that do not change with time and place, or which the national psychology of the group involved. In other words, if economics is treated as you treat it here, as an unscientific speculation about the mass psychology of men in the marketplace, it is not economics: it is merely an ad Hominem, an attempt to read unsavory motives into the minds of one's opposition.
Re: Cannot be?
Date: 2008-10-14 03:46 am (UTC)When you speak about economic theory being science, you only mean the economic theory you accept. You know perfectly well that my description of many (by no means all) economic theories as rationalizations - a description I would extend across the board to psychology, sociology and history - is true and answers to the facts. But the only way that one economic theory can be told from another is by the very unscientific test of whether they suit fallen and sinful man, which is the core issue of what I called enlightened debate between experts.
Beware of treating economic theory - meaning your favourite economic theory - as revealed truth. Beware of using it as an argument-ending point. You are in grave danger of doing exactly what should not be done - placing your rationalizations in the place of unchallengeable truth; standing the abomination where it ought not.
no subject
Date: 2008-10-14 12:54 pm (UTC)Poor Adam Smith; he gets blamed for a lot of things he'd have died rather than acknowledge, including this nonsense about basing an economy on financial trading (really, there are times when I think that the middle ages were right about usury).
no subject
Date: 2008-10-14 04:08 pm (UTC)Lending money at interest makes sense when it is in effect a contribution to a productive enterprise, that is, when it is given to someone who will use it for a profitable enterprise and pay the interest out of the profits. It is also inevitable in commercial lending, because anyone who provides a service - such as a loan - will inevitably want to be paid for his service, above and beyond the return of his capital. However, that something is inevitable does not make it any less dangerous. I have mentioned Warren Buffett exactly because he has become the world's richest man by wisely investing his and other people's money in long-term, productive businesses; but for every Warren Buffett who looked to the long term and to what business was actually meant to do, there are inevitably hundreds of gamblers who only want to see the colour of more money.
no subject
Date: 2008-10-14 05:58 pm (UTC)Absolutely - and I don't think the clock could be turned back - it's more an emotional reaction to the late insanity than anything else, I suppose.
no subject
Date: 2008-10-15 12:16 pm (UTC)Although I think starting at the collapse of Bretton Woods is a little questionable. Fixed currently rates had their own problems, we may not have run into this specific crisis without the collapse of BW, but something similar would almost certainly have taken place.....
no subject
Date: 2008-10-15 04:29 pm (UTC)no subject
Date: 2008-10-15 04:16 pm (UTC)Did similar things happen in the U.S.? Being a Midwesterner I'm used to seeing abandoned factories, and I've heard it mentioned that the government was involved in shutting down industries. I've never looked into it in detail though.
no subject
Date: 2008-10-15 04:27 pm (UTC)