Free Market Fundamentalist Opinion

Labour Must Not Take Britain Back into the 1970s

Jeremy Corbyn’s supporters may not remember what damage his policies did in the past.

As Britain’s Labour Party seems determined to take the country back into the 1970s, it’s worth remembering what that decade was like.

Many of the party’s new leader’s supporters weren’t alive at the time to see what the big-state policies Jeremy Corbyn advocates wrought.

Corbyn — who was elected leader this month with the help of tens of thousands of young supporters flocking to the Labour Party — wants to print money to finance investment and welfare spending, nationalize industries and strengthen trade unions. Not only are his policies far to the left of Middle England; they have been tried before and failed.

In the 1970s, the postwar Keynesian consensus — that had seen the British state take over large industries, enact price controls, borrow to finance benefits and sustain consumer spending at times of economic slowdowns and allow increasingly militant trade unions a veto over labor policy — broke down. Unemployment started to rise. Power cuts became a daily occurrence as a result of industrial action. Inflation reached nearly 30 percent. There were riots in the streets. The government introduced a three-day workweek and tried to persuade the unions to limit their pay demands to a 5-percent increase. They refused. A “Winter of Discontent” followed that finally convinced the country to elect Margaret Thatcher in 1979.

Britain’s economy in the 1970s was so weak that James Callaghan, the Labour Party leader, foresaw a “breakdown of democracy” and said, “If I were a young man, I would emigrate.”

The country even had to apply for an IMF loan. It was the Greece of its day, the sick man of Europe.

To understand what got Britain into that place, consider what it took to get out of it.

Thatcher cut spending and taxes, deregulated and privatized. The Bank of England raised interest rates to tame inflation. It was an effort that might nowadays be called “austerity” — except today’s version is peanuts compared to what Britain went through in the early 1980s.

Higher interest rates and the withdrawal of subsidies from unprofitable (state) enterprises bankrupted companies and pushed up unemployment even higher in the short term. It was a terribly hard adjustment.

But Thatcher got it right. Taking money and power away from bureaucrats and unions and putting it in the hands of ordinary people paid off in the end. Within a few years, Britain was back.

Did Thatcher get everything right? No. And in the end, she took it too far and was pushed out by her own party.

Did people fall by the wayside? Yes. Poverty rose during Thatcher’s tenure. But she did what needed to be done.

British voters recognized as much and wouldn’t trust Labour to run the country again until, under Tony Blair, it came to terms with Thatcher’s reforms and promised not to overturn them — but rather work within the confines of a mixed economy that was now more private than public to improve people’s lives.

After eighteen years of sometimes uncompromising right-wing rule, Middle England was susceptible to Blair’s “New Labour” and wouldn’t return the Conservatives to power again until after Labour had broken the economy (again) and the party gave them a decent and compassionate alternative in David Cameron.

His administration is once again shifting the center ground in British politics. The aim of Cameron and his deputy, George Osborne, is to redraw Britons’ relations with the state; making them less dependent on government action and more self-reliant.

Labour’s way back to electability is not fighting a program that in May received the overwhelming support of the British people. Rather, the party must reexamine its vision of community and society and — like Blair did in the 1990s and like the Conservatives have under Cameron — realign its values with the changing times.

Britain is an individualized place where most people don’t need government or trade unions to make it anymore. By far most people understand that profit-making companies are better at delivering products and services than the state. But most also recognize that some people need a little help to get ahead while few dream of a free-market utopia.

Labour’s task, a social democratic party, is to shave off the rough edges of capitalism and make sure that no one is left behind. That is a program on which it can win. Anything beyond that risks taking the country back in the 1970s — and Labour back into the electoral wilderness.