It is worth a short reprise of last week’s verdict on the government’s strategy: GDP down by 0.3% in 2012, still lower than 2008; manufacturing down 1.5% and services flat; the only positive boost coming from a fortunately timed Olympic games. The coalition government founded on the need to turn around the economy, is failing on all fronts. Despite the overwhelming evidence, the Chancellor remains stoically convinced current policy is correct, it seems denial is one of his strongest characteristics.
Politics and economics are often cyclical, especially so in the last fifty years, so we don’t have to look too far back to find very similar circumstances and compare the decision making at the time and the impact of the choices that were made.
The 1979 Thatcher government came into power on the perceived failure of the Labour administration. Unemployment stood at 1.2 million, and the famous ‘Labour isn’t working’ slogan is seminal in modern political history. The economic order of the day – then hauling down inflation as opposed today’s single focus of reducing the deficit – was the exercise of a single policy objective to take money out of the economy, largely through massive spending cuts.
Even though unemployment had more than doubled to 2.7 million by 1981, including an unemployment rate of 60% amongst young black men, then Chancellor Geoffrey Howe announced cuts of £4billion in the budget. Voices within cabinet were getting anxious. The economy was performing very badly; Conservative politician Ian Gilmour even resorted to Churchillian references urging colleagues to ‘look at the results … however beautiful the strategy may be’ – to look not just at the ideology of the policy, the driving force behind the Thatcher government, but consider also its impact.
Thatcher, famously ‘not for turning’ and not a natural team player, mocked dissenters as ‘wet’ and told the Conservative Conference that “This is the road I am resolved to follow. This is the path I must take”, an almost evangelical commitment resonant of George Osborne’s dogmatic adherence to ‘plan A’ despite a growing chorus of dissenters and rapidly declining public support.
The public of the 1980s were less ideologically committed to the monetarist agenda and the long-term benefits of free markets than their government. What most people were interested in then, as today, was a decent job providing a decent standard of living. What followed the hard line approach to further spending cuts and families and whole communities in growing poverty were some of the worst riots in modern British history, in Brixton, Southall and Toxteth in Liverpool, among others. Michael Heseltine, wrongly branded a ‘wet’, fronted the government’s response in the City and eventually secured significant efforts to support employment and growth, but only after a damning internal report significantly titled ‘It Took a Riot’ called for a more interventionist industrial and social policy.
Once again Lord Heseltine is urging the government to adopt a different approach, whilst the leaders of Newcastle, Liverpool and Sheffield have recently published an open letter to the Secretary of State for Communities and Local Government suggesting there is a real and current risk of civil disturbance in the same vein as the 1908s. Large swathes of our communities, especially young men, face long periods of unemployment and increasingly little hope of decent work as the economy continues to falter.
It took several riots in the early 1980s for the government of the day to realise that the impact of their policy was more important than the ideology inspiring it. Let’s hope George Osborne in turn appreciates these risks of social disorder, and wakes up to the fact that the impact of his hard line of austerity-at-all-costs is not only failing economically, but is also exacting a cost that is increasingly difficult for the country to bear.