JIt’s not the 1970s again, despite the apparent similarities – oil shocks, recession, seasons of discontent, inflation. What we are experiencing is something deeper. It is the painful denouement of Thatcher’s dysfunctional economic model, driven by credit, consumption and house prices, with so little concern for investment, productivity and high-performing workplaces. Its end began with the financial crisis, accelerated with Brexit and is now sealed by the economic fallout from Ukraine.
What isn’t obvious, given the retrogressive national economic conversation dominated by minions and Thatcherite myths about the horrors of public debt, is what will come next. With the right leadership, this could be a time to develop new ways of growth, 21st century business models and high-wage jobs, an attack on regional inequalities and a reframing of our relationship with Europe.
What is more likely, given the directionless and unprincipled government of Boris Johnson, is the descent into the most difficult economic circumstances since the Second World War – with unprecedented social distress, bitter division and economic stagnation. The challenges have rarely been so acute, the future has never been so open.
This week’s railway strikes are the latest trigger for fears that Britain is revisiting the 1970s and its trials of union power. But today there is no longer a single industry, such as the coal industry, on which the country depends, which can be used by a union as a lever for wage bargaining; there are no huge mass employment sites vulnerable to strikes; importantly, unionization rates have halved. This week will be awkward for many, but the three-day strike will feel like three miniature lockdowns rather than a three-day week with families huddled around gutter candles.
Indeed, knowing that it is possible to survive the downside, public support for action is surprisingly high. People may not know the details of the statistics – total wage growth in the public sector is 1.5% compared to 8% in the private sector (including bonuses) – but they sense the injustice, the meanness and a willingness to embrace the partisanship associated with everything Johnson touches. Why shouldn’t public sector workers resist sweeping real wage cuts and large-scale job losses?
This represents a larger mood shift. Whether it’s homeowners struggling to fix their mortgage rate as rates rise or people driving miles to a food bank because they can’t afford to drive, There’s a widespread feeling that not only is life suddenly tough and getting tougher, but no one has our backs. The institutions to which one could turn for support have been weakened and hollowed out by 12 years of toryism. Civil society must fight back.
The election of Sharon Graham last year as Unite General Secretary, with her commitment to focus on the heart of trade unionism – fighting for better pay and conditions – rather than the stalemate of Corbynite politics, was a tribute to this state of mind. So do the millions of savers who insist they want their retirement income to come from investments that make the world a better place: an astonishing third of all £9,000,000 funds under management in UK are meant to be invested in well-governed companies committed to improving the environment and society – and growing exponentially.
The over-50s who are resigning from the increasingly unpleasant world of high-stress work by the hundreds of thousands are yet another dimension of this quest for the better. If you add in EU nationals returning home, that means the labor force has shrunk by almost a million. As the Bank of England noted in the minutes of its monetary policy committee meeting last week, 1.3 million job vacancies broadly match the number of unemployed, an indicator of labor market tightness. labor (accentuated by the end of the free movement of labor as EU members).
The Bank also noted that core goods inflation stood at 8%, more than double the euro zone rate. Veteran members of the monetary policy committee tell me that the omens are obvious if unpleasant: public sector wages must and will exceed the 2% to 3% range indicated in last fall’s spending review, even if to stop the savage and unsustainable reductions in real wages. In this environment, if the Bank is serious about bringing inflation back to its 2% target and preventing already rising inflation expectations from taking hold, it will have to raise rates to close to 4% – and the sooner it acts , more better.
Recession, investors’ strike, falling house prices, bitter wage disputes, real social distress, stubbornly high inflation and persistent weakness in our trade with the EU are staring us in the face – that’s what happens when a economic model implodes.
But just as Thatcherism emerged from the 1970s, a new philosophy suited to our times must emerge now. Its constituent elements are still vague but already apparent. The trillions in ESG (Environmental, Social and Governance) savings must be mobilized in partnership with government to pursue great national missions – leveling, rebasing our energy system and grid to net zero, opening up space, transforming our cities, building in new resiliences, supporting our science.
A new ecosystem must be created to support the growth of our businesses of tomorrow – it is important that the shadow chancellor, Rachel Reeves, comes announcement a review of that – and great business in the 21st century must in turn be organized around the pursuit of a goal rather than short-term profit.
There must be a new set of rights and obligations at work, better relations with empowered unions and a serious commitment to developing our human capital. We need a social security system that protects us.
The state’s priority must be to organize all of this proactively, rather than the Pavlovian pursuit of tax cuts and debt reduction. There must be a constitutional settlement that embeds the rule of law and integrity in government and guarantees freedoms and democracy. Gone is the unethical, law-breaking King Boris and his court of sycophants.
There are a few very difficult years ahead, but those responsible will be punished electorally. The road is open to those who dare.