Article

Blast from the Past…

... and Back to the Future

Given that Tony Blair's government seems intent on extending the legacy of Thatcherism into the new millennium, it is useful to remember some of the claims made by Thatcher's ideological heavy-weights from the past. In that way we can see whether the succ ess of Thatcherism is all it is claimed to be and what are effective forms of struggle.

One of the major "improvements" claimed for Thatcher is successful trade union "reform." The idea that social struggle and working class organisation are harmful was expressed constantly in the 1970s. If we look at the arguments of the right in the 1970s, we find evidence that the notion that "Thatcherism" was a great success is decidedly wrong -- as is the notion that "trade union reform" aided working class people.

With the post-war Keynesian consensus crumbling, the "New Right" argued that trade unions (and strikes) hampered growth and that wealth redistribution (i.e. welfare schemes which returned some of the surplus value workers produced back into their own hands) hindered "wealth creation" (i.e. economic growth). In February this year, the Blairite Trade and Industry Secretary Stephen Byers argued that "wealth creation is now more important that wealth redistribution,"} echoing the claims of Thatcher and her cronies. Do not struggle over income, the "New Right" argued, let the market decide and everyone will be better off. Twenty years later, "New Labour" is repeating the arguments of the "New Right."

Unsurprisingly, the right-wing anti-trade union argument was dressed up in populist clothes. Thus we find the right-wing guru F.A. von Hayek arguing that, in the case of Britain, the "legalised powers of the unions have become the biggest obstacle to raising the standards of the working class as a whole. They are the chief cause of the unnecessarily big differences between the best- and worse-paid workers."} He maintained that "the elite of the British working class. . . derive their relative advantages by keeping workers who are worse off} from improving their position."} Moreover, he "predict[ed] that the average worker's income would rise fastest in a country where relative wages are flexible, and where the exploitation of workers by monopolistic trade union organisations of specialised workers are effectively outlawed."} ["1980s Unemployment and the Unions"} reproduced in The Economic Decline of Modern Britain}, p. 107, p. 108, p. 110]

Now, if von Hayek's claims were true we could expect that in the aftermath of Thatcher government's trade union reforms we would have seen the following:

1) a rise in economic growth (usually considered as the} means to improve living standards for workers by the right);

2) a decrease in the differences between high and low paid workers;

3) a reduction in the percentage of low paid workers as they improved their positions when freed from union "exploitation"; and

4) that wages rise fastest in countries with the highest wage flexibility.

Unfortunately for von Hayek, the actual trajectory of the British economy exposes his claims as nonsense. Given that Blairism is based on the same flawed theories, the claims of the past are continuing to haunt us and so are worth looking at

Looking at each of von Hayek's claims in turn we discover that rather than "exploit" other workers, trade unions are an essential means to shift income from capital to labour (which is way capital fights labo ur organisers and agitators tooth and nail). And, equally important, labour militancy aids all} workers by providing a floor under which wages cannot drop (non-unionised/militant firms in the same industry or area have to offer similar programs to prevent unionisation and be able to hire workers) and by maintaining aggregate demand. This positive role of unions/militancy in aiding all} workers can be seen by comparing Britain before and after Thatcher's von Hayek inspired trade union and labour market reforms.

As far as economic growth goes, there has been a steady fall since trade union reforms. In the "bad old days" of the 1970s, with its strikes and "militant unions" growth was 2.4% in Britain. It fell to 2% in the 1980s and fell again to 1.2% in the 1990s [ Larry Elliot and Dan Atkinson, The Age of Insecurity} , p. 236]. So the rate of "wealth creation" (economic growth) has steadily fallen as unions were "reformed" in line with von Hayek's ideology. Falling growth means that the living standards of the worki ng class as a whole do not rise as fast as they did under the "exploitation" of the "monopolistic" trade unions.

If we look at the differences between the highest and lowest paid workers, we find that von Hayek again proved wrong. Rather than decrease, they have in fact shown "a dramatic widening out of the distribution with the best-workers doing much better"} since Thatcher was elected in 1979 [Andrew Glyn and David Miliband (eds.), Paying for Inequality}, p. 100]

Given that inequality has also increased, the condition of the average worker must have suffered. For example, Ian Gilmore states that "[i]n the 1980s, for the first time for fifty years. . . the poorer half of the population saw its share of total national income shirk."} [Dancing with Dogma}, p. 113] According to Noam Chomsky, "[d]uring the Thatcher decade, the income share of the bottom half of the population fell from one-third to one-fourth"} and the between 1979 and 1992, the share of total income of the top 20% grew from 35% to 40% while that of the bottom 20% fell from 10% to 5%. In addition, the number of UK employees with weekly pay below the Council of Europe's "decency threshold" increased from 28.3% in 1979 to 37% in 1994 [World Orders, Old and New}, p. 144, p. 145] Moreover, "[b]ack in the early 1960s, the heaviest concentration of incomes fell at 80-90 per cent of the mean. . . But by the early 1990s there had been a dramatic change, with the peak of the distribution falling at just 40-50 per cent of the mean. One-quarter o f the population had incomes below half the average by the early 1990s as against 7 per cent in 1977 and 11 per cent in 1961. . ."} [Elliot and Atkinson, Op. Cit., p. 235] "Overall," }notes Takis Fotopoulos, "average incomes increased by 36 per cent during this period [1979-1991/2], but 70 per cent of the population had a below average increase in their income."} [Towards an Inclusive Democracy}, p. 113]

Looking at the claim that trade union members gained their "relative advantage by keeping workers who are worse off} from improving their position"} it would be fair to ask whether the percentage of workers in low-paid jobs decreased in Britain after the trade union reforms. In fact, the percentage of workers below the Low Pay Unit's definition of low pay (namely two-thirds of men's median earnings) increased} -- from 16.8% in 1984 to 26.2% in 1991 for men, 44.8% to 44.9% for women. For manual workers it rose by 15% to 38.4%, and for women by 7.7% to 80.7% (for non-manual workers the figures were a 5.4% rise to 13.7% for men and a 0.5% rise to 36.6%) [Paying for Inequality}, p.102]. If unions were} gaining at the expense of the worse off, you would expect a decrease} in the number in low pay, not} an increase. An OECD study concluded that "[t]ypically, countries with high rates of collective bargaining and trade unionisation tend to have low incidence of low paid employment."} [OECD Employment Outlook}, 1996, p. 94]

Nor did unemployment fall after the trade union reforms. As Elliot and Atkinson point out, "[b]y the time Blair came to po wer [in 1997], unemployment in Britain was falling, although it still remained higher than it had been when the [the last Labour Government of] Callaghan left office in May 1979."} [Op. Cit., p. 258] Von Hayek did argue that falls in unemployment would be "a slow process"} but over 10 years of higher unemployment is moving at a snail's pace! We must note that part of this fall in unemployment towards its 1970s level was due to Britain's labour force shrinking (and so, as the July 1997 Budget Statement correctly notes, "the lower 1990s peak [in unemployment] does not in itself provide convincing evidence of improved labour performance."} [p. 77]).

As far as von Hayek's prediction on wage flexibility leading to higher wages for the "average worker" goes, it has been proved totally wrong. Between 1967 and 1971, real wages grew (on average) by 2.95% per year (nominal wages grew by 8.94%) [_P. Armstron g, A. Glyn and John Harrison, Capitalism Since World War II}, p.272]. In comparison, in the 1990s real wages grew by 1.1 per cent, according to a TUC press release entitled Productivity Record, how the UK compares} released in March 1999.

Needless to say, these are different eras so it would also be useful to compare the UK (often praised as a flexible economy after Thatcher's "reforms") to France (considered far less flexible) in the 1990s. Here we find that the "flexible" UK is behind t he "inflexible" France. Wages and benefits per worker rose by almost 1.2 per cent per year compared to 0.7% for the UK. France's GDP grew at a faster rate than Britain's, averaging 1.4 per cent per year, compared with 1.2 per cent. Worker productivity is also behind, since 1979 (Thatcher's arrival) Britain's worker productivity has been 1.9 per cent per year compared to France's 2.2 per ce nt. [Seth Ackerman, "The Media Vote for Austerity",} Extra!}, September/October 1997]. And as Seth Ackerman also notes, "[w]hile France's dismal record of job creation is on permanent exhibit, it is never mentioned that Britain's is even more dismal."} [Ibid.]

Moving further afield, we find von Hayek's predictions falsified yet again. Looking at the USA, frequently claimed as a model economy in terms of wage flexibility and union weakness, we discover that the real wages of the average worker has decreased} since 1973. The weekly and hourly earnings of US production and non-supervisory workers, which accounts for 80% of the US workforce, have fallen in real terms by 19.2% and 13.4% respectively [Economic Report of the President 1995} , Table B-45]. If we look at f igures from U.S. Bureau of the Census (Current Population Survey) we discover that increased flexibility has affected income adversely for the bottom 60 per cent of the population. Between 1979-1993, the lowest 20% saw their income fall by 15%, the next 2 0% saw a 7% fall, the next a 3% fall. Between 1950 and 1978, when the labour market was more inflexible and had stronger unions, income growth grew by 138%, 98% and 106% respectively. Moreover, the growth of the US economy has also slowed down as wage fle xi bility and market reform has increased. It was 4.4% in the 1960s, 3.2% in the 1970s, 2.8% in the 1980s and 1.9% in the first half of the 1990s [Larry Elliot and Dan Atkinson, Op. Cit. p. 236]. Inequality since the 1960s has steadily increased, reaching am azing levels by the 1990s.

As can be seen, flexible wages and weaker unions have resulted in the direct opposite of von Hayek's predictions. Of course, being utterly wrong has not dented his reputation with the right nor stopped him being quoted in argument s in favour of flexibility and free market reforms. Nor has this utter lack of accuracy been reflected when Thatcher or Blair are being evaluated by the media for their performance on economic matters. Rather than look at the claims and predictions of the Thatcherites and their ideological mentors and how they measure up with what happened, a myth of economic success is created, a myth which the Labour Party seems to emulate.

Why bother to document the utterly wrong predictions of an icon of the right? Part ly, of course, it is fun to show up the massive errors of our enemies. However, and even more important, it is necessary to expose the hype and short-term memory of the media in order to fully counter the claims that the last 20 years have been anything b ut a disaster for working class people. In addition, it shows the way to improve our conditions. Militancy, direct action, solidarity and working class organisation works, they are effective and they get results. This is the message that is easily seen f rom comparing von Hayek's claims and predictions with reality. It also shows the necessity of creating a new working class movement based on these principles, the principles of anarchism.