No Nostalgia for Thatcher, but a Tribute to the Welfare State by Ken Loach


The muted protests at Thatcher’s funeral on Wednesday gave the world a glimpse of the deeply-felt divisions in British society. She did not create this social cleavage, which at root is part of an international process: a shift of manufacturing out of Europe and the U.S., and a rapid expansion of speculation in financial centres like London and New York. What she is responsible for is ending the ruling elite’s Keynesian commitment to the mitigation of regional and social inequities.

Although her death evoked few tears in Britain’s industrial heartland, there was more than a little interest in showings of Ken Loach’s new documentary about the Attlee Labour government, “The Spirit of ‘45”. I was fortunate enough to see it while in the UK recently, and my own feelings were mixed: my childhood was spent under the wing of the welfare state, so I took state-provided health and education for granted, and share Loach’s affection for the cradle-to-grave policies that characterized the period.

The interviews with people who were children in the 1930s and 1940s were very moving. They remembered the harsh and degrading conditions of that time and the optimism for a better future after the 1945 election, articulating the general disaffection with prewar society and the determination that things were going to be different.

The interviewees vividly recounted the social impact of the Labour government’s nationalization and house-building program. The experience of state-directed industry during the war had established the feasibility of state intervention to achieve social goals. There was a huge sense of pride and ownership of the newly-nationalized industries, especially the National Health Service, which brought free health care to working-class families who had never been able to afford it. The government channeled state resources into solving the immediate problems of poverty, unemployment, and bad health. Housing for millions of families living in slums or private boarding houses was made a priority.

The weaker part of the film was the final segment, which showed participants urging a return to the collectivist spirit of the postwar era. While Thatcher was the clear villain of the piece, the discussion gave the impression that she imposed privatization and unemployment from above, an arbitrary political decision that could be reversed by a revived social-democratic party in Britain.

But the world has changed since Labour’s manifesto was written in 1945.  Globalization has made national forms of struggle increasingly ineffective in resisting corporate power. What troubled me was the message that the younger generation should look to the history of the Attlee government for an alternative to austerity, which amounts to advocating old solutions to qualitatively new problems.

The achievement of a welfare state after World War II was essentially a political compromise between an organized and homogeneous working class and a capitalist class that had survived the war and needed to restart capital accumulation. This cemented the priorities of the Labour leaders to the recovery of British-based capital within the economic boundaries of the old empire.

The Labour electoral landslide was not the result of some mass revolutionary wave, as some on the left like to think, but rather came from a popular determination to continue the state planning established during the war. State technocrats were more enthusiastic about nationalization than the government, which never intended to change the balance of power in industry, and obsolete production relations were kept intact along with antiquated machinery.

While making a huge difference in people’s lives by alleviating the prewar degradation of the working class, nationalization also released capital bound up in older industries with more than generous compensation to the former owners. Later Conservative governments continued the social compromise, while full employment and expanding markets gave shopfloor militancy leverage to gain a larger share of the surplus being produced. As production rapidly accelerated, the focus of capital accumulation shifted from the national arena to the global. The revival of the German and Japanese economies intensified competition in the world market, and the boom began to falter.

Signs of the erosion of the postwar political compromise were evident by the time of the Heath government, with a wave of inflation and industrial slowdown in 1973; national control of the economy dissolved with the IMF loan to the Callaghan government in 1976. As Michael Hudson explains it: “Labour Prime Minister James Callaghan made a token attempt to address [problems of the economy] by requesting an IMF loan in 1976 to finance tangible industrial re-investment as bridge financing until the UK’s North Sea oil could begin generating foreign exchange. But US Treasury Secretary Bill Simon read him the riot act. IMF and U.S. policy was to provide credit only to pay bondholders, not to build up the real economy. Britain would be advanced loans only if it reoriented its economy to let high finance do the planning.”

At the same time, industries based on new technology were expanding in the south of England, dividing the country socially and politically, and intensifying existing class divisions which had been left unchanged even after thirty years of the welfare state. This created the upwardly-mobile forces Thatcher was able to mobilize to champion populist capitalism against the Keynesian compromise. Her neoliberal agenda corresponded to the changes in international production and exchange that had weakened the unions and enabled her to change the ideological climate within the British ruling elite to toleration of the harsh monetarist doctrines shared by U.S. capital.

She did not set out to empower bankers, but that was the inevitable result of lifting restraints on capital as soon as she took office. As Hudson puts it: “Attacking central planning by government, she shifted it into much more centralized financial hands – the City of London, unopposed by any economic back bench of financial regulation and ‘free’ of meaningful anti-monopoly price regulation. … The Iron Lady was convinced she was rebuilding England’s economy, while in reality it was only getting richer from London’s outlaw banks.”  Her administration was the last to stridently claim an independent nationalism before later governments succumbed to the dictates of international finance – there is no pretense today that British foreign or economic policy is anything but dependent on the US and the City bankers.

Like the rest of Europe and the US, Britain has moved to a low-waged, service economy dominated by global corporations. The labour movement is faced with finding new ways of organizing and fighting in line with the realities of this globalized economy. That is why signs of international resistance to global capital are significant. US workers are flying to Europe to take on their Dutch supermarket owners. Striking immigrant McDonalds workers are returning to their homelands from the US determined to spread the campaign for a living wage. Bangladeshi survivors of the Tazreen factory fire and Nicaraguan victims of antiunion assaults are in New York to confront Walmart board members. And US unions are creating non-traditional ways to organize workers who have no recognized union at their workplace; the AFL-CIO affiliate, Working America, now claims 3.2 million members and is planning to establish chapters in every state in the USA.

I made this brief sketch of events in the years not covered by Ken Loach’s film to give some historical context to Thatcher’s administration, and to argue that the revival of a social-democratic perspective, necessarily limited to winning concessions from a nationally-based state, would not be productive. I believe that activists should focus on connecting with workers in the international supply chain feeding commodities into Western markets, which is corporate capital’s weakest point.

Nostalgia for the welfare state is understandable, but we need to learn from the creative solutions of the international labour movement in order to defend those reforms that remain from the past.

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Filed under BBC, credit creation, financiers, political analysis, poverty, riots in Britain, strikes, Thatcher, Walmart

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