As the consequences of the Brexit vote begin to sink in, the British political class are reeling in shock. Most commentators and even some politicians have realized that the vote reflects a catastrophic failure of government over many years to satisfy basic social and economic needs in former industrial areas – housing, jobs, decent wages, hope for future improvement – that has been distorted through the campaign rhetoric of immigration control.
The Guardian’s John Harris writes: “Brexit is the consequence of the economic bargain struck in the early 1980s, whereby we waved goodbye to the security and certainties of the postwar settlement, and were given instead an economic model that has just about served the most populous parts of the country, while leaving too much of the rest to anxiously decline.” But Harris’s memory is faulty. There was no bargain struck with the public: it was imposed on the country by the Thatcher government acting as an agent for international corporate and financial elites. It is important therefore to reassess the historically defining moment of the establishment of a neoliberal economy in Britain – the defeat of the miners’ strike in 1984-85.
The miners’ victory in 1974 had won them the promise of an assured future for the industry, formalized in Labour’s “Plan for Coal.” It had also won them the enmity of the new Tory party leadership, Margaret Thatcher and Keith Joseph, who were determined to prevent the recurrence of a government defeat.
Their rise to power in the Tory party had come out of a revolt of the grassroots against patriarchal leaders like Heath and Macmillan who were identified with a Keynesian corporatist approach to government. Thatcher’s small-minded hatred of organized labour would have ended in political isolation if it had not aligned with the interests of US big business and the US Treasury. While it was relentless US pressure that forced Callaghan to embark on austerity measures, Thatcher was a willing accomplice, whose outlook merged the mentality of small business anti-union and anti-social democratic attitudes with monetarist ideologies geared to “liberating” national economies from restrictions on the circulation of international capital.
Although Thatcher cultivated her “iron lady” image, she hardly stood alone. Her determination to take on the unions was shored up not only by monetarist economists like Milton Friedman and Friedrich Hayek, but also by the entrenched resistance to social democratic policies from the financiers of the City of London. Like the banks, Thatcher accepted that “Keynesianism had to be abandoned and that monetarist ‘supply-side’ solutions were essential to cure the stagflation that had characterized the British economy during the 1970s. She recognized that this meant nothing short of a revolution in fiscal and social policies, and immediately signalled a fierce determination to have done with the institutions and political ways of the social democratic state that had been consolidated in Britain after 1945.” [Harvey, 22] Thatcher’s determination to defeat the miners didn’t just stem from her visceral hatred of unions but also from her ideological commitment to destroy obstacles to capital accumulation.
The international sources of Thatcher’s resolve
What monetarist economics meant in practice became clear when the US Federal Reserve under Paul Volcker raised interest rates sharply in June 1981. Over the next three years, unemployment soared, the construction and auto industries plunged into depression, and the American Midwest became known as the “rust belt” with much of the steel industry shut down; internationally, whole countries, like Mexico, that had borrowed from US banks to overcome the 1970s recession were bankrupted. The US government had abandoned Roosevelt’s New Deal promise of full employment and promoted the reduction of inflation to save confidence in the dollar. Soon after, newly-elected president Reagan faced off the PATCO air traffic controllers’ union in a long and bitter strike and fired them all when they refused to return to work. [Harvey, 23-5]
After winning power in 1979, Thatcher’s first actions were to remove constraints on capital circulation. The government’s 1981 budget, like the “Volcker shock,” focused on deflating the economy and had the effect of accelerating the decline of manufacturing. “For the nation as a whole, the visible effect was a huge rise in unemployment and a vast drop in the gross domestic product, with factories, mills, and pits closing down all over the country. In 1979-81, while other nations saw their GDP rise by 5.3 per cent, Britain’s fell by 2.5 per cent. Unemployment rose to 13.3 per cent, the highest in Western Europe.” [Morgan, 446]
Deindustrialization was a feature, not a bug. It was driven by the government’s need to enforce discipline on the working class; high interest rates attracted capital that the City diverted into low-wage economies in third world countries, shifting manufacturing offshore. “The Prime Minister, urged on by her newest economic adviser, Professor Alan Walters, forced through the most resolutely anti-Keynesian budget of modern times. It imposed Britain’s biggest-ever tax increases … A total of £3,500 million was taken out of the public sector borrowing requirement. Never before had there been so savage a fiscal squeeze; not since the thirties had there been a comparable increase in unemployment, now approaching 3 million.” [Morgan, 446-7]
But this was just the first step in imposing a neoliberal agenda on Britain. The other necessary condition was to defeat the most militant and organized section of the working class. As part of the fiscal squeeze, the external financial limits (EFLs) on the National Coal Board inherited from the Callaghan government were constricted, abandoning the production targets of the 1974 Plan for Coal. “The recession – and particularly the decline of large-scale energy users – reduced demand further, thereby increasing the stranglehold of the EFLs. … [The NCB] therefore decided in February 1981 that it would be necessary to accelerate the rate of colliery closures. The NUM responded by threatening to call a strike ballot, and the miners in South Wales jumped the gun and went on strike.” [Helm, 74]
Thatcher had learned from the success of Reagan’s gamble with PATCO that governments could gain politically from a dramatic confrontation with unions. The Tories’ 1980 Employment Act virtually replicated US labour laws to prohibit secondary picketing and remove unions’ legal immunity. However, Thatcher was not politically ready for a confrontation with the miners at this stage; her cabinet was still dominated by Tory “wets”, and the government did not have the full support of its middle-class base. Above all, she wanted to avoid Heath’s fate. So she ordered the NCB to back down, while continuing to implement strategic preparations for a strike.
The monetarist economist Friedrich Hayek urged Thatcher to implement yet more drastic increases in interest rates, citing the example of Chile. Thatcher replied: “I was aware of the remarkable success of the Chilean economy in reducing the share of Government expenditure substantially over the decade of the 70s. The progression from Allende’s Socialism to the free enterprise capitalist economy of the 1980s is a striking example of economic reform from which we can learn many lessons. However, I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable. Our reform must be in line with our traditions and our Constitution.”
The subtext of Thatcher’s reply bears analysis. She did not disagree with Hayek’s lionization of Pinochet’s “remarkable success” in achieving economic “reform,” despite her distaste for mass killings of trade unionists. But she was able to create within British institutions – Parliament, the police, the judiciary – the consent for shock tactics of a different kind in order to restructure the economy.
At the end of 1981 the government was at its lowest ebb. Riots in the inner cities broke out against unemployment. But in March 1982 Argentina occupied the Malvinas islands, known to the British as the Falklands, and Thatcher made a strategic gamble that her ideological kinship with Reagan would result in American assistance for a British military response, succeeding in getting the use of a US airbase on Ascension Island, advanced weapons technology, and intelligence help. Her sympathies for Pinochet were also returned: the Chileans installed a long-range military radar opposite Argentina’s main air base that supplied early warnings of Argentine air attacks to the British invasion fleet. When the radar had to be switched off for maintenance one day in June, the Argentinians were able to launch a surprise attack and sink two troopships.
Although demonstrating Britain’s political and economic dependence on the US, the war’s success changed the political climate to one of belligerent chauvinism, and within the government Thatcher was able to centralize cabinet decision-making in her own hands, bypassing the “wets” in the cabinet. She worked to dissolve the collectivist spirit of the country into the responsibilities of individuals, an ideological message aimed at the aspirational middle class and skilled working class, that lay behind the selloff of council housing to more prosperous tenants. In late 1984 the privatization of British Telecom “made privatization part of a wider cultural shift among the British people, including wide swathes of the working class. Many hundreds of thousands of trade unionists were among those who became shareholders for the first time. … There followed the privatization of British Aerospace and Britoil, and finally the huge sale of British Gas for £5.434 million in December 1986.” [Morgan, 469]
The real beneficiaries of the selloffs were the financiers in the City of London whose central role in mobilizing capital for the privatizations did not mean the strengthening of nationally-based capital, but enhanced its power as a key conduit for the circulation of global finance. The pressures for privatization did not originate within the nation-state but were imposed on it by international capital.
The Thatcher government won re-election in 1983 with renewed political confidence and the results of four years of preparations to take on the miners. The coal industry represented capital locked up in a nationally-circumscribed economy, tightly linked to the electricity industry, and as such was a barrier to the circulation of international capital. But the global economy had already undermined these national arrangements: “The real underpinning of the coal industry lay in the demand for electricity. The 1980-82 recession decimated heavy industry, and, thereafter, the structure of the economy changed to one in which economic growth no longer needed ever more electricity generated.” [Helm, 81]
While in opposition, the Tories had prepared a report on nationalized industries that called for: (a) the building up of maximum coal stocks, particularly at the power stations; (b) contingency plans for the import of coal; (c) the recruitment of non-union lorry drivers by haulage companies to help move coal where necessary; (d) introduction of dual coal/oil firing in all power stations as quickly as possible. There should also be “a large, mobile squad of police equipped and prepared to uphold the law against violent picketing. ‘Good nonunion drivers’ should be recruited to cross picket lines with police protection.” [Saville, 296]
The government’s tactical retreat in 1981 meant that surplus coal was being produced and coal stocks built up at the power stations. The closures of Cortonwood and Polmaise, two of the left’s traditional strongholds, made a strike inevitable, despite the tactical disadvantages of starting a strike in the spring. “[T]he stark choice [for the NUM leadership], faced with MacGregor’s closure programme, was either to capitulate and accept what the NUM had resolutely opposed since the late 1970s, or to fight as best they could … The EFLs were tightened, and hence the Treasury squeeze could only force closures. … Without the new labour laws, without the stocking policies, without the more gentle treatment of what became UDM areas… and without the generous redundancy packages, it would have been more close-run.” [Helm, 87]
During the strike the miners were consistently portrayed as violent, when large numbers of police escorted a very small number of “working miners” into pits. While the violence against pickets was unprecedented in British terms, by international standards it was mild: the police were armed with riot shields, helmets and batons, and nobody got shot, unlike miners in South Africa or South America. Public opinion about the rules of engagement still mattered, but the government were able to prejudice this opinion through its control of the media message. In the course of the strike paramilitary techniques developed in Northern Ireland were refined and the police were “in effect allowed by the courts to re-write the law.” [Saville, 326]
What a focus on the violence of the police against pickets obscures, however, is that Thatcher was carrying out a political war against the miners, that involved an all-round ideological campaign to manufacture consent for her government. The police, as well as being a physical force, were also a means to an ideological end. Her rhetoric of the “enemy within” framed the strike struggle as a conflict contained within national borders; the more she channeled the interests of international capital by harnessing the state to neutralize trade union militancy, the more she appealed to national chauvinism to bolster the legitimacy of the state’s violence against its own citizens.
Her hectoring bombast targeted the social democratic institutions of the postwar consensus; she invested the ideas of “democracy,” “liberty” and the “rule of law” with the content of “obeying orders from superiors,” framing the strike as one that challenged the rule of an elected government and democracy in general. When she said there was “no alternative,” she was able to do so unchallenged because the Labour party elite had already conceded the necessity for austerity in the course of the IMF crisis.
What Thatcher actually achieved through the defeat of the miners was to remove the most important political obstacle to a transition from an economy embodying barriers to global production and exchange in the form of the nationalized industries, to one open to international capital circulation. For this she won the applause of global corporations and their shareholders.
Next: the left fails to acknowledge the international dimension of the strike
David Harvey, A Brief History of Neoliberalism, Oxford, 2005
Dieter Helm, Energy, the State, and the Market: British Energy Policy since 1979, Oxford, 2003.
Kenneth O. Morgan, The People’s Peace: British History 1945-1990, Oxford, 1992 (rev. ed.)
John Saville, “An Open Conspiracy: Conservative Politics and the Miners’ Strike 1984-5,” The Socialist Register, 1985-86