Milton Friedman
Thatcher’s monetarist guru dies
MILTON FRIEDMAN, economics guru of former Prime Minister Margaret Thatcher and US president Ronald Reagan, died last week. Their application of his ‘monetarist’ or ‘supply-side’ economics (known today as ‘neo-liberalism’) in the 1980s led to a massive redistribution of wealth from the workers to the capitalists.
This was achieved by decimating public services, (in attacking welfare provision Friedman popularised the saying: “There’s no such thing as a free lunch.”), tax cuts for the rich, privatisation, deregulation of commerce and industry, and above all, by weakening the power of the trade unions.
Friedman, in common with anti-socialist philosopher Hayek, believed that capitalism equalled freedom. In practice, that meant freedom for the minority capitalist class to enrich themselves at the expense of the majority of the population.
Friedman’s ideas became popular in conservative political circles and big business boardrooms in the 1970s, at a time when British industry’s profitability was falling as the long post-war economic upswing came to an end. The period of upswing had been dominated by a political consensus that espoused ‘full employment’ and the benefits of a ‘mixed economy’ (a public sector within a predominately privately-owned economy).
Governments of whatever political hue believed that recessions, which bedevilled capitalist society in the 1920s and 1930s, could be avoided by managing demand in the economy through public expenditure. This was known as ‘Keynesianism’ – named after the economist JM Keynes.
The post-1945 period also saw the trade unions strengthened. By taking militant strike action, they achieved significant gains in pay and conditions and also, the expansion of the welfare state.
Britain’s capitalist class, which had under-invested in industry compared to its international rivals, and facing ever-increasing demands for improvements from workers, saw their profits squeezed.
Curbing the trade unions’ power became a priority for the capitalists. But in the early 1970s Prime Minister Ted Heath received a bloody nose from the workers’ movement when he initially tried to steer a monetarist course and legally shackle the unions.
During the 1970s the British economy stagnated but also was afflicted with high inflation. Against this background Jim Callaghan’s right-wing Labour government was defeated by Thatcher’s Tory party in the 1979 general election.
In office, the Tories gradually applied Friedman’s ideas. They argued that to control inflation a tight monetary policy was needed ie high interest rates, a credit squeeze, and public expenditure cuts. This entailed engineering an economic recession. The resulting mass unemployment could then be used as a whip against organised labour, holding down wage rates and weakening the unions. At the same time anti-trade union laws were introduced.
Mindful of Ted Heath’s fate, Thatcher carefully avoided confronting unions in the public and private sector at the same time.
Grim legacy
THE 1980-81 recession was one of the deepest in history with manufacturing output falling by 15%. Unemployment rose to over two-and-a-half million, the highest figure since 1935. Public spending on health, education and local councils was slashed. And while overall taxation actually increased, taxes on the rich and on corporations were cut dramatically.
Privatisation measures were introduced. Initially these largely consisted of selling off state-owned industries and assets at knock-down prices. But increasingly it enabled private contractors to run public services for a healthy profit.
The Thatcher years also witnessed a period of unprecedented capitalist greed in the newly deregulated markets, typified in the film Wall Street by corporate raider Gordon Gecko with his infamous phrase: “Greed is good”.
This assault on workers’ living standards could have been stopped by determined strike action, including a general strike. But the Labour Party and trade union leaders’ political timidity allowed Thatcher to pick off the unions sector by sector. The crunch came during the 1984-85 miners’ strike and also the struggle between Labour-run councils and the Tory government.
Despite widespread working-class support, the miners were left isolated by the TUC leaders. Likewise, only Liverpool council, then under the influence of Militant (the Socialist Party’s forerunner), organised any real resistance to cuts in local government funding.
Today, the working class and sections of the middle class continue to suffer the effects of Friedman’s monetarist legacy under a Blair-led Labour government. Socialists must fight this rotten legacy and consign it to the dustbin of history.
