With the passing away of one of the best known prime minsters of Britain, Margaret Thatcher, a few days ago, I was struck with confusion, bewilderment, acknowledgment and deep thought after watching a Channel 4 TV documentary: Margaret: Death Of A Revolutionary that showed how the former prime minister had transformed the economic problems of 1970s Britain to the economic miracle recovery of 1980s Britain. The decade 1980 to 1989 reversed all the problems for the decade 1970 to 1979.
was a young boy at the start of the 1970s, living in
Yes there were some great …. and dire moments in the 1970s to remember.
However what struck me as odd was why the BBC a year ago today (April 16th 2012) asked why does the 1970s get painted as such a bad decade?
Ok I did mention some dire times above like the 3-day week, but the BBC said, of all the decades in the post-war period, the 1970s was the worst! In others words, the 1970s was the ugly duckling decade of all other decades. The era of militant trade unions and public sector strikes etc.
The Channel 4 programme mentioned a major fact that after war, both Labour and the Conservative party governments set about taking over many industries as a major step towards recovery, known by politicians as the Post-War Consensus. It was influenced by Keynesian policies of the economist John Maynard Keynes. The Post-War Consensus among other things called for a mixed economy, with a large role for state ownership of the utilities (such as gas, electricity, coal, trains, etc) and intervention and planning in the economy. Very soon gas, electricity, mines, airports, airlines, telephone, buses, etc, you name it; all had been nationalized by the start of the 1970s with Ted Heath, who took over from Harold Wilson and the swinging 1960s.
Channel 4 programme goes on to note that during the 1970s, the effects of the Post-War Consensus did not create recovery fast enough and soon Britain fell into to stagnation, leading to 30% inflation and high unemployment by the mid 1970s, Jim Callaghan asking for an IMF loan and the unforgettable Winter of Discontent in 1979. Margaret Thatcher from 1980 reversed all that, nationalization polices were thrown out the window for good. Today British Gas, British Aerospace, British Telecom or BT, British Airways etc, are now all doing well as privatised entities listed on the stock market and the economy is in much better shape compared to the 1970s.
the end of the 1980s, Wikipedia
points out that British net assets abroad rose approximately nine fold from £12
billion at the end of 1979 to nearly £110 billion at the end of 1986, a record
post-war level and second only to Japan. Privatisation of nationalized
industries increased share ownership in
am no economist, just a humble librarian and writer, but yes that is the main
point: in a nutshell, nationalized 1970s
But is that the full picture? The Channel 4 programme simply forgot to mention another far more important point, which came to my mind.
The other main point that I think
contributed to the dire 1970s apart from nationalization was not entirely
Today, the price of oil is an acceptable $103 per barrel (Brent Crude version). There are no nightmare scenarios: no one is panicking; the United Nations has not called an emergency session to talk about the price of oil. OPEC is not under severe pressure. No one is hoarding drum-loads of petrol in secret storages, and at the petrol stations there are no big queues for petrol or diesel.
Now just imagine for once, if the price of oil today went from $103 per barrel to over $400 per barrel or more than quadrupled in price. All possible worst nightmare scenarios will begin faster than you can blink.
In 1973-1974, the above worst nightmare scenarios did happen. The price of oil did quadruple. And everyone worldwide DID panic, big time really. The massive oil price hike was ordered by OPEC Arab members as retribution. They were angry at certain world powers taking sides during the Yom Kippur War.
world has moved on since the 1970s, it is highly unlikely BUT not impossible,
that a very huge oil price hike will one day happen again. But the massive
2008 economic crises, this time not caused by oil or OPEC, but rather by greedy
bankers, showed that certain groups of people in the world or numbskulls in
the “powers that be” category, are not done yet causing mayhem, mischief and
other problems for everyone else but themselves, but lessons have been learnt.
One economic decision the 2008 crises created universally, was the decison of several of the big G8 / OECD countries like the U.S., Germany, the U.K., the Netherlands and Japan. to carry out needy fiscal stimulus, i.e. stimulus package anouncements, and then print more money / inject more money into the economy a.k.a quantitative easing.
economic policies previously advocated by John Maynard Keynes.
In other words, in 2008 there was worldwide interest in the return of some key elements of Keynesian economics. It was not a full return to Keynesian economics however, just an admission that even free Capitalism or liberal economics policies can sometimes get out of control, as illustrated by the abusive use of short selling of shares in which traders practically ruined share values of several companies by betting heavily against its shares. This prompted the U.S. Securities and Exchange Commission or SEC to step in and protect the shares of companies that were deemed just too big to fail, by issuing bans on short sales of 799 selected financial shares in September 2008. Indeed when free Capitalism does get out of control and cowboy rules and reckless colossal betting infiltrate financial markets leading to rogue traders running amok as happened in 2008/2009, then speedy government intervention is required to keep checks and balances.
New York Times, September 2008.
April 16th 2013
Something to read during your tea break: