The Reinvention of Britain 1960-2016
by Scott Newton
IN 1945, Labour introduced a programme of full employment, public ownership and the welfare state. A brave new world of economic expansion and renewal, it was interrupted by problems of inflation, the adverse balances of international payments and the runs on sterling which continued under later Tory governments.
Those problems continued under the Labour government of Harold Wilson, which in 1964 put the accent on planning and supply side reforms. But the aim of increased growth of 25 per cent up to 1970 was a target not achieved.
Tory leader Edward Heath next took charge of the mixed economy, which still included high taxation of the rich. He removed restrictions on the banks' powers of lending, so that funds flowed increasingly into property purchase and financial speculation. His party began to demand Milton Friedman's remedy for inflation —reduction in the money supply, and the demise of the full employment target — and eventually negotiated entry to the European Economic Community (EEC) in order to stimulate the economy.
Labour's last five years back in office saw the demands for the monetarist approach to solve the endemic inflation and balance of payments crises rise to a chorus in the financial markets and the Tory Party and in this book Scott Newton gives a sympathetic account of the radical left response, led by Tony Benn and Stuart Holland, in favour of more nationalisation and greater state control over capital exports and the level of imports.
They argued that the multinationals, forming most of the top 100 British firms, were able to evade credit controls and taxation and indeed a parliamentary committee in 2008 found that a quarter of Britain's multinationals paid no corporation tax at all in 2005-2006.
The left, dominating the Labour Party's national executive committee, proposed a state holding board to establish a controlling interest in 25 leading firms to support the development of new products and prevent speculative pressures that had bedevilled sterling during the last Labour government.
Benn subsequently supported compulsory planning agreements with the top 100 companies. It was generally recognised that to implement these controls would require withdrawal from the EEC.
The dominating political issue became the Common Market referendum, after which the case for an alternative economic policy was lost.
Thatcher swept to power and within a few years severe recession ruled, with bankruptcies, factory closures and mass unemployment and deregulation of the economy, though the service sector became prosperous and personal consumption increased on average.
Her downfall, linked to her hostile attitude to the European project, was followed by John Major's Tory government, an interlude before the business and finance-friendly New Labour government which sought to widen the party's appeal to the professions and small business and attracted substantial funds from business and the City.
In the words of Newton's acute analysis of the Blair government, "it embraced the political economy of neoliberalism" and, ultimately, its light-touch control of the financial sector and economic management would lead to the great crash of 2007-8 and its ideological discrediting in the 2010 general election.
This is neither to gainsay or exaggerate the benefits of its reforms, such as Sure Start and more money for schools.
Newton's is a stimulating history, notable for its detail and clarity. Today, the fight to control the capitalist tiger is resumed, with the Labour Party's huge membership backing Corbyn, Tony Benn's principles an inspiration and For the Many, Not the Few a hot programme for change.
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