What is the character of Thatcherism? Most of the debate on the left has centred on Thatcher's economic policies. John Ross argues that there are no insurmountable internal contradictions for Thatcherism on the economic level within the ruling class. Its major economic contradictions lie only in relations with the working class. Above all however the essence, and problem, of Thatcherism lies in the realm of politics. The left is drastically unprepared for the massive reorganisation of the British political system which is the consequence of the policies of this government.
The depth of the crisis of British capitalism
Those capitalist forces backing the strategy of the Thatcher [illegible] have made great play of the statistics for [illegible] some seven or eight per cent — a higher rate of increase than Japan's. The profits of British industry rose ten per cent between the second and third quarters of the year. Days lost in strikes fell from over twelve million in 1980 to only a little over four million in 1981. Collecting these figures together in its issue of 30 January the strongly pro-Thatcher Economist magazine chose the headline 'Nothing to smile about?'.
If they had been achieved in Japan, West Germany or France, these figures would be worth more than a smile. The problem for Thatcher is that the British economy now lags so far behind its rivals that these results would need to be achieved year after year, amid incredible working class suffering, for British capitalism even to begin to catch up with its competitors — a point dealt with in some detail below...
What is more the 1981 figures were only achieved at the cost of a 15 per cent fall in [illegible] in 1979-81 and a 40 per cent fall in manufacturing sector profits during the first two years of the government's life. Crashing the economy in this way is not a strategy which can be pursued frequently by the bourgeoisie — otherwise its economic base will be reduced to a point where it is completely incapable of confronting its competitors. Such economic policies must produce once and for all results if they are to allow the relative gap with rivals to be narrowed. Thatcherism has proved itself quite capable of creating a gigantic recession and producing encouraging figures for industrial capital for one year after two disastrous ones. But for capitalism recession is a means to an end — not a goal in itself. Its purpose is to devalorise capital and raise the rate of exploitation in order to permit a new wave of increased profits and growth.
In order to understand this point, to see just how far British capitalism is behind its major competitors, and therefore just how long any 'recovery' would need to continue to result in serious catching up, it is crucial to grasp the central qualitative indicators of the state of the British economy.
*In 1969, the productivity of labour was 3.45 times the British level in the United States, 1.46 times higher in West Germany, and 1.45 times higher in France. Since then the gap has increased rather than narrowed as Table 1 shows.
Table 1: Average annual percentage growth in productivity
Italy 5.4 1.1
[illegible]
Britain 3.0 0.6
[illegible]
Source: Hodgson: Labour at the Crossroads, Martin Robertson, 1981, pp 154-5
When talking about the seven to eight per cent rise in productivity in 1981, it is also important to remember that this followed a fall in the productivity of labour earlier in the life of the government. In fact, in the two and a quarter years to the third quarter of 1981, it achieved a total increase in labour productivity of 3.5 per cent — an annual average increase of 1.6 per cent. During the life of the last Labour government, productivity rose by 7.6 per cent — an annual average of 1.5 per cent. It could, with some justification, be argued that Thatcher has produced a one-seventh fall in industrial output and a thirty per cent fall in profits to gain an extra productivity increase of 0.1 per cent a year!
Looked at from the viewpoint of trends, of course, the productivity figures for 1981 are more impressive than this comparison with the Labour government would indicate. But they [illegible] competitors. Moreover, the rate of exploitation, which is the key to profits, does not simply depend on the [illegible] labour but also on real wages. Here, Thatcher has achieved far less than the Labour government.
*As regards investment in industry, the record of the British economy has long been catastrophic. The average annual increase in the stock of capital per worker in the period 1870-1970 was 1.8 times higher in the United States, 1.9 times higher in West Germany, 2.5 in Italy, 2.6 in France, and 2.7 in Japan than it was in Britain (see: Glyn and Harrison: The British Economic Disaster, Pluto, 1980, p37). The accumulated historical result of these differences is enormous: in 1976, the average worker in Japanese manufacturing was backed by capital investment of £30,000; the equivalent figure for West Germany was £23,000 and the United States fell between the two. The figure for Britain was £7,500. To bring British capital investment per employee into line with its main competitors would cost some £100,000 million. In line with the fall in industrial production under Thatcher, manufacturing investment fell some thirty per cent between 1979 and the end of 1981 (Economist, 13 February 1982, p32). In short British capitalism is falling further behind all the time.
*Britain's trade figures reflect its inability to compete in terms of productivity and investment, as shown in Table 2.
Table 2: Percentage shares of world exports of manufactured goods by value
1950 1960 1970 1979
United States 27 22 19 16
Britain 26 17 11 10
France 10 10 9 8
Japan 3 7 12 14
West Germany 7 19 20 21
Source: Gamble: Britain in Decline, Macmillan, 1981, p. 21
*British industry is not capable of competing even in its domestic market, let alone foreign ones: in the relatively successful year of 1981, despite the high exchange rate of the pound and the depressed economy, manufactured imports were more than 6 per cent higher in volume terms than in the previous peak year of 1979 (Economist, 9 January 1982, p 21).
Comparing the absolute size of the economy, a significant consideration in the times of cut-throat inter-imperialist competition to come, the signals of decline are just as clear. As recently as 1965, the British economy (assessed in terms of Gross National Product) was the same size as the French, fourteen per cent smaller than the German, and ten per cent larger than the Japanese. By 1979, the French economy was twenty-five per cent larger, the West German forty per cent larger, and the Japanese twice as large as the British. The huge decline in British industrial output under Thatcher has only served to put Britain even further behind.
Comparing profits, the motor by which any capitalist economic strategy needs to be generated, Table 3 shows Britain consistently near the bottom of the league table, and the situation has grown worse since 1975 even prior to the Thatcher slump.
Table 3: Percentage rates of profit for industrial and commercial companies before tax
1960 1965 1970 1973 1975
Japan 19.7 [illegible] 22.7 14.7 9.5
West Germany 23.4 16.5 15.6 12.1 9.1
United States 9.9 13.7 8.1 8.6 6.9
France 11.9 9.9 1.1 10.2 4.1
Britain 14.2 11.8 8.7 7.2 3.5
Italy 11.0 7.9 8.6 4.5 0.8
Source: Glyn and Harrison: The British Economic Disaster, Pluto Press, p12
To complete the picture of the qualitative position of the British economy, it is necessary simply to summarise the further effects not discussed above of the Thatcher slump initiated in 1979.
*In 1980, manufacturing output fell by over 15 per cent in a single year. This is a more rapid fall than was recorded in the great slump of 1929 and, with the exception of the years 1920-21, which reflected the after-effects of the First World War, constitutes the most precipitous decline in production since the industrial revolution.
*British international competitiveness has deteriorated to an astonishing degree since the mid-1970s, helped considerably on its way by the high exchange rate of the pound produced by Thatcher's policies during 1979-81. By the beginning of 1982, the competitiveness of the UK economy was around 35 to 40 per cent below its 1975 level.
*Despite the devastating increase in unemployment, Thatcher has still not succeeded in reducing real wages to anything like the extent her strategy requires. Real wages after tax decreased by only 3 per cent compared to an increase of 17 per cent between 1977 and 1980.
*This ability of the working class to defend its real wages despite huge unemployment up until 1981, has had important effects on profit figures. The 10 per cent increase in 1981 must be set against a fall of 40 per cent (excluding the North Sea Oil sector) in the preceding two years.
To sum up then, the British economy was massively behind its competitors before Thatcher started to apply her policies. The initial effect of Thatcherism has been to put British capitalism further behind than it was when she started. It is this context which underlines how little the 1981 figures amount to in relation to what needs to be achieved, and how decisive it is for the British ruling class, having made substantial economic sacrifices to set out on the Thatcherite road, that these results can be maintained and improved upon over a long period of time.
This is precisely the point where Thatcherism and British ruling class politics in general face massive contradictions — and explain the scope of the political changes taking place in the country. British capitalism cannot rapidly catch up with its competitors and certainly not during the lifetime of one government. What is more, it cannot catch up while remaining permanently in a slump of the scale imposed by Thatcher. British capitalism must produce major productivity gains and depress the real wages of the working class over a period of many years. And it must do so not merely during economic downturns but also during the relative upturns they are designed to pave the [illegible].
The last time such an equivalent offensive had to be made on the working class, in the early 1920s and again at the beginning of the 1930s, the ruling class policy was spearheaded by the Conservative Party. This both inflicted a crushing economic defeat on the working class before and after the General Strike and increased simultaneously its political strength and vote — going from 38 per cent of the poll in 1922 to 54 per cent in 1935 [illegible] much stronger working class opposition, and has slumped to record unpopularity in the opinion polls. Furthermore it is confronted with a Labour Party which, despite its losses, is electorally more consolidated than in this earlier period. It is this combination of economic and political contradictions which begins to pose the necessity for a major reorganisation of the political system.
Thatcherism and the working class
The improvements in the economy for the bourgeoisie during 1981 were achieved at the expense of the second largest fall in living standards and the largest rise in unemployment experienced by the British working class since the Second World War.
For the bourgeoisie to sustain this improvement for the necessary period of years to begin decisively to change its international position requires that the working class is unable to win back what it has already lost or to resist the bigger and unremitting attacks which will follow. What is more, not only must the working class not fight back during the downturn, when it usually does badly, but it must not fight back effectively during a future upturn either.
This last point is an extremely important one, not least because of two prevailing misconceptions on the left about the relationship between trade union struggle and unemployment. First, there is the view that there is a direct correlation between the absolute level of unemployment and reduction in the level of working class struggle. It is sufficient to point out that both the number unemployed and the number of days lost in strikes have been increasing consistently, albeit with ups and downs, since the mid-1960s to show that this is not an adequate explanation of real developments.
The second misconception is the somewhat bizarre one — which runs counter to all classic Marxist writing on the subject — that dramatic increases in unemployment should somehow radicalise the working class on the trade union field. (This is a quite separate and more complex issue than the argument that increasing unemployment may lead to a radicalisation on the political terrain which is dealt with later). The origins of this misconception lie in an unwarranted generalisation from the period 1970-72 when there was so great a surge of working class militancy that it carried through a period of sharply rising unemployment with no fall in strikes at all.
But leaving aside this one exceptional case, the whole history of Britain since the restabilisation of the economy following the Second World War, and indeed previously indicates that there is a regular and significant correlation between the onset and development of a major rise of unemployment and a fall in the number of working days lost in strikes. With the exception of 1970-72, there have been five such post-war surges in the rate of increase of unemployment:
(i) The onset of rising unemployment in 1956 saw a sharp drop in strike days but a revival to higher than previous levels in the period 1958-59 when unemployment was higher in absolute terms.
(ii) Rapidly rising unemployment in 1962-3 led to a sharp fall in strikes (initially disguised by a protest strike in engineering in 1962) but a recovery in 1964-5.
(iii) The year 1966 saw the introduction of the austerity recession of the first Wilson government and the start of rapidly rising unemployment. There was a drop in strike days lost which gave way to struggles at record post-war levels towards the end of the government's life.
(iv) By 1975-6, unemployment was rising rapidly and strike days fell sharply but recovered to reach a new post-war record level by 1979 despite a level of unemployment which had not declined.
(v) The rapid onset of unemployment in 1980-81 sent strike figures plummeting.
The importance of this point, and the reason for discussing it at such length, is that it shows the fall in strike struggles in 1981 neither to be part of an inevitable and unstoppable downward trend (as proponents of the 'unemployment ends struggles' school would have us believe) nor a dramatic change from the normal pattern of events which can only be explained by a major downturn in the class struggle (as those who overgeneralised from 1970-72 now argue).
Put in this context, the strike figures for 1981 fit fairly classically into the year's position in the economic cycle. Indeed, given the enormously high levels of unemployment, it is, if anything, surprising that the fall was not larger than it was. The working class does not struggle for the sake of it but only if it believes there is a chance of winning, for which the downswing of the economic cycle creates unfavourable conditions.
It is also important for assessing the trade union struggle, to note the general relationship between the level of real wages and the economic cycle which has prevailed in Britain (in particular since the 1960s). After usually suffering some slowdown or setbacks in the downturn of the industrial cycle, in each new upturn the section of the working class in employment has succeeded in taking back a large part of, or more than, what has been lost. (It must be stressed that we are here talking only of the wages of employed workers and not of winning back the jobs of the unemployed; unlike the former, the latter has never been achieved at the level of the whole working class simply by trade union as opposed to political struggle).
This can be easily illustrated by considering the period since 1974. The huge industrial upsurge of 1968-74 was broken by a combination of the austerity policies of the Labour government and soaring inflation and unemployment which created new and far more unfavourable conditions for struggle. The working class waited until the rate of increase of unemployment started to tail off in 1977 and actually decreased slightly in 1978 and 1979. The surge in strike figures in this period scored a considerable success as Table 4 indicates.
Table 4: [illegible]
July 1974 105
July 1975 101
July 1976 103
July 1977 97
July 1978 104
March 1979 105
Source: Glyn and Harrison: The British Economic Disaster, Pluto Press, p117.
This surge continued into the first period of the Thatcher government with real disposable personal income increasing three per cent in the 18 months to the end of 1980 (Economist, 16 January 1982, p21). With the onset, over the last three years, of the savage downswing of the deepest economic cycle since the war, and as one would expect from all previous experience other than the wholly exceptional one of 1968-74, attempts to defend wages have virtually collapsed and days lost in strikes have plummeted. Real wages started falling sharply in the last half of 1980 and continued downwards throughout 1981. To maintain real post-tax incomes, workers would have required a 15.6 per cent wage increase in the year to November 1981; in fact, wages rose on average only 11.3 per cent. Furthermore, the rate of wage increases was consistently falling throughout the year and was down into single figures by the start of 1982. (Economist, 23 January 1982, p37). Real wages will fall far more sharply in 1982 even than in 1981.
But what should also be noted is that this fall in real wages is actually less than the one occasioned by the last Labour government's austerity incomes policies: the fall in real wages between late 1974 and the end of Labour's Phase II incomes policy in 1977 was at least ten per cent — in all probability the sharpest fall since the Industrial Revolution (Glyn and Harrison, p118). Thatcher has achieved less than this, perhaps six or seven per cent by the end of 1982 (and this is based on the government's own projections) with a level of unemployment twice as high. Furthermore, she is just reaching the crucial point of her entire operation — the onset of an upturn in the industrial cycle.
The immediate situation of the trade union struggle
It is in this overall context that, for example, the much discussed question of the 1982 miners' strike ballot must be seen. While journals like the Economist expected the miners to strike in support of their pay claim and the government to capitulate to them, sections of the left thought it the end of the world when they did not. Apart from those who considered it a confirmation of their view of a major downturn in the class struggle (which they only arrive at because they confuse class struggle with trade union struggle) others attributed it simply to a betrayal by Gormley. But workers always have to overcome resistance and betrayal by their leaders if they want to fight. In the context of a particular union, the character of the bureaucracy is a relatively fixed element; it cannot explain why the miners fought in one year but not in another. The processes leading the miners to reject a vote for the strike reflected real processes taking place inside the working class and not just 'bureaucratic betrayal'.
The developments in the NUM in fact should not have caused such surprise. They are explicable in terms of the above analysis of the entire post war period. During the full downswing of the economic cycle no section of the working class has really fought to defend wages. The miners did far better than most but it would have been fairly optimistic to expect a major wages offensive during this period, and equally impressionistic to fall prey to demoralisation because one did not take place. What should have been expected was the kind of steady politicisation and move to the left without major wage struggles which we have seen in the sweeping victory of Benn in the NUM's Labour Party deputy leadership ballot and in Scargill's resounding victory in the election for the union's new president.
On the field of mass struggle however, by far the most important event was the February 1981 struggle against the 23 threatened pit closures. The speed with which strike action developed against this threat took both the NUM leadership, and more importantly the Tories, totally by surprise. The 24-hour U-turn made by Thatcher on the closures was the most humiliating defeat suffered by this government at the hands of a trade union. This strike was a crucial index of the class struggle. A mass wages struggle was not objectively speaking a likely development from the miners at that point in the economic cycle. But if they had not fought to defend their basic conditions and jobs with all the industrial strength they possess, that would have indicated a really major downturn and defeat. It did not occur.
None of this should be taken as a justification for Gormley or a lapse into economic determinism. Not only may political conditions be more unfavourable for the miners next year, if for example other groups of workers are defeated in the meantime; but if the miners had voted for a strike this year, it is, as many bourgeois commentators thought, quite possible that the government would have had to surrender before it even got under way. On the other hand, if the government had decided to stick it out, a pay strike by the miners would have provided the focus for a major offensive struggle of the working class. Victory would have very probably broken the back of the Thatcher government. For that reason the struggle would have been unprecedentedly bitter and waged with enormous ferocity on both sides.
The fact that the miners did not vote for a strike on pay was therefore a setback. But it was neither a catastrophic nor, for precisely the above reasons, an inexplicable one — any more than a strike vote would have meant a total reversal of the class relation of forces and an advance to a 'revolutionary crisis'. The miners reflect, in a relatively very favourable relation of forces, the general processes taking place in the working class today. At this stage of the economic cycle, and in the given political situation, certain layers of workers are prepared to enter defensive struggles against employers' attempts to make use of the downturn to launch offensives on speed-up and productivity. They are, however, not yet prepared to break through the resistance of the bureaucracy to launch a major offensive against employers and the government on pay.
This is shown not merely in the overall strike figures given earlier, but is confirmed by the most important disputes which have taken place in the last period.
*At British Leyland, huge defeats were suffered throughout the downturn: indeed, given the depressed state of the company, they started even before it. The slight economic upturn, in this case reinforced by the introduction of the Metro, led, just before Christmas, to the first real moves in years towards a real struggle on pay by a major section of the workforce. This was not sufficient to overcome the tremendous campaign of sabotage by the bureaucracy but it was the closest run thing for a long time with key plants, notably Cowley, voting strongly for a strike and significant minorities for it elsewhere. It was followed, logically in view of economic circumstances, by the most determined fight against productivity and speed-up at Longbridge since the introduction of the Edwardes plan. This was followed in turn by a major strike against redundancies in the truck division. Despite the defeats suffered this is still the first time for several years that any major fight back has taken place in British Leyland.
*At Fords, a significant struggle against speed-up and the management's productivity drive continued throughout the recession. The well-organised and militant Halewood plant secured some important victories. Dagenham was defeated. As one would expect no major pay struggles took place during the economic downturn. The beginning of industrial upturn in the second half of 1981, was accompanied by the most significant move towards a pay strike at Ford since the struggle that smashed the last Labour government's wage controls in 1978. The final vote at the beginning of 1982 was very close despite an enormous campaign by the bureaucracy, and a whole series of plants voted against the national union leadership recommendation to accept the company's offer.
*The ASLEF dispute was again an example of exactly the type of industrial struggle one would expect to see waged at this point of the economic cycle. It is indeed notable for the extreme determination with which it was waged by the train drivers, and the solidarity given them by other workers. It was also notable for the fierce determination of the employers to impose their will. It would be idle to expect in present economic conditions some massive struggle by rail workers to push up their wages; but their serious struggle on productivity does show that their underlying strength is not defeated.
The bulk of the working class does not enjoy the strength of the miners. The big majority of defensive struggles are lost. But the definite upturn in struggles since the middle of 1981 shows the real qualitative nature of the situation. Its overall development appears still to be following the pattern it has shown since the war, and more particularly since 1968: setbacks and defensive struggles in periods of economic downturn; fightbacks and regaining of lost ground in periods of upturn. It is this cycle which has both prevented the bourgeoisie finding any solution to its economic crisis and prevented the working class suffering any qualitative defeat.
This situation is of course not one for facile optimism. Over the long term, successive cycles take place within a relation of forces slowly moving against the working class on the economic field. Each downturn is more pronounced and each upturn requires a harder struggle to win back less of what has been lost. But it is simply impressionism to believe either that, in the present situation the ruling class can or has imposed a stunning once-and-for-all defeat on the working class which totally breaks its ability to resist, or, on the other hand, that the periodic upturns in the trade union struggle represent any kind of pre-revolutionary upsurge to overthrow capitalism. The working class in Britain is much too strong organisationally and socially to be rapidly crushed by the ruling class. The bourgeoisie is too strong to be overthrown by any outburst of economic struggles, no matter how militant, by the working class. The resulting interplay of class forces creates increasingly severe fluctuations in the class struggle with great victories for one side being met with counter-offensives from the other. Battles are getting more and more bitter with greater and greater stakes involved. As Table 5 shows, there has already been a dramatic trend towards fewer but bigger and longer strikes since the early 1960s; a trend which is undoubtedly the direct result of high unemployment and employers' determination to resist wage demands; workers need to struggle much longer in the economic conditions of the late 1970s and the 1980s than they did prior to the onset of mass unemployment — a fact which discourages many workers, especially in smaller companies or workplaces, from going into struggle.
Table 5: Percentage of strike days lost in strikes costing 200,000 worker-days or more
1960 1965 1970 1975 1976 1977 1978 1979 1980
[illegible]
Source: Beecham Updating the Downturn, International Socialism 14, Autumn 1981
As the trade union struggles get more bitter and the fluctuations of gains and losses by each class become more extreme, the whole process is becoming increasingly intertwined with the major political crisis which the failure to resolve the situation in its own interests is creating for both classes. The end result will be an enormous explosion and a decisive confrontation on the political field which will determine the relation of class forces for a considerable period.
But we have by no means arrived at this situation yet, nor will we in a short time span. Thatcherism has not broken the resistance of the working class and there is no reason to expect that the present upturn will not (and given that the recession out of which it is developing is far deeper than in previous post-war experience, it is to be expected that there will be a longer than normal delay) give rise in the medium term to a real attempt by the working class to defend and win back losses in real wages. This will in turn create yet another intensification of what will undoubtedly prove a prolonged crisis of British capitalism.
Thatcherism and the SDP
This now brings us to the real core of the problems facing the British ruling class. The key to Thatcher's policies and their risks and possibilities for the ruling class lies not in economics but in politics. It is here, and not in terms of some non-existent economic irrationality, that the contradictions of Thatcherism are concentrated. In Labour at the Crossroads Geoff Hodgson argued that: 'There is no clear economic rationale to monetarism.' But Thatcherism is perfectly rational and coherent for the ruling class given one set of assumptions concerning the political relation of forces between the classes in Britain. It is totally irrational and even disastrous given another. If the types of cuts in living standards and conditions imposed by Thatcher could be maintained during an economic upturn and over a long period of time then the ruling class would have succeeded in something very fundamental indeed. It would have brought about a major and permanent shift in the economic relation of forces between capital and labour in Britain.
On that basis, of course, of a real qualitative defeat of the working class, British capitalism could begin to catch up with its rivals at last. Such a situation would however mean, presuppose and require a complete transformation of the political situation in the country.
A defeat of the working class on this scale, the greatest since the 1926 General Strike, would necessarily have to be carried through and take place at every level of society. It could not be confined to economics. The ability of the working class to resist would have to be broken in the economy, in society, and, above all, in their concentrated expression in politics.
This is what marks Thatcher out as a radically new type of Prime Minister in recent British history. She has seized the nettle that it is politics which is the key to the solution of the internal economic problems facing the British ruling class. Her predecessor Heath did this in the field of international relations in embarking on a major reorientation of foreign policy away from total subordination to the United States and towards alliance with the EEC: but he pursued a traditional 'technicist' economic policy internally — embarking on a major reflationary policy in response to unemployment in 1971-72 for example.
Thatcher has carried the idea of politics being the directly determining question into internal economic issues as well. Her extreme deflationary policies have an internal political logic. She believes that by these means the resistance of the working class can be decisively smashed so that even in any subsequent economic upturn it will not fight to regain what it has lost. She believes it is possible to bring about a permanent shift in the relation of forces between the ruling class and the working class to the favour of the former sufficient to begin to catch up with Britain's imperialist rivals. This is the political assumption on which Thatcher's economic policies make full sense.
If, on the other hand, Thatcher does not succeed in bringing about such a major shift in the relation of class forces against the working class than her policies are indeed incoherent and irrational from the point of view of the key sectors of industrial capital. She will have radically deflated the economy, permanently reduced the manufacturing base of the country, created innumerable bankruptcies, in order simply later to see the working class take back what it has lost. Under these circumstances the ruling class would have no serious alternative but to dump Thatcher and at least temporarily find a different tactic for dealing with the situation.
It is this political question, which relates to the overall relation of class forces, which explains the divisions within the ruling class and the Tory Party which opened up over Thatcher's course. She has been referred to as an extremely 'doctrinaire' and 'theoretical' Prime Minister. This is false. She is in fact simply an extremely political one. It is the political risks which she is taking which create the divisions within capital over her policies.
Divisions inside the ruling class
The initial period of Thatcher's government posed no major problems for all the different sectors of the ruling class to unite behind her. But they supported her for different reasons. Banking capital, concentrated in the City of London, had a direct and continuing economic interest in her policies. Soaring interest rates to enforce her monetarist policies created record bank profits. Barclay's Bank at least temporarily overtook its US competitors to become the largest bank in the world. Banking capital also benefited from other aspects of Thatcher's policies — notably the complete decontrol of foreign exchange and the high exchange rate of the pound against other currencies — which opened up major new opportunities for foreign investment and foreign operations.
These benefits became so large that in the budget of 1981 the government was forced to introduce a nominal tax on 'excess' bank profits; this, of course, only touched a small part of their gains.
To give some idea of the scale of banking capital's direct benefit from Thatcher's policies we need only note that the average real profit on British manufacturing capital by the first half of 1981 was down to 2.25 per cent. In contrast interest payment on seven-day deposits with banks was 14 per cent at the beginning of 1982. In short it is over five times as profitable to put money in a bank as to invest it in industry! No wonder that manufacturing investment fell 15 per cent in real terms from an already historically depressed starting point during 1979 (Economist, 19 January 1982, p21).
Under these circumstances, of course, banking capital is fully satisfied for the present policies of Thatcher to continue more or less indefinitely. It is only some political event, a sign that the government was losing control of internal political stability, that would lead the powerful British banks and financial institutions to want a major change in the government's line. Banking capital is a long term structural supporter of 'Thatcherism'.
The situation for industrial capital, however, is much more conjunctural and depends on the relatively short term development of the situation. In particular its relation to the Thatcher government depends on politics and the overall relation of class forces. Clearly, like banking capital, industrial capital hopes that Thatcher will succeed. As the crucial test of the upturn has not yet arrived, it would be foolish indeed to withdraw its support before at least the first substantial results become evident. But with so many risks in the Thatcherite strategy it is not surprising that the more farsighted representatives of the capitalist class are forced to prepare other alternatives.
[illegible] class strategy. Its significance for the British ruling class has to be approached not through the superficial indices of opinion polls but through the much more basic question of capital and its interrelation to the political system in [illegible].
As we have already noted all major sections of the British ruling class supported Thatcher during the period of downswing of the economic cycle. All will continue to do so of course as long as she continues to have success in attacks on the working class. The Tory 'wets' have been more quiet of late not out of changes in ideas but simply because Thatcher has had some successes in 1981. Ruling class opposition is the effect, not the cause, of successes against Thatcher.
Banking capital, as we have already seen, has a permanent structural interest in undiluted Thatcher-type policies. Industrial capital however faces the threat that any serious working class resistance will lead to the collapse of Thatcher's strategy amid major internal economic and political contradictions. Furthermore it is far too risky at present to accept the threat of the election of a divided and unreliable Labour government. The role of the SDP-Liberals is to create the possibility for the imposition of a more organisationally and politically flexible system of bourgeois governments which can be operated in periods not only of economic downturn but also those of relative upturn.
It is radically false to believe that the bourgeoisie is primarily concerned with the formation of an 'Alliance' government after the next election. Not merely do the SDP and Liberals realistically have little chance of doing so, but an SDP-Liberal government would be institutionally weak, unstable, and liable to collapse rapidly leaving bourgeois politics in crisis. The SDP-Liberals are not going to replace either the Tories or Labour, and their 40-45 per cent standing in the opinion polls gained at the end of 1981 is an historical accident. The Alliance parties will in all probability be the weaker force after both the major parties.
What is more the SDP-Liberals are well aware of this. They are the first significant parties in British history to campaign explicitly on the basis that even if elected their first action would be to introduce a change in the electoral system that would ensure they never had a majority again! The introduction of proportional representation would lead not to an SDP-Liberal government but to a permanent situation of coalition government, with the SDP-Liberals as the 'permanent' brokers and thereby a key link in ruling class policy.
There is no doubt what the ruling class would like to achieve with the SDP: for it to replace the Labour Party as the alternative to the Tories. If Thatcher can hammer the working class economically and the SDP hammer Labour politically, then indeed the ruling class would have taken an enormous step forward in radically reshaping the situation in Britain. The role of the SDP-Liberals would then be simple. If Thatcher's attacks were basically working, but simply lacked a small element of electoral support, then a Conservative-Alliance government, probably with a new Prime Minister, would continue Thatcher's policies essentially unchanged.
If however Thatcher's policies should crash amid mounting working class resistance then the Alliance also plays a crucial role — only this time not in alliance with the Tories but with Labour. The programme of such a government would be carrying through a major programme of wage controls, implicitly accepted for example in the recent TUC Programme for Recovery. The 'job creation' part of that plan, in which the bourgeoisie has no interest, would of course never be implemented and in practice would be abandoned even by the labour bureaucracy.
We can therefore clearly summarise the situation of ruling class strategy in Britain today. At present all sections of the ruling class are united behind Thatcher and will be as long as she has relative successes. It is therefore against Thatcher's government that the chief attacks of the labour movement must be directed. But the more farsighted representatives of the ruling class understand that there is little chance of her policies succeeding over the timescale required. Other more flexible alternatives must also be prepared. [illegible] the SDP and its alliance with the Liberals. It plays immediately the [illegible] in weakening any possibility of Labour winning the election. More strategically it lays the basis for a more flexible system of bourgeois political domination.
The SDP-Liberals, along with reorganisation of the electoral system, therefore provide a neat potential way of tying together political and economic strategy for the bourgeoisie. In periods of downturn, a simple deflationist Tory, or Tory-dominated coalition government can be put in place and direct alliance with the trade union and labour bureaucracy ignored. In any economic upturn where the working class fights back, an SDP-Labour coalition could attempt to hold back living standards through an incomes policy to make the work of the next Tory/coalition government easier. Meanwhile, because it would have to bear the main responsibility for policing the policy, Labour would decline in popularity even more than the SDP in such a coalition, weakening the working class politically as well as economically. Meanwhile preparations for such coalitions, or simply threats of SDP gains, would powerfully reinforce the right wing inside the [illegible] Party and trade union bureaucracy — as indeed they already have done.
Conclusion
The next years are of crucial importance for British politics and the workers' movement. The labour movement however continues to be extremely unprepared for what is coming. Large parts of the Labour left and the Labour leadership as a whole continue to think that Thatcherism will collapse under the impact of its internal economic contradictions. They orient to the very policies, notably wage controls, that are the backbone of the future coalitionist politics with the SDP. They watch the latest fluctuations of opinion polls in the hope that the SDP will go away of its own accord, rather than waging a real fight against it.
The axes of such a fight flowing from the above analysis can be summed up in four points:
1) Thatcherism will not collapse because of its own internal problems or resistance from the ruling class. It is only mass action against it, with the final aim of bringing it and any future Tory government down, that will end it.
2) In order to prepare itself for this struggle and against the ruling class manoeuvres which will surround it, the labour movement has to completely reject any coalition with the SDP and the policies, above all wage controls on which it would be based.
3) As the alternative to the de facto projects of coalition with the SDP and Liberals the left inside the labour movement has to develop a real socialist policy which it both fights for now and seeks to pledge a future Labour government to.
4) Building a mass campaigning, democratic Labour Party and movement which fights for these goals.
It is out of these struggles combined with the immense clashes in world politics that a real revolutionary socialist alternative in Britain will be built.