Some brief thoughts on why the left lost the twentieth century

The proletarian struggle marches on!

The proletarian struggle marches on?

I recently attended a debate hosted by the New Statesman, the great political and cultural magazine founded by the Webbs in 1913. The motion was “The left won the twentieth century”, and I thought I’d give some brief thoughts on that theme. Defending the motion were Helen Lewis, Deputy Editor of the New Statesman; Simon Heffer, formerly of the Daily Telegraph and now writing for the Daily Mail (but amusing and intelligent despite this); and Mehdi Hasan, political editor of the UK Huffington Post. Opposing were Tim Montgomerie, founder and former editor of ConservativeHome; Ruth Porter of the Institute of Economic Affairs; and Owen Jones of ‘Chavs’ and increasingly ‘This Morning’ fame.

It was an excellent debate, and particularly interesting in that the result changed, with the audience voting against the motion before, and in favour at the end. I originally voted no, and ended up abstaining. Mehdi Hasan moved me slightly: in questions, I picked up on his claim that the left had “won the argument” on the NHS, the welfare state, etc. I pointed out that politics is not just conducted at the level of ideas, but of interests, and the comprehensive defeat of the labour movement since the 1970s was the most important issue of all, because on that movement was based all the achievements he described. He responded that that may be the case, but the fact remains that those institutions still exist. Although it is worth pointing out – contra Mr Heffer, who argued that all the achievements standing were of the left – that the creator of the welfare state was Otto von Bismarck, not exactly a man of the left. Indeed, there is a case to be made that the welfare state is one of the most powerful barriers to an increased radicalism, honeying over as it does the stark divisions that would otherwise come about.

Nonetheless tt was a good answer, and I was almost convinced. Above all, two of the greatest achievements of the twentieth century – decolonisation and the improvement in the condition of women – came from the left. But in the end I still didn’t vote for the motion. And here is why.

A young woman from Romania made a passionate case that the left failed her grandparents and parents because of the horrors of ‘socialism’ in her country. Mehdi Hasan, referring to a comment from Simon Heffer that the Soviet Union no less undermined the left than Hitler undermined the right, said this was not something that was relevant to the experience of the Western left. Owen Jones, when asked what lessons the left should learn from the USSR, said “the lesson to learn from totalitarian regimes is don’t be murderous totalitarian regimes!”

Both of these claims are problematic. Hasan and Jones seem to imply that the left – or rather, leftism – first: bears no responsibility for the Soviet/Eastern bloc experience and second: has nothing to learn from them (beyond the obvious political point that dictatorships aren’t very nice). But neither are obviously true.

We all go through phases...

We all go through phases…

Reference was light-heartedly made at the debate to the fact that Beatrice and Sidney Webb (who founded, as well as the New Statesman, the London School of Economics and the Fabian Society) were sympathisers with Soviet Communism. In 1935 they published the study “Soviet Communism: A New Civilization?” from which the question mark was later notoriously dropped. And yes, that is 1935, not 1925. Stalinism was in full swing and the purges were just around the corner. It just so happens that I was leafing through a copy last week; the section in which they defend Stalin against accusations of dictatorship are particularly hard to stomach.

But this is not a fluke result. Nor is this sort of Soviet apologetics unique to the Webbs and their middle class ilk. Who do you think said this in 1960?

I have not the slightest doubt that the economic measures and the Socialist measures which one will find in countries of Eastern Europe, will become increasingly powerful against the uncoordinated, planless society in which the West is living at present.

Fidel Castro perhaps? Erich Honecker? Nikita Khrushchev?

No. That would be James Callaghan speaking in the House of Commons. And this was not a particular eccentric view at the time: based on growth rates, the economist Paul Samuelson – author of the bestselling economics textbook in the world – predicted that the USSR would overtake the USA by the mid-eighties or late-nineties. Similarly, Noam Chomsky points out that much of the global conflict in the 60s and 70s was an attempt by the United States to suffocate “the Castro model of taking matters into their own hands” – that is, breaking away from the American liberal economic model and following the Soviet model of “modernisation in a single generation”. It’s also true that (until the 1970s, when the Eastern bloc began to stagnate) much of the opposition to Soviet hegemony came from socialist critique (eg. Czechoslovakia, Hungary), and not from Reaganite Cold Warriors.

So, from the 1930s to the 1960s, there was a strong sense in the Western left that a kind of centralised bureaucratic planning could overcome the messiness of market relations entirely, and that state ownership of industry – coupled with a kind of ‘Keynesian’ demand management – would be the model of the future. There is in this regard something awfully similar about this Fabian approach, and the practice of the Bolsheviks. The Webbs’ fondness for the Soviet model is the direct corollary of Beatrice’s criticism of worker cooperatives. For the Webbs, as for the Fabians and as for the Bolsheviks, socialism was a matter of intricate planning from on high.

"Don't worry comrades! I've got it covered!"

“Don’t worry comrades! I’ve got it covered!”

This sort of approach is now highly discredited. Although it served well to develop poor societies (or redevelop rich ones broken by war), its capacity to meet the increasing complexities of the consumer society was unimpressive. The USSR became over-invested in heavy industry at the expense of consumer goods, and the vested interests of the central state (ie. the military) received a disproportionate share of the benefits of growth. The central planning model became sluggish and stunted, and the experience in the West with nationalisation was not much better.

So does this mean the left is a hopeless cause? Should we all just pack up, embrace David Cameron, and head home?

Please love me :(

Is this all there is?


We must return to first principles. We must distinguish between policies (which are the means) and the vision of society we would like to see (the end). Let us start with the vision, which must begin, in true dialectical fashion, with a critique:

  1. In entering a capitalist production process, workers submit to an unaccountable authority (the capitalist or his agent, the manager)
  2. This means the workers have no say in the process of production, or in what is done with the product once it is made, despite their having been instrumental in its creation
  3. This is undesirable because it distorts economic activity (production and employment become solely a means toward private profit and do not occur in its absence) and causes social harm (the worker becomes dehumanised and increasingly subject to economic forces beyond her control)

This is a diagnosis that I think the whole of the left – from anarchists to democratic socialists, communists to social democrats – could agree with. It is also something the right would vigorously disagree with. And notice what hasn’t been said. No reference has been made to markets, or money, or even to equality. No mention of planning. No mention of surplus value or crisis or effective demand. All these are matters for the left to fight over behind closed doors. The essential critique that all leftists can agree on is this: capitalism is not democratic. That is, in a capitalist society, capital is the determining factor of social organisation, and its decisions are not directly accountable to the people it effects.

Now in an age where industry flees to wherever wages are cheapest and the economy stagnates because capital refuses to invest, this critique seems to me to have lost none of its power. And if the problem in capitalism is the lack of democracy, it follows that the solution is to democratise the economy: to increase the degree of worker control over the process of production. (Incidentally, this is why New Labour was not leftist: it abandoned any aspiration to increase worker control in production, and replaced it with the conservative aim of a ‘property-owning democracy’. The crucial point – which the implosion of the housing bubble has handily shown – is that houses are not productive assets. A working class which owned their own homes – a middle class, in other words – would still have to turn up to work each morning in an autocratic workplace. You can’t eat your conservatory.)

One method of doing this would indeed be for the government to take ownership of all industry and have the workers as a whole determine economic matters through the ballot box. (Note that the fact workers could not do this in the Soviet Union immediately rules out its claim to be a socialist state; state ownership of industry is only socialist insofar as the state is accountable to the working class). This, in microcosmic form, is what happened in post-war Britain. I say microcosmic because even the Attlee Government only nationalised 20% of economic activity; British Coal or British Rail were therefore socialist enterprises, but Britain was not a socialist society.

But this is far from the only method. A workers’ cooperative would meet the same democratic standards. A society of corporations owned by wage-earner funds could arguably do the same. Indeed, some have argued that that is the precise direction in which modern society is moving. Large public providers – such as railways or schools – could be publicly owned and managed by councils of workers and consumers. And there is nothing in this vision which rules out the use of markets per se. Markets are a means of exchange; capitalism is a system of production. A society of worker cooperatives, funded through publicly owned banks and selling goods to market, would be a quite different species to a capitalist society in which investment and production is controlled by an unaccountable elite.

Soviet propaganda; it's better than that crappy 'I'll cut the deficit, not the NHS' poster anyway

An exclusive look at Labour’s next campaign poster

The key theme tying all these different options together (and why couldn’t society mix and match where appropriate?) is increased direct engagement by workers and consumers. The left lost the twentieth century because it limited itself to one model of economic democracy, dizzy with the apparent success of the Soviet Union. When that model – overcentralised, bureaucratic, unresponsive to people’s changing expectations – proved unable to adapt (and, in its own way, as alienating as any capitalist hierarchy) the right declared THE END OF HISTORY!‘, and the left – its ideas hollowed out by decades of nationalisation – did not know how to respond.

Perhaps most important of all – and here the influence of classical Marxism has been unhelpful – the left fell into the trap of considering markets and capitalism the same thing (a little trick that the right very happily engage in, for talk of ‘the market economy’ very elegantly skips over the autocratic and unequal distribution of power and wealth). But markets are simply a method of exchange: they are neutral as to the content of the transaction (handbags, machines, people) and to the inputs of that transaction (who has market power?) From the perspective of exchange alone, the trade of goods between two farmers of equal wealth is qualitatively no different from the situation of a starving landless peasant who works sixteen hours a day for the lord of the manor in exchange for somewhere to live. From the perspective of exchange, both are acceptable because in both instances, both parties benefit relative to their prior position. The same argument is often made about child sweatshops: ‘Yes’, we are told, ‘it’s obviously horrible that kids have to work. But they do it because it’s better than being even poorer on the farm.’ The person making this case never seems to realise that just because it’s better for a child to work in a horrid factory than on a starving farm, it does not follow that working in a horrid factory is the optimal situation for a child. In a world as rich as our own, maybe we could find the resources to, I don’t know, send that kid to school?

So we must focus on the content of what is exchanged, and this becomes particularly important when talking about capitalism. For capitalism not a method of exchange (per se), but a method of production. When you and I trade Pokemon cards, we are not engaing in capitalism, we are engaging in…trade! Trade is exchanging goods and services for mutual benefit. This happens in all societies – even the USSR had trade. But this tells us nothing about where the goods came from in the first place. For that you need a system of production, not just exchange. If you employed your friends for a wage in the production of Pokemon cards and then sold them to me, then we’re into capitalist territory.

Not capitalism.

Not capitalism.

Capitalism is an economic system where the majority of the population sell their labour to the owners of capital in exchange for a wage. What that means is the worker surrenders control of the production process, and of the product, to the capitalist. Capitalism is characterised therefore by authoritarian relations of production. It is this authoritarian element in the workplace (and not the process of market exchange itself) which creates the most objectionable phenomena of capitalist society: the inequality, the warped investment decisions, the alienation, the use and abuse of the workforce. Indeed it is my contention – contrary to the communists – that the method of production is far more important than the method of exchange. Markets are an effective means of providing information and incentives. In this, Hayek was right and many socialists were wrong. Che Guevara’s attempt to create an economy motivated by ‘moral incentives‘ rather than material ones was a disaster. The point is that human nature is neither as bad nor as good as people like to imagine. It is shaped by its context and institutions. Democratising the workplace – worker control of production – would go a long way towards humanising the economy, and far more than the cold inhumanism of the USSR ever did.

Now, on the other side of the greatest financial crisis since the Great Depression, we can see what fatuous nonsense the ‘End of Hisory’ really was. The central insight of the left – that a society whose priorities are determined by capital is in conflict with the principle of democracy – still holds. The task for the twenty-first century is how to apply that understanding in the light of our failures last time. I will elaborate on this in future posts, but this is an outline of my position.


Workers of the world unite! You have nothing to lose but your defunct economic models!


The Myth of Margaret Thatcher

"Now all of you, get back to work!"

“Bye peasants, get back to work!”

When the Roman emperors died, the greatest amongst them were granted an apotheosis – elevation to a divine level. The names of those given such an honour – Julius Caesar, Augustus, Claudius – are still known today. Politician-as-god might not quite be the view while they are alive (the Divine Clegg? the Divine Miliband?) but occasionally in death some alchemy takes place, and the zeroes become heroes for the ages.

Unless you live under a rock, or in an abandoned mining town, you’ll have probably noticed that the Iron Lady is dead. The nation is in mourning/jubiliation (delete where applicable). There has been endless media coverage for days (the Daily Mail seems to have temporarily forgotten immigrants exist), and such luminaries as Gorbachev, Obama and Harry Styles have all paid tribute. Perhaps the most melodramatic obituary came from Peter Oborne (a once interesting but increasingly preposterous man) in the aforementioned Mail, in which he claimed that “There were only two great British prime ministers in the twentieth century”, the other, of course, being Churchill. Apparently Attlee, Asquith and Lloyd-George never existed. Plans have been announced for a Thatcher Library, and she is to receive what essentially amounts to a state funeral. News Thump have satirised this instant-mythologisation (just add dead leader!) very nicely, with “Margaret Thatcher was first man on moon, claim Tories”.

Regardless of the melodrama, it’s clear that Margaret Thatcher was a great prime minister, if by greatness is meant ‘historical importance’. She certainly led one of the three most radical governments of the century (the equal being Attlee’s, with Campbell-Bannerman/Asquith somewhat behind). And unlike Attlee or Asquith, she was the indisputable leader of that government. You probably have to go back to the dance between Gladstone and Disraeli to find a politician who has so personally dominated British society, and they at least bounced off each other; Thatcher dominated all on her own. Britain in 1990 was almost unrecognisable from the Britain in 1979. And – what is an even greater achievement – the Britain of 2013 still looks remarkably like the Britain of 1990.

So a great prime minister, certainly. But a good one?

The inheritance

The "winter of discontent" - apparently it's Chaucer or something

The “winter of discontent” – apparently it’s Chaucer or something

Britpop and ‘Cool Britannia’ was a reaction to the gloom of the Eighties; the Sixties counterculture was a reaction to the stuffy conformism of the Fifties; the Twenties jazz age was a reaction to the horrors of the First World War. Every decade can be read as a reaction to the decade preceding it. Except for the Noughties. The Noughties were a reaction to Simon Cowell, and were consequently crap.

This has never been truer than in the case of the 1980s. The Thatcher “revolution” (or counter-revolution, depending on your taste) was more self-consciously a reaction to the drama of the years preceding it than any other post-war government. The power of this narrative infects even the greatest of minds: when the Loose Women discovered that Thatcher had died, Carol McGiffin proffered that she supported Thatcher because she “remembered what it was like in 1979, with the winter of discontent and the three day week.” Never mind that the three day week was actually introduced in 1973 by the Conservative government of Edward Heath, of which Thatcher was a Cabinet member; it’s just too good a story to tell.

"The Three Day Week! You weren't there man! You weren't there!"

“The Three Day Week! You weren’t there man! You weren’t there!”

I have discussed in detail elsewhere the historical forces which caused all the trouble in the 1970s; see my earlier blogpost, ‘The Spirit of ’45 and the Spectre of ’79’. Here it will suffice for all you One Direction fans to just highlight the key events.

Edward Heath, Mrs Thatcher’s predecessor as Tory leader who appointed her to the Cabinet as Education Secretary, was Prime Minister from 1970-1974. He was elected to replace Labour’s Harold Wilson. By historical standards, the economy he inherited wasn’t too bad, although inflation was trending upwards. Heath was elected on a commitment to ‘disengage’ the government from the economy (in contrast to Wilson, who liked fiddling. With the economy, that is). Heath’s policy was all over the place: he tried to control pay (and thereby inflation), but he also abolished lending constraints on banks (which allowed the money supply to increase significantly – 72% between November 1971 and December 1973). He also u-turned on ‘disengagement’, bailing out Rolls-Royce, among others. Then in 1973, war broke out between the Arabs and the Israelis and oil prices quadrupled, with inflation shooting through the roof. But the final humiliation came when relations with the miners broke down in 1973, leading to a deliberate slowing down of work on their part. As coal stocks dwindled, Heath introduced the ‘Three Day Week’, in order to conserve energy stocks. This policy took force in late 1973, and a few months later Heath called a general election on the slogan “Who Governs?” Needless to say, he lost.

Labour returned under Harold Wilson to find the worst economic problems since the war. Inflation peaked at 24.2% in 1975; the following year, in 1976, the British Government had to turn to the IMF to receive a bailout. (The mythology and misunderstanding surrounding this episode is so great that I shall assess it in a separate post in the future). British economic prestige – already comparatively low when set against others such as Germany or France or Japan – sunk even lower and we became known as ‘the Sick Man of Europe’. James Callaghan (who took over from Wilson in 1976) tried to strengthen control over pay and inflation throughout his premiership, to varying degrees of success and failure. But in 1978, world oil prices once again shot up (this time, primarily because of the rising conflict in Iran) and the inflationary spirals were set off all over again. The Callaghan Government tried to hold firm – leading to increased conflict with the unions. The end result was the ‘Winter of Discontent’, which famously saw the dead go unburied and the rubbish go uncollected as gravediggers and garbage collectors (and others, including ambulance drivers) went on strike. Although the bulk of the chaos had passed by the end of the winter, the damage was done, and in May 1979, Margaret Hilda Thatcher became the first female Prime Minister in British history.

The book received mixed reviews

Fifty Shades of Blue; published to mixed reviews

The Lady’s not for turning?

Thatcher entered office with two main targets, and one broad mission. The targets (which were related) were to bring down inflation and rein in the trade unions. The mission was to restore the British economy to competitiveness and prosperity. In her view, bringing down inflation and wrestling power away from the unions were the first steps to any such prosperity. And so Thatcher set off with a uniquely clear vision and a determination to not buckle in the way the previous Conservative government had done under Heath.

Thatcher’s inner circle were strong believers in monetarism, defined by future-Chancellor Nigel Lawson in 1980 as consisting of

two basic propositions. The first is that changes in the quantity of money determines, at the end of the day, changes in the general price level; the second is that government is able to determine the quantity of money.

This is where it gets a bit technical. But it is important to understand what the Thatcher Government went on to do, because the myth that “the lady’s not for turning” is largely erected by people who don’t understand it (see: Andrew Marr), or by people who don’t want you to understand it (see: Mrs Thatcher herself).

One of the main ways central banks tried to control demand in the economy – and thereby, control inflation – was through the setting of interest rates. When inflation picked up, this was read as too much demand, and interest rates would rise to choke off expansion. Thatcher’s monetarist advisers told her that this was unnecessary, and that the best way of controlling inflation was by attacking it at (what they took to be) its root: the money supply.

Economists use various different measurements of ‘money’ to work out how much is circulating in the economy at any given time. In the UK, the narrowest definition of money is known as M0 and consists of cash (paper money and coins) and reserves held by private banks at the central bank (the Bank of England). The broadest definition is known as M4 (though was then actually known as M3) and consists of all of the above, plus deposits in the wider economy, which are the product primarily of loans. In other words, narrow money (aka. the monetary base) is cash plus bank reserves; broad money (aka. the money supply) is cash, reserves and credit. In the UK in 2010, measurements of M0 stood at £47 billion; measurements of M4 stood at £2.2 trillion. In other words, base money made up only 2.1% of the UK money supply. The rest was credit, created through the private banking system.

Money (That's What I Want)

M4 (That’s What I Want)

So the Thatcherites believed they could control the money supply through government action. Some argued for doing so through cutting government spending; others for doing so by controlling base money. (To those who have been following recent events, this latter idea may sound suspiciously similar to the policy known as quantitative easing: you are quite right. It is the same theological balls). Ultimately the government resolved to cut the government deficit, and stopped using interest rates as a tool, leaving them instead to fall where they may.

The result was disaster.

Oh noez!!!!1!!

Oh noez!!!!1!!

Interest rates rose sharply to reach a peak of 17%. (As you can see, they fell significantly in 1982, which played some part in the return to growth of that year, just conveniently in time for a general election! More on this later). This meant that it became increasingly difficult for businesses in Britain to invest. It also had the effect of increasing the value of the pound, which had already risen because of the tapping of North Sea oil. Consequently, British industry became exceedingly uncompetitive. Britain entered a two year recession, losing 2.0% of GDP in 1980 and 1.2% in 1981. The most catastrophic loss was in manufacturing. Output there fell by 0.1% in 1979, and then collapsed by 8.0% in 1980 and 6.0% in 1981. In 1982 it only gained 0.2% on these losses. Manufacturing in Britain was decimated, not by its inherent uncompetitiveness (though uncompetitive much of it was), not by the behaviour of the trade unions (though badly behaved they often were), but as a direct consequence of government policy. British industry needed to change, there is no doubt of that. But the sheer scale of the damage done in the first years of the Thatcher government was totally disproportionate.

Thatcher apologists would say that this was a necessary price to control inflation. Unfortunately for them, it did no such thing. Because while the monetarists predicted that directly targeting the money supply would control it, in fact it continued to grow, and what is more, its relationship with inflation is not in evidence in these years:

                    Increase in money supply per year     /     Rate of inflation

1979          14.1                                                      13.4
1980          17.2                                                      18.0
1981          20.9                                                      11.9
1982          12.0                                                      8.6
1983          13.2                                                      4.5

(Source: Smith, D., 1992. ‘From Boom To Bust: Trial and Error in British Economic Policy’)

We can see that even as the money supply increased (despite Thatcher’s attempts to stop it) it beared very little relationship to the rate of inflation, particularly from 1981 onwards. It seems that inflation fell not because of monetary policy, but in spite of monetary policy. And what happened around this time that could be an alternative explanation for the fall in inflation?

Holy smokes Batman!

Holy smokes Batman!

Ho ho! What a coincidence.

The sharper amongst you will recognise that the money supply was increasing (despite the government’s efforts). But if businesses were finding it increasingly difficult to borrow, where was all this new money going?





And there we have it. Net mortgage lending doubled between 1980 and 1982. By the time Thatcher left power, house prices had risen 175%. And the cost of a house relative to income had increased by a third. (The bursting of the Lawson bubble and the recession under Major did their bit to make things more affordable again, before Blair and Brown picked up the same trajectory with gusto). So here, in embyro, is the economic model that came to dominate Britain for the next thirty years: away from industrial production and towards property speculation. And while it is a phenomenon that has occurred throughout the developed world, the loss has been steeper in Britain than in almost any other country. As Germany and Japan show, economic modernisation need not mean deindustrialisation, with all the employment effects (particularly on unskilled men) that that entails.

Down, down, deeper and down...

Down, down, deeper and down…

And what of employment? We know that the Thatcher government needlessly crippled manufacturing, invented a new economic model based on speculation and asset inflation, and failed even to do the one thing it wanted to do, namely control the money supply. What was the effect of all this incompetence on employment?

Not good.

Not good.

Unemployment (already rising to a post-war record under the austerity measures demanded by the IMF in 1976) reached an incredible 12% – over three million people. This is particularly offensive given the Conservatives had won the 1979 election in part on the slogan “Labour isn’t working”, criticising the Callaghan Government for the rise in unemployment.

Irony that would put Alanis Morissette to shame.

Irony that would put Alanis Morissette to shame.

Now just look at that chart closely again and let it sink in. Two things in particular stand out. First: unemployment under Thatcher never fell to the levels it was pre-Thatcher. Throughout her term in office, unemployment was higher than she found it. Second, even more shockingly, unemployment since Thatcher has never fallen to its level pre-neoliberalism (if we take the imposition of neoliberalism as starting in 1976). In other words, Thatcher cemented an economic model which has been chronically incapable of meeting the levels of employment that existed before it. Not only that, but it hasn’t even been able to produce the same level of growth as the high-point of the apparently awful post-war consensus, the 1960s (and nor have the decades following it).

The claim therefore that all Thatcher did was remove artifical government support for employment is untrue: in fact, she swept away a policy – a commitment to full employment – which filled a need that the market has since failed to satisfy. (See my earlier post ‘The silent British jobs crisis’ for more information).



And there is good reason to believe that, far from being a terrible side effect of the government’s policy, it was consciously understood as a price worth paying. Here is the appropriately-named Lord Cockfield, Treasury Minister from 1979 to 1982, writing to the Chancellor of the Exchequer on the money supply:

Control of the money operates through the simple but brutal means of butchering company profits. Ultimately insolvency and unemployment teach employers and workers alike that they need to behave reasonably and sensibly.

Well, well.

What Maggie did next

So in 1980, amongst all this chaos – high interest rates, manufacturing collapse, rocketing unemployment – Thatcher addressed the Tory congregation and declared “You turn if you want to. The lady’s not for turning.” The mythologising of this moment has reached epic proportions; it is one of her most famous quotes, and there is a similar reference in the Meryl Steep film ‘The Iron Lady’. While having her dress fixed, Meryl Thatcher is accosted by her cowardly ministers who beg her to change course for fear that they might lose the next election. Thatcher is furious. “Yes the medicine is harsh, but the patient requires it.” There are only two problems with this. First, the ministers who criticised her were making quite rational economic assessments, not acting out of vain self-interest. Second, it wasn’t medicine, it was poison.

"I ain't budgin' bitchez."

“I ain’t budgin’ bitchez.”

Now if you don’t follow or understand the intricacies of monetary policy (ie. you are Meryl Streep or Andrew Marr), you would be forgiven for thinking this is an accurate representation of what happened. The story is something like: Britain was a mess in the 1970s; Thatcher came along and did a lot of harsh stuff; lots of weak people and vested interests complained; Thatcher stuck to her guns; the problems of the 1970s disappeared; Thatcher saved us, give her a state funeral.

The problem here is Thatcher did not stick to her guns. The government abandoned the original monetarist policy of directly targeting monetary aggregates and reversed the rise in interest rates. All the economic indicators improved and, coupled with victory in the Falklands, Thatcher won the 1983 election. As Hywel Williams says,

This was one of the biggest economic policy U-turns post-1945. It doesn’t get the attention it deserves because it suits both Thatcher-worshippers and Thatcher-loathers to present her as steadfast or inflexible (according to taste). It also suits Lady Thatcher herself to ignore the evidence of her own pragmatism in the face of the facts. But the lady really was for turning – when Alan Walters told her she had to.

The legacy

Thatcher went on to oversee many other changes in her next two terms of office, in particular, the liberalisation of the banking system and the consequent decline in building societies and rise in property speculation. The victory over the miners following their year-long strike also had the effect of crippling trade union optimism: if the miners – the ‘aristocracy’ of the labour movement – could not stop Thatcherism, who could? The path was set for the decline of traditional manufacturing and the rise of the service industries. This legacy continues, particularly in the failure of the Coalition’s hope for an ‘export-led recovery’.

Much of the growth from 1985 onwards in fact was an enormous bubble in property and finance (sound familiar?) which promptly burst in 1988. So in a sense, the economics of the Thatcher era which conservatives so droolingly vaunt today amounted to an unsustainable boom buttressed by the two deepest recessions since the war. Yet another feather in the cap of Tory economic management.

"Can you believe they keep buying this shit?" "I know right? Have a state funeral!"

“Can you believe they keep buying this shit?”

But it was in the first term that the greatest – and most needless – damage was done. The unions had become too powerful and industry had become sclerotic. Clearly something needed to change. But the price paid in unemployment and the severity of manufacturing collapse was completely unnecessary. It was this which created the culture of hopelessness which pervaded so many parts of the country, and in many places still does. The basic claims in defence of this suffering – that it was necessary, and that Thatcher held her nerve – do not stand to scrutiny. Charles Moore, Thatcher’s official biographer, pointed out on Question Time a few nights ago that 29 million working days were lost to strikes in 1979, and that this was reduced to 2 million by the end of her premiership. Fine. But how many working days were lost to unemployment throughout her leadership? How many in 1982, when unemployment broke three million? 3 million unemployed multiplied by 240 working days lost works out at nearly 750 million working days lost due to unemployment in 1982 alone. The difference is the unemployed do not strike or disrupt production, or in fact do anything at all. They just sit there and rot and lay forgotten, faceless statistics on a government database. But the suffering and lost lives are real enough.

The reason feelings are so strong on Thatcher is because people only look at one side of the balance sheet. Supporters ignore or explain away the suffering; opponents do not account for the problems that preceded her. The truth is Thatcher solved the problems she set out to solve, but she did so by replacing them with a whole new set of problems. High inflation was replaced with high unemployment. Almighty unions were replaced with almighty banks. Productivity improved but the balance of payments actually worsened. Inefficient manufacturing was replaced with unstable financial services. Working days lost because of striking by labour have been replaced by many more lost because of striking by capital. It’s a mixed legacy at best. But in this week of her death, an attempt has been made to turn her into an unambiguously positive figure. This is myth-making. And as Jonathan Freedland rightly points out, this is an argument about Britain’s present and future as much as about its past. If cold but crucial leadership is what Britain required then, maybe it’s what Britain requires now? Maybe Cameron isn’t so bad afterall? This is why the government are so keen to give Thatcher a glorious send off. Such is the use and abuse of history.

If you want to know the real legacy of Margaret Thatcher, and not the myths, three charts will do.


Decline of labour


Inequality of power


Increase in profit

Tory Party headquarters are welcome to redistribute this post.



Further viewing…

The silent British jobs crisis

Lazy and workshy

The Jarrow Marchers: feckless and workshy

In 1936, at the height of the Great Depression, unemployed workers from Jarrow marched almost 300 miles to Westminster, led by their Labour MP Ellen Wilkinson, in protest against poverty and unemployment. When they finally got there, their petition was accepted and little more was done. The last marcher died in 2003, though one man who took part in the final leg of the protest held on until 2012 – just long enough to see the same catastrophic mess happen all over again.

The Work and Pensions Secretary Iain Duncan Smith, who has done so little to help the unemployed yet thinks he has done so much, was involved recently in what is usually called a ‘heated debate’ with radio presenter James O’Brien (available here). While there was, as usual, more heat than light, O’Brien was the first interviewer I’ve heard to actually put the concrete figures – not just about unemployment, but about vacancies – to Mr Duncan Smith.

The government have

identified two key problems with the current system:

  • work incentives are poor, and
  • the system is too complex.

We are reforming the system to help people to move into and progress in work, while supporting the most vulnerable.

Reforming the benefit system aims to make it fairer, more affordable and better able to tackle poverty, worklessness and welfare dependency. We are committed to overhaul the benefit system to promote work and personal responsibility.

So the problem, in their estimation, is that there aren’t enough incentives to get into work. The welfare system has trapped people, and the most effective way of tackling the problem is by changing the psychology and incentives of the unemployed.

That’s what the government say. It’s also what the Daily Mail – owned by the 45-year old Viscount Rothermere, a friend of David Cameron who inherited his £1.02 billion fortune from his dad – would have you believe. But what are the actual facts?

According to the Office of National Statistics, there are 2.5 million people unemployed in the UK. That is 7.8% of the working population. The government will constantly tell you that this is down on last year, and indeed it is – by 0.6%. But before you pop out the champagne, it’d be wise to dig a little further.

A sudden burst of laziness?

A sudden burst of laziness?

The first thing to notice about this chart is that unemployment rather mysteriously correlates with the wider economic crisis. How strange! What stood at 5.3% in 2007 reached a peak of 8.5% in 2011. This seems to put into question the claim of the government that the problem is the welfare system, rather than the wider economy…

The second thing to notice is that, after the sudden rise in 2007/8, the unemployment rate was ever-so-slightly beginning to trend down by  2010. This is in keeping with the very tepid growth that stood when Gordon Brown left office. But then, under the Coalition, we see unemployment dramatically sharpen upwards again, to 8.5%. So the boasts of the government that unemployment is falling essentially amount to “We made it worse, and now we made it better again.” Except even ‘better again’ is a stretch: unemployment now is essentially exactly where it was when the Coalition came to power, with a hell of a lot of added misery in between.

So next time you hear a Tory (or a Lib Dem, if they even still exist) boasting that unemployment is falling, remember that.

Now how do these figures break down?



More than half have been unemployed for over six months. And a third have been unemployed for over a year. It is this final category that is known as the “long term unemployed”. Of those 879,000 long-term unemployed, 442,000 have been unemployed for more than two years. And for all the boasts of IDS and Co, this number has decreased by only 1000 since the summer.

So in Britain today there are: 2.5 million unemployed, of which 879,000 have been unemployed for more than a year. But I’m afraid it gets worse.

There are 974,000 unemployed people under 25, and this is up 11,000 since the summer. The youth unemployment rate in Britain is 20.8%. All that talk of a ‘lost generation’ is no exaggeration. And unfortunately, one of the first acts of the new coalition was to scrap Labour’s Future Jobs Fund, which it subsequently discovered was actually quite a success.

But no! Don’t let out a breath yet! It gets even worse.

The number of people underemployed – that is, people who are working part-time but would like (and in fact probably need) to work full-time – has risen by one million since the crisis began, now standing at 3.05 million people. This is 10.5% of the entire workforce.



So when you add it all together, there are 2.5 million people unemployed – without work at all – and 3.05 million people underemployed. In other words, there are 5.55 million people in the UK today who want full time work but do not have it.

So let’s recap for the final time before the cherry on the cake.

Unemployed: 2,500,000

Underemployed: 3,050,000

of which

Youth unemployed: 974,000

Long-term unemployed: 879,000

And how many vacancies are there in the UK? How many jobs have these lazy scroungers rejected?

Drum roll please!

“There were 487,000 job vacancies for November 2012 to January 2013…”


Oh bollocks.

So there you have it. For the 2.5 million jobless in the UK today, there are just 487,000 vacancies. In other words, less than half the number of youth unemployed alone.

These are the facts you will rarely hear a government minister or apologist refer to. But they are there in black and white. And when they are raised in the IDS interview, his only response is to say ‘Well I didn’t say there was a magic wand’. Great, thanks!

There is a silent jobs crisis in Britain today, and all the government has done thus far is fiddle the statistics and make it worse. So the next time you hear a government minister say they are on the right track, remember what they choose to ignore.

Oh, and by the way Mr Cameron: there is an alternative.

Update: Since the time of writing – that is, in just sixteen hours – the unemployment rate has gone upIt now stands at 2.52 million. Most stark has been the case of under 25s: youth unemployment has risen from 974,000 to 993,000 – now standing at 21.2%. The total number of people wanting full-time work but unable to get it therefore stands at 5.57 million, with youth unemployment just under one million. Great job guys! Keep it up!

The Spirit of ’45 and the Spectre of ’79

The people made tremendous efforts to win the last war also. But when they had won it they lacked a lively interest in the social and economic problems of peace, and accepted the election promises of the leaders of the anti-Labour parties at their face value. So the “hard-faced men who had done well out of the war” were able to get the kind of peace that suited themselves. The people lost that peace. And when we say “peace” we mean not only the Treaty, but the social and economic policy which followed the fighting.

In the years that followed, the “hard-faced men” and their political friends kept control of the Government. They controlled the banks, the mines, the big industries, largely the press and the cinema. They controlled the means by which the people got their living. They controlled the ways by which most of the people learned about the world outside. This happened in all the big industrialised countries.

Great economic blizzards swept the world in those years. The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain result of the concentration of too much economic power in the hands of too few men. These men had only learned how to act in the interest of their own bureaucratically-run private monopolies which may be likened to totalitarian oligarchies within our democratic State. They had and they felt no responsibility to the nation.

So reads the preface to ‘Let Us Face The Future‘, the 1945 Labour Party manifesto, which ushered in the most radical government in British history. In just six years, Clement Attlee’s leadership saw: the implementation of the Beveridge Report – including child benefit, universal pensions and sick pay; the nationalisation of the railways, water supply, electricity, gas, telecom and the mines; significant improvements in the conditions, hours and pay of workers; a deliberate policy of full employment; over a million new homes built, most of them council houses; and universal health coverage for the whole population in the form of the NHS. This is a remarkable record, especially when set against the misery that followed the First World War. It is this new political programme that Ken Loach’s documentary ‘The Spirit of ’45’ seeks to understand.

The film consists of interviews with ordinary people today (some who remember the Attlee Government, some who are experts in various fields), supplemented by archival footage of the ’45 election and the subsequent government. Sadly there was only one speech by Nye Bevan (I am constantly searching for audio of him speaking…), but there was an amusing party political broadcast by Clement Attlee, and fascinating footage of Winston Churchill being booed on the campaign trial by a crowd shouting “We want Labour! We want Labour!” Some of the stories of the people looking back were dreadful: one man whose mother died giving birth “for want of a pint of blood”; another who slept in a bed with hundreds of bugs and fleas. This was all very moving. But what of the political substance?

In a live question and answer session broadcast after the film, Loach explained that the title is very deliberate. In his account, the key factor was the new consciousness – the ‘spirit’ – that had developed during the war. Tony Benn, reliably appearing as always, gives expression to this new consciousness: “People began to say, if we can have full employment to kill Germans during the war, why can’t we have full employment to build homes after it?” This is undoubtedly correct. The ease with which the unemployment of the Great Depression had been abolished by the war, and the leading role suddenly taken by the state in the organisation of the economy (including temporary nationalisation of the mines and central planning of the railways), opened people’s eyes to the possibilities of a new economic model. Particularly interestingly, this was not merely a passive phenomenon, but was actively encouraged by the wartime coalition: copies of the Beveridge Report were distributed amongst the troops abroad, and they were ordered to form weekly political discussion groups. All rather Red Army!

So the film covers and articulates this new political spirit well. Following this general overview, we are treated to small histories of the major reforms: a section on health, a section on the railways, a section on housing, etc. I felt these sections were somewhat overreliant on personal anecdotes; actual facts and figures would have been helpful (ie. how many new houses were built; how and who did the government pay for the railways and mines?) But the personal stories did bring an important human element to it, with comedy and tragedy often together.

And it is on this note that we are listening to a cute little old man extol the greatness of these reforms, saying “Anybody who tried to attack all that, we should fight”, and then, suddenly, we cut to…

Satan in a skirt?

Satan in a skirt?

And this is where the problems start.

The arrival of Thatcher on screen was greeted with an amusing array of hissing and booing from the audience, and very little else from the film. No context for her rise to power is given. That she won three general elections comfortably is not even shown, let alone explained. No Winter of Discontent, no inflation or strikes, no problems whatsoever. In a mirror of the list of industries nationalised at the start of the film, at the end we are treated to a list of privatisations. Mrs Thatcher apparently swooped into the New Jerusalem, Satan in a skirt, and single-handedly destroyed all that the war generation had achieved.

The film from this point on becomes laced with simplicities. ‘Greed’ replaced ‘working together’. Thatcher ‘made it all about the individual’. No doubt Thatcher brought in (and/or was the product of?) a more individualistic age. But the binary distinction drawn between the selfless post-war era and the selfish Thatcher one is simply untenable. In fact, weren’t we told in this very same film that the only way Bevin was able to create the NHS was by “stuffing [the doctors’] mouths with gold”?

And it is in this contradiction that the film’s problems lie. Although Tony Benn does make passing comment that in many of the nationalised industries, “all that happened was you replaced the corporate manager with a bureaucratic manager”, this is generally glossed over. In fact, even at its peak the Attlee Government only nationalised 20% of the overall economy. The rest was left in private hands, as before (albeit, facing a far more powerful labour movement – to which we will come). In other words, contrary to the claims of some rabid Tories, Britain under Labour was never a socialist country. At best, it was an island of (particularly bureaucratic and state-centred) socialism in a sea of traditional capitalism. What new political consciousness had been birthed by depression and war found precious little room in which it could breathe. And while the railways and the mines – starved of investment for decades – did get the support they needed, the nationalisations set a pattern that became all too familiar in the post-war years: public ownership for failing companies, private ownership for successful ones (including, most crucially, the banks – Alistair Darling was to their left on this one…)

Perhaps it is worth considering the words of James Connolly, writing in 1899:

One of the most significant signs of our times is the readiness with which our struggling middle class turns to schemes of State or Municipal ownership and control, for relief from the economic pressure under which it is struggling. Thus we find in England demands for the nationalisation of the telephone system, for the extension of municipal enterprise in the use of electricity, for the extension of the parcel system in the Post Office, for the nationalisation of railways and canals…

But all this notwithstanding, we would, without undue desire to carp or cavil, point out that to call such demands ‘Socialistic’ is in the highest degree misleading. Socialism properly implies above all things the co-operative control by the workers of the machinery of production; without this co-operative control the public ownership by the State is not Socialism – it is only State capitalism…

Therefore, we repeat, state ownership and control is not necessarily Socialism – if it were, then the Army, the Navy, the Police, the Judges, the Gaolers, the Informers, and the Hangmen, all would all be Socialist functionaries, as they are State officials – but the ownership by the State of all the land and materials for labour, combined with the co-operative control by the workers of such land and materials, would be Socialism.

The great nationalisations of 1945 are certainly impressive. But the idealistic tint given them by the film does not accord with the complex reality. Other failures are also ignored: the House of Lords remained pretty much untouched; so did the monarchy, and the landowning aristocracy. The public schools were not addressed, and nor were the concentrations of press power that soon set about a propaganda campaign against the government.  Social matters, such as women’s rights or gay rights, were left for future generations. (And if it seems unfair to expect such enlightenment in 1945, it’s worth remembering that the Bolshevik Revolution had legalised homosexuality, abortion and divorce nearly thirty years before). Although, to be fair, it wasn’t just negatives; other great achievements – such as independence for India – were also left out.

Loach defended his film in the Q&A (alongside wunderkind Owen Jones and the awesome Dot Gibson from the National Pensioners Convention) by appealing to limited timing, and that’s a fair point (though at only ninety minutes long, it did go by very quickly). But by not even touching on the 1970s – to my mind, as important as the 1930s for the lessons it provides – the strength of analysis is lost, and the documentary can be fairly accused of at least mild nostalgia.

So what happened in the 1970s? Why did the post-war consensus break down? It’s a crucial question. Just as the spirit of ’45 did not come out of nowhere, the spirit of ’79  (or perhaps, more accurately, the spectre of ’79) was shaped by the struggles that preceded it. In the case of the 1970s, these were the precise opposite of the struggles of the 1930s. Not deflation, but inflation. Not mass unemployment, but a labour shortage. When Ted Heath held the 1974 election on the slogan ‘Who governs?’, the answer was pretty clearly ‘Not you mate’. Difficulties had begun around the world in 1968/69 as inflationary pressures rose, and economic and political militancy increased. The ‘Siouxante-Huitards’ – ’68ers – had not experienced war or depression. The new prosperity of the ‘Golden Age of Capitalism’ created new consumer and wage expectations, and these came to a head in the late 60s. As labour militancy increased, Barbara Castle – then Employment Secretary – offered a white paper called In Place of Strife as an attempt to curb strikes. But this was considered an unacceptable intrusion by the union leadership, and with the support of some in the Labour cabinet – including, ironically, James Callaghan – the bulk of the proposal was dropped and a voluntary concordat formed with the unions instead. Additional factors in the inflation rise may include increased American armaments spending as the Vietnam War escalated, and the devaluation of sterling in 1967. But it was in the following decade that the monster really took off.

Babs > Maggie

Babs > Maggie

Three factors came together in the 1970s to produce explosive rates of inflation. The first was the sharp rise in the oil price in 1973 (following the Yom Kippur War and the subsequent OPEC embargo) and 1979 (following the Iranian Revolution). The second was the liberalisation of monetary policy around the world: most importantly the final destruction of the Bretton Woods system when Richard Nixon closed the gold window in 1971 (and the inflationary expectations that arose thereafter), but also through more specific deregulation. In Britain for example, the Heath Government introduced ‘Competition and Credit Control’, a new policy whereby the Bank of England no longer directly regulated the creation and allocation of credit. The shocking result was a large increase in the money supply.

But most important of all was the historically unprecedented bargaining power of labour. Here is a chart showing crude oil prices since 1970 set against inflation in the United States…

Here is the inflation rate in Britain…

The inflationary parallels (both between Britain and America, and between inflation and the price of oil) are remarkable. But notice something else: there have been steep rises in the oil price since. Yet these have not led to similar bursts of inflation. One of the major explanatory differences must be the following:

The bargaining position of the working class grew dramatically in the period following the Second World War. (In fact, it was growing during the Depression and the war itself, but unemployment and price controls respectively kept wage demands in check). But it was precisely in that militant period of 1968-79 that trade union membership peaked. This empowered the workers to demand wage increases to meet the price increases, and this in turn set off an inflationary spiral. The initial crisis of ’73-75 came to an end with the end of the OPEC embargo, slightly more restrictive monetary policy, and the election of a Labour government. But as Hegel famously said, all historical events must happen twice. The return of the inflationary crisis in the late 1970s made it clear that this was a systemic problem. And the new Conservative leader was the only one in Britain who showed an understanding of what this meant.

The distribution of income between wages and profits – between labour and capital – is a political phenomenon. It occurs according to the balance of economic power in society. In the post-war era, and particularly from 1968 onwards, the balance of power was significantly in the hands of the workers. This power allowed them to acquire an ever-greater share of revenue:

But this presents an almost insurmountable problem for a capitalist economy. For just as growth depends on investment, under capitalism investment depends on profit. It is the profitability of a company, and of an economy more generally, which provides both the funds and the motive for new investment. But when the pool of revenue accruing to the capitalist begins to dry up, so too does the basic mechanism of the capitalist economic system. If capitalism is to be preserved, the barriers to its profitability must be smashed.

It's the class war, stupid!

It’s the class war, stupid!

As you can see, this is precisely what occured. The great Marxian economist Michal Kalecki not only created the Keynesian solution to unemployment three years before Keynes, he also identified the limitations to the liberal-Keynesian model in 1944 – before it was even implemented:

We have considered the political reasons for the opposition to the policy of creating employment by government spending.  But even if this opposition were overcome — as it may well be under the pressure of the masses — the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders.  Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary measure.  The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow.  Strikes for wage increases and improvements in conditions of work would create political tension.  It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests.  But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders.  Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.

Neoclassical economists refer today, without a hint of irony, to the ‘natural rate of unemployment’. As in so many things, Marx pre-empted them by a century, in discussing the ‘reserve army of the unemployed.

This then is the explanation for Thatcherism, and this was what was lacking in Ken Loach’s film. Thatcherism was not the product of one woman, nor was it the product of ideas alone. Thatcherism was the only logical solution to the crisis short of moving beyond capitalism itself – something that obviously wasn’t on her radar. While most of the left were woefully ill-equipped to understand the historic question before them, some did. But that is a topic for another day.

Syriza and false dawns

I have just returned from a gathering at Friends House in Euston, for a talk by Alexis Tsipras. Tsipras is the head of SYRIZA, and by virtue of that party’s success in the Greek elections of 2012, Leader of the Opposition. He spoke vividly about the crisis in Greece: Between 2008 and 2012, GDP declined by a shocking 20%, and there is no end in sight as Greece enters its sixth year of recession. Official unemployment now stands at 26%, up from 24.8% the previous quarter and 20.7% this time last year. For the young it is even worse: 57.8% of those between 15 and 24 are unemployed. And in both instances, women suffer more than men: 29.7% of women are unemployed against 23.3% of men, and 65% of all women under 25. With funding for public hospitals cut by 40% many are going without drugs, and food banks and homelessness have proliferated across the country. The minimum wage has been cut by 22% (and 32% for the young) and real wages have, according to some estimates, fallen by an unbelievable 25%. And yet, in spite of all this, the Greek national debt has continued to dramatically rise.

This is a crisis of staggering proportions. For point of comparison, unemployment in the US during the Great Depression peaked at 25%; in Germany, it only took 30% to propel Hitler to power. We rightly look back at that time as an era of shocking suffering and incredible political incompetence. Well, it seems that history does indeed repeat itself, for we are witnessing the same thing all over again – though traces of tragedy far outweigh the elements of farce.

And quite apart from the grim economic realities, our times also find echo in the disturbing rise of the fascist party Golden Dawn, whose leader has openly described himself as a ‘racist’, and who are now polling as high as 12%.

It is against this backdrop that Alexis Tsipras was speaking, and indeed against which the importance of Syriza has grown. In 2009, their vote share stood at 4.6%. When parliamentary elections were held in May 2012, they quadrupled their number of seats and received 16% of the vote. When the mainstream parties failed to form a government (the social democratic and former governing party PASOK having been almost wiped out), new elections were held in June, at which Syriza received 27% – just under 3% less than the conservative New Democracy party, who now lead the government in Athens.

The success of Syriza therefore marks a sadly rare turn to the left in times of economic crisis, and despite some reports that the police are particularly supportive of Golden Dawn, wider Greek society has thus far avoided the descent into scapegoating that all too often accompanies economic crises. It was suggested at the talk that this may have something to do with the heroic role played by the Greek left against the Nazis, and later against the military junta that ruled from 1968-74.

Though Tsipras was disappointingly vague on detail, he did offer a compelling understanding of the true nature of austerity. The Greek government is presently in a desperate scramble to sell off anything it can find, including beaches, ports, and the water supply. There is even talk that museums and historical sites could be put up for sale. ‘All that is solid melts into air…’ This is a historic moment: the first time that the shock therapy so frequently meted out by the West to the poor of the world is turned on the West itself. And as Slavoj Zizek brilliantly points out, “Greece is not an exception. It is one of the main testing grounds for a new socio-economic model of potentially unlimited application: a depoliticised technocracy in which bankers and other experts are allowed to demolish democracy.” And if this sounds melodramatic, you probably do not know that Germany proposed only last year to appoint a ‘budget commissioner’ with the power to overrule the elected Greek Parliament.

The aim is simple, and though cloaked in beneficient rhetoric, it occasionally erupts to the fore as in the German suggestion above. The aim is to demolish all alternatives to neoliberalism and all barriers to the accumulation of profit. Whether the European political class genuinely believe this will lead to recovery, or whether they are simply using the fog of crisis as a cover, is immaterial. The end result is the same. The living standards and bargaining power of the working people of Greece (and Portugal, and Ireland, and Spain, and on and on and on) will be broken; those spheres of public life separated from the endless pursuit of profit will be eradicated; and the power of business and finance will reign supreme and unchallenged across the continent. Tsipras understood all this, and articulated it well; certainly far better than some.

But there is a problem. We’ve been here before. Francois Hollande was elected French President in May 2012 on a broadly anti-austerity platform. By November, he was implementing spending cuts. The right were quick to crow that this proves the truth of their facile mantra, excavated from Thatcher’s acidic mouth, that ‘There Is No Alternative‘. Of course it proves no such thing. Or at least, not in the way they think it does.

I intended to ask Tsipras a question, but wasn’t picked. A girl in the audience thankfully asked something similar however, in just three words: Euro or drachma? The answer Tsipras gave shows a grave misunderstanding of the problem facing Greece, and does not bode well for the success of any future Syriza government.

His answer to the question – should Greece keep the euro, or return to its old currency the drachma – was (paraphrasing): ‘It does not matter whether we have the euro. Look at Britain. You have no euro, does that mean no austerity?’ At this, some people in the audience laughed – haha, what a clever point. No. It is a stupid point, for reasons I will make clear in a moment. Tsipras then continued ‘But that does not mean we will waste our bargaining power. Greece is just one part of a long chain in the eurozone.’

Quite apart from the contradiction in the latter part of the answer – how can membership of the euro simultaneously ‘not matter’ and be a powerful bargaining chip? – the main problem for Greece is precisely its membership of the euro. For all the talk of the Greek debt crisis, or the Spanish debt crisis, or the Irish debt crisis, none of these countries are the most indebted in the world. That honour, in fact, belongs to Japan. You’d expect, then, for the Japanese debt crisis to be all over the news too. Yet it is nowhere to be found. For over fifteen years, pundits have been predicting an imminent sovereign debt crisis – which would manifest in rocketing bond yields, as has been observed in Greece:

Historical Data Chart

In fact, this has been the result:

Yes, you are reading that right. The axis on the first chart (Greek 10-year bond yields) reaches 50. The axis on the Japanese chart reaches 2. What the hell is going on here? Greek debt is at 170% of GDP, and the rate of interest the Greek government must offer lenders rockets accordingly. The Japanese debt is 220% of GDP, and not only does nothing bad happen, it actually gets cheaper for the government to borrow. For over ten years Japanese debt has got bigger and bigger and 10-year bond yields have barely budged. Two-year bond yields are effectively zero. Those who have followed the drama over the downgrades of the United States by S&P in 2011 and the United Kingdom earlier this year will recognise a familiar pattern.

For good measure, let’s compare some more. Here’s Portugal…

Historical Data Chart

…and Ireland…

Historical Data Chart

…and Italy…

Historical Data Chart

…and Spain.

Historical Data Chart

Now here’s Britain…

Historical Data Chart

…and here’s the United States…

Historical Data Chart

Well isn’t that just odd. One the one hand you’ve got Portugal, Ireland, Italy, Greece and Spain – the so-called ‘PIIGS’. The price of their debt shot dramatically up. And on the other hand, you have Japan, the UK and the US, who have all been censured by the international credit ratings agencies, and all of whom have experienced the precise opposite of the PIIGS. The causation cannot lie in the size of the national debts – the national debt of the UK for example is larger than that of Spain. Nor can it be the nationality of the bondholders – while it is true that almost all Japanese debt is held domestically, the same is not the case for the UK. Nor can the cause lie in commitment to austerity, as Messers Cameron and Osborne like to pretend – the United States and Japan have made no concerted effort to cut spending, whereas Greece and Spain are the paragons of austerity. So what could possibly be the difference? Greece, Ireland and Spain on the one hand…Britain, Japan and America on the other…Hmm…

The difference is shockingly simple. Greece, Portugal, Ireland, Italy and Spain are all in the eurozone. That is, they do not control their own currencies. Unlike Britain or, for that matter, most other countries in the world, the countries of the eurozone have surrendered that power to the European Central Bank. That means there is a very real possibility that Greece or Spain or even France could literally run out of money. Unless the ECB is prepared to step in (which, under Mario Draghi, it has become more willing to do – hence the declining yields), those who have leant money to the eurozone countries are at real risk of losing it, especially if the governments of those countries give in to popular pressure and default on their debt. In contrast, there is no such risk for those holding British or American or Japanese bonds. It is impossible for those countries to be forced into bankruptcy. The only thing in question for those bondholders is the value of the money they get back, and that depends on all manner of factors (not least of which is the growth of the national economy). And in a time of general economic crisis, sitting your money in literally riskless bonds is a far safer bet than investing in companies that may well make a loss. This, incidentally, is a sure-fire test of stupidity. If you ever hear a British or American politician compare their country to Greece or the eurozone – and it happens disturbingly often, from Cameron and Obama down – you can be sure that person does not have the slightest clue what they are talking about, and ignore them accordingly.

So to return to Alexis Tsipras by way of Francois Hollande. In the happy event of a Syriza election victory, three things could happen. First: the German and European rulers could recognise they are fighting a losing battle and radically reverse their position in favour of a Marshall Plan-style reconstruction, and allow German wages and inflation to rise. This is what Tsipras articulated as his aim. Second: Syriza could argue for the above, fail to achieve it, and end up forced by the spectre of bankruptcy into continuing austerity measures. Third: Syriza could argue for the above, fail to achieve it, and leave the eurozone. This would allow Greece to adjust more naturally by devaluing the new drachma against the euro. It would not be painless, but it would be far less so than the austerity programme thus far.

The problem for Syriza therefore lies in this. The first option – a complete turnaround not just in Euro-German policy, but in over fifty years of German political culture – is incredibly unlikely. It is not unthinkable if the cost would be the collapse of the eurozone, but it is very hard to imagine. In the event of a Syriza victory, the expectation then must be one of immediate failure on its main objective: Frankfurt and Brussels will not be willing to reverse course. Yet if Syriza is still trapped in the view that the currency doesn’t matter – a surprisingly conservative conception of the neutrality of money – the third option will never seriously occur to them. Which leaves only option two, and all the economic suffering and political darkness that would come from such a disappointment of people’s hopes.

In sum, Syriza represent an important movement in the fight against austerity. They understand the political agenda behind the economic policy, and they show that a radical critique can find voice in a parliamentary democracy. But until they understand fully the role of the euro – as presently constituted, a neoliberal weapon extraordinaire – and act accordingly, they will remain doomed to repeat the failings of France. If the only alternative to Golden Dawn is a false dawn from Syriza, the future of Europe looks very dark indeed.