Will 2008 have a Winter of Discontent?
June, 18, 2008
Pundits keep comparing the economic gloom of 2008 with “The Winter of Discontent” in 1978/79. Why are they harking back to this period and not the recession that led to the housing crash of the late 80’s and early 90’s? So put on your acrylic bell-bottoms, Cuban heels and kipper tie. Jump into our time machine and we’ll find out!
The main reason journalists are fond of comparing today’s credit crunch woes with the 1970’s are a number of spooky similarities that might make Labour politicians nervous. The narrative of a troubled centre-Left government on the ropes, in thrall to inflation, spiralling energy costs and public sector strikes is resonant. But is it accurate?
The Arab / Israeli war in the Middle East in 1973 saw the oil producing countries use supply as a bargaining chip (which in the UK led to a three day week to safeguard coal reserves), and like today fuel prices really hit western consumers. hards. (Mind you compared with today, the price of a barrel of oil rocketed in the 70s to $12!). Inflation across the decade went bonkers (peaking at 27% in 1975, just in case you were thinking things were bad today) and the Government tried to intervene in pay settlements, even in the private sector. It even tried to pass a law limiting pay rises to 5% which was defeated in Parliament (fast forward to 2008, when Yvette Cooper can only ask nicely for modest boardroom pay rises).
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Even spookier, in 1978, lorry drivers (including tanker drivers) went on strike, winning a 20% pay rise (a bit like Shell tanker drivers this week). By the winter of ’78 a general strike loomed, the army was called out and (infamously) bodies were piling up unburied as municipal workers went on strike. My husband remembers, as a nine year old living in London, the rubbish bags piling up outside his house and rumours of giant rats in the street. Even bread ran out.
Labour PM “Sunny” Jim Callaghan tried to shrug it off (sealing his political doom), the Unions were calling the shots and some conspiracy theorists even claimed that shadowy forces in the army and MI5 were considering a coup to rescue the country! Remember the Cold War backdrop and the very Left Wing background of many figures in the Labour Party at the time...
The net result of all this chaos was Margaret Thatcher’s victory in 1979 and eighteen years of opposition for Labour, who decided that they way forward was to be even more left wing until Neil Kinnock began to fight back against the hard Left. Tony Blair went on to famously dump every bit of ideological baggage that reminded people of the late 70’s under Labour. But Blair isn’t PM any more.
A grim time indeed: worse than Black Wednesday, the Recession and the last property crash. However, some major differences exist that put some distance between tempting 1978/2008 comparisons:
Property: In the 1970’s private home ownership wasn’t as widespread as it is today amongst manual workers, “The Property Owning Democracy” and sale of council property being a thoroughly Thatcherite phenomenon. In 2008 people have become to expect a tidy profit from their homes as a right. This, potentially, is something that makes 2008 as explosive for the Government. Nonetheless, it is a significant difference from the 1970’s.
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The Pound: It is also significant that the 1970’s saw the value of the pound plummet. In 1976 the UK even had to arrange an IMF loan as sterling devalued. If we fast forward to 2008: The pound is taking a hammering from the Euro, but is still holding up solidly against the dollar. This is a key difference.
The Unions: Compared with the 1970’s, when union barons went for “beer and sandwiches” at Number Ten, they are a shadow of their former selves when it comes to raw power with New Labour. The Unions are now a more conciliatory voice. They still seek to influence the government, but (generally) accept market-based mechanisms as opposed to the socialist class warriors of the 1970’s. This might change, especially with the likes of Unison preparing to call on its members to tear up a pay agreement which is only a fortnight old!
There are interesting historical parallels between 1978 and 2008 that naturally lead political journalists to muse on the similarities. Indeed, 1978/1979 provides us with a powerful case study in the dangers of rampant inflation and poor industrial relations in a less Globalised world. However, some pundits are already suggesting that the legacy of the Credit Crunch will be unique – a longer ‘shallower’ period of economic difficulty that will throw up its own specific challenges and problems.
We don’t have a crystal ball here at SaveBorrowSpend, but perhaps we’ve helped put the issue into context so you can understand the people who talk like they can tell the future!
SaveBorrowSpend Philippa Adam
