The analysis in nlr 179 by Bob Jessop, Kevin Bonnets and Simon Bromley of Thatcherism’s current difficulties in terms of the weaknesses of its economic strategy, demonstrates the power and indispensability of ‘traditional’ political economy.footnote1 But it also shows some of the limitations of that approach. They present their analysis as an antidote to what they see as the idealism of Stuart Hall’s analysis of Thatcherism—both in his earlier treatment of it as ‘authoritarian populism’ and in his recent discussion of it in relation to ‘New Times’.footnote2 However, if Hall’s work attributes too much importance to ideology (as they believe), their own virtually ignores it, and this leads them to misrepresent the real nature of Thatcherism, and to understate the real weakness of Labour’s current ‘market-research socialism’ as an alternative. They assume that the task confronting governments in Britain today is one of creating a national economy capable of supporting rising living standards for the masses. They do not recognize that this was impossible in 1979, and may still be impossible. They fault Thatcherism for not having an industrial strategy of a kind which the Conservatives could not have pursued even if they had wished to. Because they reject the centrality of ideology, they underestimate the Conservatives’ accomplishment in securing at least national acquiescence in a new kind of national accommodation to the forces of the world market. It is true that the effects of this accommodation are likely to cost the Conservatives the next election, but neither Hall nor anyone else has ever maintained that Thatcherism had discovered the secret of permanent electoral success. What may well be permanent, however, is the Thatcherite ‘settlement’—at least as permanent as that of the postwar ‘Keynesian welfare state’.

The political-economic analysis of the Thatcherite project outlined by Jessop and his colleagues is rich and, in general, very cogent; in fact it is just the sort of analysis which their earlier book promised, and it would be invaluable to have it developed.footnote3 One can agree without reservation that after the severe deflation of 1979–81, and assisted by North Sea oil and gas production, by privatization sales, and above all by Reagan’s ‘military Keynesianism’, Thatcherism has rested, politically, on a consumption boom, involving an accelerated shift in the structure of the economy from manufacturing towards services. One can also agree unreservedly that the rise in inflation levels since 1986, and the reappearance of a very large current-account deficit in the balance of payments, leading to high interest rates and the risk of another round of deflation, is now hurting many of those whose disaffection from Labour made possible Mrs Thatcher’s strong parliamentary majorities, in spite of her relatively limited electoral base. These conditions also threaten to resurrect the crisis atmosphere of the 1970s, exploited so effectively in her successful bid for power: an atmosphere apt to destroy even a government which declares that the market and not the government is responsible for our economic fate. One may even agree—though here with some reservations—that the continued weaknesses of manufacturing are partly attributable to the government’s economic strategy; and that it is ultimately these weaknesses, rather than Mrs Thatcher’s obnoxious ‘style’, or particular blunders such as the poll tax, that are undermining her government, just as they undermined those of Wilson, Heath and Callaghan. (That is, if manufacturing performance were now to reduce sharply the balance-of-payments deficit, so that inflation and interest rates fell, tax levels remained constant and real disposable income continued to rise, a Conservative defeat in 1991 could not be counted on.) The case for looking closely at the long-term impact of Thatcherism on the long-term structural problem of the economy is undeniable.

The reservations are, however, important. First, it is not yet clear that the manufacturing sector is ‘just’ as weak as it used to be. Second, it is not clear that the standpoint from which Jessop and his colleagues put forward their critique of Thatcherism—as a failed economic project, rather than a successful political one—makes sense. These two points are connected, but it is easier to treat the first rather empirically, and then consider the conceptual issue—which is where the dispute with Hall also comes in—separately.

As regards the weakness of the manufacturing sector, it is possible to argue, as Keynesians and neo-Ricardians have consistently done, that the prime determinant of manufacturing growth (and a sine qua non for productivity-raising investment) is the maintenance of domestic demand. On this view, Thatcherism’s most significant policy towards manufacturing has simply been a classic ‘stop-go’, which first aggravated the effects of a world-wide trade contraction down to 1981 (so that when the recovery began in 1982 Britain simply started from a lower—and structurally weaker—base) and then overheated the recovery for electoral purposes (the Lawson boom). Other policies favouring the financial and commercial sectors at the expense of manufacturing may also be cited (although some left-wing political economists tend to discount this factor);footnote4 but the main charge is that the destruction of 1979—1981 had only just been made good eight years later—when another ‘stop’ called a fresh halt. This view is sceptical about ‘supply-side’ arguments and tends to be dismissive of claims made about the improvement in manufacturing productivity under Thatcherism.

This is broadly the view of Jessop and his colleagues. But this approach must confront the evidence of the ‘impressive annual gains’ which, Jessop and co. acknowledge, have occurred in manufacturing productivity since 1981.footnote5 On this issue they rely heavily on the surveys by Francis Green and his colleagues in The Restructuring of the uk Economy, and especially Peter Nolan’s discussion, ‘The Productivity Miracle?’, concluding that while there has been some increase in investment, the productivity increases are due mainly to harder work extracted from a defeated and fearful labour force. The technology involved in the new investment has been geared to exploiting this situation and has not represented a shift towards long-term, higher-tech and higher-wage production; and consequently the productivity gains are not likely to endure.footnote6 The danger, then, is that in a situation of ‘world-wide equalization of wage rates for work of equal low-skill content. . .only those in the elite high-skill workforces, particularly those able to partake via multinationals in the international rewards for skilled professionals, managers and technicians, will be able to command high and increasing wages. For the rest, a levelling-down to [the wages] received in the emergent developing nations is not so farfetched in the long run.’footnote7