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

As Nolan acknowledges, these are difficult judgements to make, given the nature of the evidence; other economists (including several he cites) take the view that a supply-side transformation has indeed begun. I want to agree with Nolan and his colleagues, but since the determinants of productivity are so complex and interdependent, some caution is desirable. It is knocking down a straw man to show that there has been no productivity ‘miracle’, as Thatcherite rhetoric has sometimes claimed. Nolan concludes, for example, that Thatcherism has not ‘transformed the basic character’ of British manufacturing; but it would indeed be miraculous if it had, in all the circumstances and in only ten years. This straw man is set against the equally utopian ideal of a ‘developmental state’ dedicated to a ‘root and branch modernization of productive conditions’.footnote⁸ As opposed to these pipe dreams, the important question is whether the Thatcherite strategy has contributed anything necessary, let alone sufficient, to the unavoidably long-term processes involved in transforming the basic character of British manufacturing, and this is more difficult to be sure about. When one reads about the changes that have actually been made in a particular industry, it is sometimes hard to know exactly what the companies concerned might have done, other than what they apparently did, and it is difficult to feel sure that the critics know either.footnote⁹ The criticism that there has been an ‘incremental, piecemeal approach to new investment which, too often, is more concerned with speeding up and intensifying the labour process than with upgrading workers’ skills and adding value’ is after all a curious one to level at any individual capital.footnote¹⁰ When most manufacturing capitals are organized multinationally, the kinds of investment they make in Britain presumably reflect more or less their relative profitability. What the criticism really seems to imply is the need for action not by individual capitals, but by a ‘developmental state’, and this brings us to the issue of the standpoint from which Jessop and his colleagues make their critique.

Their implicit model of a developmental state, against which the performance of the Thatcher regime is judged, rests on the assumption that in Britain the ultimate objective of any government is the construction of a ‘national economy’ with a manufacturing sector capable of competing with high-tech competitors anywhere, and hence able to pay high wages while keeping the trade balance healthy. But for most governments in the world today this is not the case: for most of them such an objective is unattainable. For most of them Hugo Radice’s observation that in the world economy today ‘capitals rather than nation-states are the basic units’ is an obvious truism, and their strategies are determined by the necessity to ‘reconcile the need to reproduce capitalist-class rule within [their] boundaries, with the demands placed by global capitals seeking to accumulate and reproduce on a world-wide basis’.footnote¹¹ The differing structures and technical bases of their economies, the balance of social and political forces, and the ideas and aspirations to which they can appeal, give rise to a corresponding variety of strategies. Only a few governments, with both the technical-economic resources and a set of social, political and ideological conditions permitting appropriate strategies to be formulated and implemented, can set themselves the objective envisaged by Jessop and co. And the point about Thatcherism is that it more or less consciously rejected that objective. It did not rule it out for ever, but determined that if necessary it should be abandoned, while priority was given to re-establishing the security of capitalist-class rule. And in this, I would argue, it has succeeded far more than Jessop and co. appear to acknowledge.