speri.comment: the political economy blog

Thatcherism and the origins of the present crisis

Thatcher transformed Britain, yet many of her policies only accelerated tendencies that had long been incubated within British capitalism

Jeremy Green, Honorary Research Fellow, SPERI, and Lecturer in Politics, University of Bristol

Jeremy Green

Jeremy Green

In a peculiar sense, the recent obituaries for Margaret Thatcher represent more than death-notices for a former British prime minister.  They represent an obituary for a certain kind of Britain – an overdue obituary for pre-Thatcher Britain, which has been irrevocably lost, as much as the lady herself.

Thatcher’s political project, perhaps uniquely in modern British history, transcended ordinary understandings of executive rule and prime ministerial politics. Her politics and policy passed over into a political philosophy in their own right.  This was Thatcherism.

Once established, Thatcherism assumed its own autonomy as a political concept, based upon the twin doctrines of the ‘free economy’ and the ‘strong state’, as Andrew Gamble famously opined.  The real, longer-term legacy of Thatcher’s passing will not be manifested in the political gun-slinging of the press, but more in the role and reputation of Thatcherism as a political creed and the extent to which it has seeped deep into the foundations of British political culture.

Although Thatcher herself has gone, the political project over which she presided endures and informs contemporary British politics to a profound degree.  For what all of the eulogising, mythologising and eviscerating (depending upon where you stand) of Thatcher’s legacy have in common is recognition of the paradigm-shifting nature of her eleven years in office.

Both left and right can at least find common ground on this point.  Thatcherism was marked by radical discontinuity, a rupture in the crisis-prone constancy of Britain’s post-war development that was either an abominable aberration or an essential elixir for British society.  But was it really such a radical break?

In fact, the Thatcherite political project was not a bolt from the blue for British development.  There was actually much continuity, both with what went before and what has since transpired.  Thatcherism itself was, in large part, the continuation and radicalisation of tendencies that were long discernible within British capitalism.

Looking again at Perry Anderson’s famous essay, ‘The Origins of the Present Crisis’, is instructive here.  In that seminal essay, Anderson outlined a damning précis of the debilitating idiosyncrasies of British capitalism: an overbearing and continued prevalence of aristocratic power and privilege; the continuity of state institutions produced by nearly half a millennia of uninterrupted development; and the way that Britain’s imperial past was refracted back into national culture and institutions in the form of a stultifying deference to authority and an enduring appetite for overseas aggrandisement.

Perhaps most importantly of all, Anderson identified the special role of the City within British development and its prickly relationship with British industry.  The City of London’s pre-industrial origins as a commercial entrepôt ensured that it played a particular, and comparatively unusual, role in British capitalist development.  Unlike other European banking systems, the City had a decidedly arms-length relationship to the financing of industrial development as the latter gathered momentum from the 18th century.

Anderson was writing during the mid-1960s, a period during which Harold Wilson had come to power promising a wide-ranging modernisation of British industry and a rebalancing of the relationship between the City and industry.  But Wilson never delivered upon that promise.  Behind the rhetoric, he remained closely connected to the City’s merchant-banking elite.

The story of Britain’s post-1945 development is that of the re-establishment of the City’s national hegemony. That dominance was initially balanced by the rise of the great industrial cities of the Midlands and the North during the 19th century, but the influence of these new social forces fell away as the decline of British industry gathered momentum.

Even during the heyday of British industrial primacy, however, as again Anderson identified, the principal centre of elite power in Britain rested upon the conjunction of aristocratic and financial interests, or ‘gentlemanly capitalism’ as it came to be known.

Within the British state, this hegemonic concentration of power was reflected in the centrality of the City-Bank-Treasury nexus.  When a comparable institutional basis for British industry was attempted, through the Department for Economic Affairs and the National Economic Development Council during the 1960s, the results were unimpressive.

In fact, during the 1960s, the City’s primacy within the British economy was undergoing a stealthy reassertion built upon earlier Conservative championing of its international revival during the 1950s.  Through the Euromarkets and the embrace of the US dollar, as well as via an influx of American banks, the City tapped in to the globalisation of finance and established itself as a major offshore centre.  It became increasingly independent of the fate of Britain’s economy and currency.

How does this bear upon Thatcherism?  Thatcher overcame the schizophrenic nature of British capitalist development symbolised by the conflicting interests of the City and industry and encapsulated in the contested politics of sterling.  But, in its place, she laid the grounds for new pathologies.

Thatcher’s liberalisation of exchange controls, the fight against inflation and the enactment of the ‘Big Bang’ in 1986 all served to accelerate the steady march forward of the City’s hegemony within post-war Britain.  However, the final step towards its full entrenchment was the dismantling of much of Britain’s industry and the powerful unions associated with it so spectacularly engineered by her government.

This marked the full restoration of concentrated financial power under the rubric of ‘the market’.  It rendered the British economy a globaliser par excellence – an open container for capital flows and a pivot for the expansion of global finance.

But, perhaps most significantly of all, Thatcherism paved the way for City hegemony by defeating Old Labour, which had always contained elements and tendencies that challenged the City’s power.  The New Labour party that emerged in its place was, unashamedly, a party of the City.

The present crisis, lest we forget, emanated from the overweening and reckless endeavours of the British banking sector, even though it has since been rebranded as a fiscal crisis of the state.   As we have seen, Thatcher is not its exclusive patron.  The deeper cause lies in the longstanding failing of both of Britain’s major political parties to tackle the predominance of the City and effect a proper rebalancing of the British economy.

As Anderson noted, some things in Britain never seem to change.  ‘Gentlemanly capitalism’ lives on, with three Old Etonians governing a banking sector still immune, even in the wake of the financial crash, to all but the most cosmetic of reforms.

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