The Atlantic and Its Enemies (51 page)

By the early sixties there was uneasiness about all of this, and it was translated into politics. Fifties England had been run, as far as finance was concerned, in budget-balancing style: the overseas position was too fragile for anything else. The rules were slightly bent in 1958, as the reigning Conservative Prime Minister, Harold Macmillan, bid for popularity in a pre-election year. His three Treasury ministers resigned, but the protest was waved aside, and an election in 1959 was triumphantly won, with the victory slogan (not quite accurately quoted) ‘You’ve never had it so good’. This was true enough, and the wartime generation remembered the vegetable mess of ‘Woolton pie’ and taxation that, from quite a low level, took half of an income. Now, the working classes were earning good money, and often lived in subsidized (‘council’) housing; they were beginning to take holidays abroad, as the pound stood relatively high. Astute middle-class people acquired property, with generous tax relief, for small sums of money, which could be borrowed cheaply. The truly astute ones invested in equities, the rise in the values of which was again not taxed, and if a bank gave you an overdraft, you could be well-rewarded for doing nothing at all. Fifties England was the last gasp of the Victorian era, but acid was running through the system.

There followed almost two decades of self-consciously big government, in the spirit of H. G. Wells. In the Edwardian period he had been the very archangel of Progress - a career of extraordinary diligence and doggedness, triumphing over illness, divorce, lowly social origins to become a major novelist and a commentator with a deep knowledge of the natural sciences. He spoke for a world of classless technicians, by preference scientists, and condemned the older world of monarchs, horses, Latin and peasants. From 1964 to 1979 there was a dismal descant on H. G. Wells and even, in the form of C. P. (Lord) Snow, a caricature of him. This was the era of Wilson (Labour) and Heath (Conservative), which for historical purposes can be regarded as a seamless web. The initial Labour government in 1964 was led by Harold Wilson, a scholarship boy from Leeds (itself one of the grand Victorian cities, but the southernmost of them) who had taught Economics at Oxford. He recruited a team that was the brightest, in terms of education, that the country had ever produced, except perhaps for the Liberal Cabinet of 1914. One or two of their autobiographies were of very high quality, Denis Healey’s especially (he was an excellent German-speaker and knew music properly). They also instinctively believed for the most part in the virtues of planning, in Snow’s case making silly remarks about the Soviet Union; they greatly expanded education, putting up new universities and expanding old ones in a manner that now looks foolish.

However, they fell foul of twin problems: the balance of payments and the trade unions. In England inflation stood generally somewhat higher than elsewhere, and the trade unions were blamed for being greedy. In Germany the unions were ‘responsible’ and had their own stake in the system. The British ones were much less controlled and there were vastly more of them, competing with each other as much as with the alleged bosses. Wages rose, without much reference to productivity, and since the pound was overvalued, exports suffered because they were too expensive - quite apart from the problems of quality and delivery that were coming up. The French had had a great problem with large Communist-controlled unions, but they ruthlessly devalued to keep down export costs and to deter importers. But the Wilson government opposed devaluation, partly because London was reconstituting foreign investment quite cheaply, partly because they had foreign debts to pay, and partly because the overvaluing of the pound meant that running military enterprises, whether ‘east of Suez’ or in Germany, was cheaper; besides, a third of world trade was conducted in pounds sterling, which meant a great deal of money for the City of London. The Americans, with a very large stake in the system, would give support. However, trade was more or less free, foreign goods were cheap and of decent quality, and there were constant alarms as to the British balance of trade. Governments were reluctant to cut spending (and in any case the deficit of the balance of payments came about through military expenditure abroad). They were severely criticized for not spending more, and foreigners speculated again and again against sterling. In November 1967 it was devalued (from $2.80 to $2.40) but the pressure did not really go away, because the British problem was too great: attempts to play a world role and at the same time to spend money on various domestic temptations. An attempt in that direction even cost Labour an election. In 1971 a new Conservative government came in, under Edward Heath. He was a hapless and virginal figure, who to begin with talked the language of private business, and soon ended up adopting the same policies as Wilson: big government, the saving of industries such as shipping that were in trouble. A National Enterprise Board, an Industrial Reorganization Corporation, ruled the roost: meetings of these included civil servants and trade union officials, as well as businessmen to whom titles were awarded (the businessman’s definition of a knight was ‘a man who failed to say no when he should have done’). There had even been an absurd parody of a National Plan, the offices of which contained a lavatory without a lock or paper, and its head, deliberately put there by Wilson so that he would discredit himself, drank too much.

British government interventions of this sort were not successful. In the automobile world, they went almost comically wrong. In the 1960s there was the almost inevitable response to competition, the creation of a large corporation, British Leyland, itself after 1974 directed by a National Enterprise Board (under the head of Reed International) and before then vaguely responsible to the Industrial Reorganization Corporation. However, tax again distorted affairs. It became sensible for British businesses to pay their people in ‘perks’, such as motor cars, and a standard, not very interesting range then appeared, which did not match Mercedes or BMW in engineering. To these, the Swedish Volvo offered serious competition, and since the British had a free-trade agreement with Sweden, offsetting the Common Market, Volvos took the top of the market. By 1980 three fifths of the motor cars sold in Britain were imported. Leyland’s management did not deal with the crisis as Arnold Weinstock had done with electricity, that is by cutting management costs and building reserves of cash. Instead, in 1972, they tried to negotiate with trade unions and craftsmen, and the Board refused to bring in outside advisers. The oil crisis of 1973, and then the inflation, brought a financial crisis, and the National Enterprise Board put in a large sum of money; Alan (Lord) Bullock recommended three levels of union co-responsibility (‘partnership’ in the German manner). But it was all pointless. Union troubles rose, to the point of ridiculousness, and by 1980 under a million British cars were produced, one third of them for export, whereas France had 3 million and Germany 3.5 million, between half and two thirds being exported (in Germany Volkswagen had faced a crisis, but Helmut Schmidt had refused to bail it out as Leyland had been bailed out). Japan had already entered the world market, taking a quarter of American sales, and even building factories in the United States.

Intelligent people did not need statistics to learn about the decline of the country; they only needed to take the boat train to France. By this time, British problems seemed to be falling into a vicious circle, of inflation, of problems with the pound, of problems with the balance of payments, of problems regarding unions and management alike. In 1971 unemployment began to rise, reaching not far from one million, while at the same time inflation stood at 9 per cent - not what was supposed to happen. Heath saw the answer in three directions. After a few weeks of pretending that he would ‘free’ the market, he was soon (February 1972) into the business of subsidizing collapsing industries, and then imposing controls on wages and prices (November: the ‘U Turn’). But he would make up for this. First of all would be government spending. Then would come attempts to deal with the union problem, whether by agreement, or by law. Finally, there was ‘Europe’: the magic that had worked in France and Germany would work in England as well.

The first two tacks ran into headwinds. Money was splashed around, interest rates were reduced from 7 to 5 per cent, and bank lending was less controlled; taxation was cut by £500m and post-war credits were repaid. At the same time public works were undertaken, particularly in the north - famously, an elaborate concrete bridge with hardly any traffic on it. There was an explosion of bank lending - £1.32bn in 1970, £1.8bn in 1971 and almost £7bn by 1973. Another expansionary budget followed in 1972, with tax cuts of £1.2bn. In 1972 the floating of the pound allowed inflows from abroad, and new credit-giving institutions were allowed to emerge, offering and taking loans in conditions no longer subject to the controls of the past. For a time, this seemed to work. Unemployment did indeed fall to 500,000, but this was classic fool’s gold. The ‘fringe banks’ for a time did well out of property prices, which had a dangerously more important role in England than elsewhere, and unlovely concrete spread and spread and spread.

But then came the oil shock. Even food prices trebled by 1974 as against 1971, and the bubble burst in November 1973, when the minimum lending rate was pushed up to 13 per cent while public spending was cut back by £12bn. One of the new banks could not obtain credit, and the other banks had to set up a ‘lifeboat’. It was not enough. The Bank of England itself had to move in, in the winter of 1974-5, and a well-connected bucket shop concern, Slater Walker Securities, had to be rescued in 1975. The Stock Exchange collapsed. Heath’s effort to spend his way through the strange ‘stagflation’ had thus come to grief, and inflation by 1976 reached 25 per cent.

In this dismal tale came a damp squib: since the later 1950s the importance of the European recovery had been plain for all to see. Germany boomed and boomed, and so, despite 1968, did France. Italy was also picking herself up in a remarkable way, and by 1970 any Englishman could see for himself how far his country was lagging behind. By 1960 British governments appreciated that their might-have-been alternative, the former imperial lands and some of the smaller European countries such as Finland and Austria, did not give them quite the same weight as would membership of the European Economic Community. Besides, the Americans were very keen to have Great Britain as a member, for the obvious reason that she would act as an Atlantic bridge for them, in a hostile view, to walk upon. The British tried in 1962-3 and were told ‘no’ rudely and in public by de Gaulle, who wanted to build up Europe as a sort of ‘third force’. He did it again in 1967. After his resignation, and after the shock of 1968, there were more realistic French governments and de Gaulle’s successor, Pompidou, could see, with the shocks of the world’s financial system in the early seventies, and the American disaster in Vietnam, that the Atlantic system needed buttressing. On the British side the various mishaps of that period caused a good part of opinion to wish that, like Italy, England could be governed by foreign-made rules, since the domestic ones were so demonstrably not working. Besides, on both sides of the political divide, senior politicians believed in big government, erecting concrete blocks of some hideousness in celebration of it. The Europe of Brussels did much the same, and the tourism shops in that city even sold ballpoint pens with a paper-clip as pocket-attacher. In 1972-3 the Heath government pushed British membership, and did so in some desperation. It signed away British fishing rights, condemning picturesque fishing villages to decline as floating fishing factories vacuumed the fish out of the sea. It also had to accept the Common Agricultural Policy, which put up food costs for the poor by £25 per week, and deprived former colonial territories of an appropriate market, all the while getting the ordinary taxpayer to pay. Still, ‘Britain in Europe’ appeared to be the only way out of the troubles of the Heath-Wilson period, and in 1975 a referendum confirmed British membership. Italians had constantly voted with enthusiasm for not being governed by Italians. Now the British did the same. Heath had quite unwittingly done that service to the cause he most believed in. But Europe offered no immediate relief, quite the contrary.

The attempt to deal with the union problem was farcical. It had split the Labour government in 1969. Heath tried to deal with it by law, and made the law look an ass: jailing dockers, however repellent they might be, in peacetime, was a
reductio ad absurdum
of Marx’s
Eighteenth Brumaire
, called for ridicule, and got it. London, at the time, was plastered with government posters explaining an incomes policy of percentages of percentages minus some figure that had been thought up for the lowest-paid, and the face of the Prime Minister on television was an invitation not to bother voting at all. Heath’s incomes policy did not get off the ground; it was sabotaged by the miners in 1972 and fatally in 1973-4. A Prices and Incomes Board was established (under one Aubrey Jones, a marketer of soap powder in the 1960s). Of course, it was absurd for some central body to be controlling such details unless it had the equivalent of wartime powers. But the Atlantic world attempted such things, even under another supposed conservative, Nixon. The whole thing tended to freeze pay as it stood, ‘relativities’ being a minefield,
i.e.
who was paid more than whom for what. The Cabinet, to its bewilderment, found itself discussing what the secretaries should be paid. With the Coal Board, there were immediate problems, because miners saw themselves as essential, could also discern that the rise in oil prices would make coal very desirable, had their wages politically determined, and did not see why their daughters should earn more as hairdressers. In 1972 they put in a claim for 27 per cent and 10,000 of them besieged the Saltley Coke Depot outside Birmingham. This was settled. Dockers then wanted their slice.

In the end it was the inflation that caused much of the trouble, but there was as ever in England an historical element. An extraordinary British anomaly, a tribute to the very high standards of the past, was that the trade unions were subject only to the criminal law: gratuitous mayhem, of a kind that no-one, in the English nineteenth century, would have expected. In 1906 a Liberal government anxious to please labour produced a trade union law that assumed common decency. The matter was not even debated, so that the then worthies could devote their oratorical talents to the Irish Question. The trade unions’ power to ‘picket’,
i.e.
to deter potential customers and strike-breakers, was unchallenged. That power was not supposed to include violence, but there was nothing to prevent strike pickets from roving around to stop firms that were indirectly involved in the affairs of the struck-against one. A would-be mining revolutionary, Arthur Scargill, sent men with brickbats to raid the power stations and stop the use of coal, and the police stood by, helpless. In the docks, a similar protection-racketeering prevailed. In the event, power was switched off for much of the day, and industry itself went over to a three-day week (during which it produced more than in the previous 5½-day week). In February 1974 Heath narrowly lost an election, and Labour returned, this time producing a ‘social contract’ with the unions which was received with derision. The general idea was that there would be a ‘fairer’ society -
i.e.
direct taxes on the better off that would reach almost 100 per cent - if the unions restrained wage demands. They could not control their own people and the overall inflation was such that they were required to put in for higher wages in any event.