Is it 1976 again?

[TobyBelch]

As the UK economy apparently heads towards another slump, this time reminiscent of the ‘stagflation’ of the 1970’s; does anyone who was around in 1976 ( I was 10 years old at the time), recognise similarities between the economic stagnation and stubborn inflation of that era? Are Labour Party policies to blame?

[ALB]

I was around at the time but wasn’t living in Britain so didn’t experience what went on there. But I am not sure the comparison of today with the 1970s is that valid. This was certainly a period of “stagflation” ie stagnation plus a continuously rising price level. But then the rate of increase was in double digits (just checked, in 1976 it was 16.5%). Today it is between 2 and 3% and unlikely to increase to double figures.

What is a parallel, though, is that attempts of the governments — Tory as well as Labour — of the decade to end stagnation and bring about “growth” failed. Hardy wrote a good article about this in the August 1975 Socialist Standard in which he noted:

“Any serious student of capitalism knows that the capitalist is in business to make a profit and therefore will not invest more to expand production at those times when there is no prospect of selling the product profitably. Yet in the last recession, in 1971-2, Heath and Barber complained bitterly that though for months on end they pleaded and threatened and offered inducements for increased investment, “nobody would listen”. Healey, Chancellor of the Exchequer in the present government, confesses to having been equally ignorant of the facts of economic life. “One thing I have learnt from my experience in the past seven months [as Chancellor]: there is no chance of investment if business expects a general and prolonged recession, however generous the tax incentives” (Report of speech, The Times, 5th October 1974).”

In imagining that they can get business to expand production when capitalist firms don’t see the prospect of making a profit, the present government is showing the same ignorance of how capitalism works as the Tory and Labour ministers of the 1970s. Maybe at some point we will hear a similar confession to Healey’s from Reeves.

I don’t think we can say that the present Labour government’s policies are responsible for the comparatively stagnant date of the British economy. That’s due to the working of capitalism over which governments have no control.

On the other hand, the double digit inflation of the 1970s was the result of what governments did by inflating the currency, as Hardy’s article explained. The present government is not pursuing the same policy (they want to keep inflation at only 2%).

Hardy’s article can be found here:

The Crisis: Capitalism’s Stranglehold on the Labour Government

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