A Winter of Discontent? Maybe. A Frozen Government for Sure
Peter Jukes looks at the differences between the crises of the 1970s and the current state of Brexit Britain – and finds some surprising but chilling echoes
Rapidly escalating energy prices, a crisis in supply chains, empty shelves in the shops, car manufacturing plants stalled, the army conscripted to deliver fuel to petrol stations – Britain, according to The New York Times, “is heading into a nightmarish winter”.
However, this ‘perfect storm’ is no natural meteorological phenomenon, but a direct economic result of the policies of Boris Johnson’s Government. “The bleak winter ahead,” The New York Times concludes “is of their own making.”
For anyone old enough to remember, it’s hard to avoid analogies between the crisis this winter and the infamous ‘Winter of Discontent’ of 1978-1979, illustrated with graphic images of uncollected black bin bags in Leicester Square and bodies not being buried in Liverpool.
Then, as now, that winter was a culmination of a global crisis, triggered by the worldwide restriction of oil supplies by the Organisation of Petroleum Exporting Countries (OPEC) in 1973 which led to two years of ‘stagflation’ – a combination of inflation and recession – and a steep rise in unemployment for most western countries that relied on oil imports.
But now, as then, Britain seems in a parlous position compared to its direct neighbours and competitors.
There are supply chain crises across the globe, mainly thanks to the Coronavirus pandemic. Container ports in the US are reaching full capacity, which means ships are stacking up outside the ports and a logjam for imports, especially consumer items for the Christmas season. The sudden rise in coal prices given a surge of demand has led to power cuts in China. In Germany, there’s an acute labour shortage, especially in road haulage and the surge in energy and petrol prices has led to a sudden rise in inflation, predicted to reach 5% by the end of the year. Even Russia – a major exporter of coal, gas and oil – faces rising food prices and a labour shortage since many migrant workers left during the Coronavirus crisis.
Yet, none of these countries are experiencing fights at fuel pumps, labour shortages across all sectors, and a year-long decline in imports and exports as Britain has since it finally left the EU at the beginning of the year. Byline TV has, since last October, documented the impact of Brexit on fishing, farming, hospitality, retail and haulage and now the combined shock is becoming too egregious for the rest of the media to ignore.
Car production in the UK has collapsed to 1950s levels, partially due to the shortage of semiconductors, but also due to a slump in demand owing to the new frictions at the UK borders for exports to Europe. The loss of two million EU workers is hitting key sectors in the run-up to the great festival of consumerism around Christmas this year. Pigs and turkeys are being destroyed before coming to market because there is a shortage of foreign workers in slaughterhouses and processing plants. Daffodils and other crops are being left to rot, while more than 500 firms polled by the Guardian attribute the lack of stock or fall in production due to staff shortages, with a collapse in confidence in the hospitality sector particularly acute. Only 18% of 200 restaurant, pub and bar businesses felt confident that they could recruit or retain the necessary staff, down 50% from just three months ago.
Our current Government seems incapable of dealing with the looming second Winter of Discontent mainly because so much of it is of its own making. But there is more in the analogy between Brexit Britain and the economic tribulations of the 1970s than that one sonorous Shakespearean catchphrase.
‘Crisis? What Crisis?’
In the interactive play Crisis? What Crisis? staged by the Parabolic Theatre group in London this summer, the audience was given a front-seat role in the unfolding drama around Jim Callaghan’s Labour Government, trying to avoid a no-confidence vote and a forced general election in the context of the Winter of Discontent of 1978-1979.
By taking part in either treasury decisions, civil defence, press management or the parliamentary whip, the audience could calibrate pay rises, enact or roll-back cuts to services, stave off backbench rebellion or sell-off state assets, with the combination of decisions leading to a different outcome at the end of each performance.
The night I attended, we managed to get Tony Benn back from New York on Concorde and negotiate a lower pay rise for road hauliers to avert a strike, and therefore the Callaghan Government just survived the no-confidence vote. But history proves that was only a temporary reprieve. Meanwhile, the matinee performance by Parabolic earlier that day had ended up in a communist revolution.
Drama aside, the ‘Winter of Discontent’ catchphrase – credited to the then Sun editor Larry Lamb – was already a misleading headline at the time.
Like Brexit Britain in 2021-22, the winter of 1978-79 was the culmination of five years of industrial strife triggered by the OPEC oil embargo in 1973, which rapidly led to the first miners’ strike in 50 years, national power cuts, and Conservative Prime Minister Edward Heath instituting an emergency three-day working week. For Britain, the ’70s economic crisis was not a seasonal melodrama but part of a much more epic narrative that went back to Britain’s poor economic performance compared to the rest of Europe in the post-war era – a victim of military victory, industrial complacency, and the loss of captured markets through decolonisation.
Yet, in the headlines of the time and the legends that came after, this bigger backdrop is often ignored. So too is the crucial decision to join and stay in the then EEC (European Economic Community) in the 1970s. Instead, the era is portrayed in dramatic caricatures – the overweening power of union barons and protective ‘Spanish practices’, sclerotic management, driven by an old boys’ network from private schools; government intervening in industry too much and choosing winners or losers, government not intervening enough and letting profiteers sell the family silver.
The crucial flaw in the British post-war economy was an overall failure of productivity: this is why the surge in inflation with the oil shock hit the UK particularly hard. Any wage increases were almost immediately passed on as price increases, which just perpetuated the inflationary spiral. Given the lack of stability and investment, recruitment and training stagnated, and the barriers to entry for the unemployed increased.
The economy was locked into a mixture of recession and inflation – stagflation. Successive governments were frozen into that locked economy, especially Labour which had come to power with union backing and promising to protect the employment and earnings of ordinary people.
The single solution to this impasse was not, as depicted in much of Conservative Party mythology, Margaret Thatcher’s process of union-busting and de-industrialisation. Britain lagged behind most of its major competitors throughout the ’80s. It took until 2000, three years after Tony Blair was elected, for Britain to return to its output levels of 1979. Neither privatisation or the ‘Big Bang’ of the 1980s was the sole force for rising living standards, competitiveness and output. A major driving force in our escape from post-war decline was the increasing integration of the British economy with its EU neighbours, particularly with the advent of the single market, which finally came into force in 1992.
As the Financial Times pointed out in 2017, the growth of Britain’s post-war gross domestic product lagged way behind the other EEC countries until entry in 1973. It began to catch up over the next 40 years until, by 2013, it “became more prosperous than the average of the three other large European economies for the first time since 1965”.
The way European integration transformed and improved the British economy can be most visibly demonstrated (especially in their current absence) by the cheaper presence of European foodstuffs in our supermarkets, furnishing departments and consumer good stores.
A much more profound impact took place in the bowels of the British economy with the growth of complex supply chains across the entire European market – for example, in the British automotive industry. Not only did economies of scale apply, and access to a market of 350 million people, but productivity and investment rose with the price stability around exchange rates and the increasing movement of workers and capital across EU borders.
How did exceptionalist Britain get in this position which left it so exceptionally vulnerable to a global crisis?
The paradox of freedom of movement of labour is similar to the paradox of trade in the 19th Century, which split the Conservative Party over the Corn Laws. The importation of cheaper corn may have immediately threatened to diminish the income of national producers, but the longer-term substitution – making other things which people will pay more for while enjoying cheaper bread – led to overall economic growth and improving living conditions.
All those well tested and well proven advantages of the freedom of movement of goods, capital and labour were ignored, concealed or dismissed as ‘Project Fear’ by the leading politicians behind the Vote Leave campaign in 2016, who have dominated the Government of Boris Johnson for the past two years.
Unable to accept their oversights, many leading Brexiters claim that the answer to acute labour shortages having such a painful impact on the economy is to ‘pay British workers’ more. Not only would that result in higher prices, but many of the skills shortages will take years to fill, if ever, domestically. In the meantime, these businesses will simply disappear. Underpinning this kind of ‘Brexitomics’ is an atavistic appeal to autarky and nationalism which, from the outset, has sought to blame low wages in the UK on competition from cheap foreign labour.
It’s the Corn Law argument 200 years on. Though in some narrow areas, such as crop harvesting in Lincolnshire, EU workers might have depressed wages, in general, freedom of movement boosted the British economy – both through the money migrant workers spent here and the taxes they paid, and the general rise in productivity through the free exchange in skills.
The UK is now realising those additional truths about freedom of movement five years on from the Brexit vote, but too late and by subtraction. The departure of two million EU workers is not leading to rising wages and living standards, but an overall fall. The longer-term consequences of this will be a decline in both investment and productivity.
The Sick Man of Europe, Again
Back in the 19th Century, Turkey became known as a ‘sick man of Europe’ because of its failure to modernise its crumbling Ottoman Empire. By the 1970s, Britain had earned the title for similar reasons of imperial decline, nostalgia and backwardness.
Forty years later, by the time of the London Olympics, the UK seemed to have confounded this reputation – not only because of the positivity of its message and the celebration of the diversity of post-Imperial Britain, but because it could deliver in performance terms, both in gold medals and a flawlessly run global event.
Back in 2012, austerity was already beginning to bite, and then came the EU Referendum and its shock result in 2016. For the past five years, there have been three changes in Prime Ministers – rather like the period from Heath, Wilson and Callaghan in the ’70s. We’ve also failed to address the underlying structural problems of diminishing productivity and competitiveness.
Instead, the UK has exacerbated them by seeking an EU withdrawal deal that puts us on the far fringes of Europe (further than Turkey) and directly penalises both export industries and limits the necessary import of skills in order to grow and compete. No trade deals with Australia, Japan or indeed the promised but stalled one with the US, can replace the gravitational pull of our biggest and nearest market.
While supply chain problems can be solved among 27 nations sharing a single market, and energy costs can be defrayed by joint purchasing, both Britain’s labour shortages and price rises are destined to be more extreme in glorious isolation.
Which leaves the final question as the most salient: how did exceptionalist Britain get in this position which left it so exceptionally vulnerable to a global crisis? And why are we the only nation in modern times to not even have a single market within its own borders (thanks to the Northern Ireland Protocol)? And how are we the only large trading country in recent history to have declared a trade war on itself? And – even more pressingly – why can’t we change course?
This is where the parallels with the Winter of Discontent are at their most distinct and instructively different.
Looking back, we can see that the Callaghan Government was effectively paralysed by the ideological disunity in the Labour Party over the Government’s role in the economy and its reliance on trade unions, both for financing and the bloc vote in its leadership. Today, that sense of capture and confinement amply demonstrates the inability of the Johnson administration to do much to alleviate the crisis it has caused.
Even though he has a healthy majority, the Prime Minister is ideologically captured by the Faragiste right and the European Research Group – the Tories’ ‘party within a party’ – whenever it seeks to mitigate supply strains by moving closer to the EU. Meanwhile, in terms of finances and propaganda support, the Government is nearly completely dependent (as Byline Times and others have revealed) on city traders, hedge funds, foreign-born oligarchs, and press barons domiciled overseas for tax purposes.
Much more than Labour in the ’70s, the current Conservative Party is answerable to a tiny rent-seeking elite who have very little invested in the wider productive growth of the economy. It’s not beer and sandwiches at No. 10 with union leaders, but Leader’s Group dinners for Conservative donors who give more than £50,000 with ‘carriages at midnight’. While the press feared Tony Benn and the threat of nationalism and socialism in one country in the 1970s, we now see billions of pounds of public contracts siphoned off to Conservative donors, with lordships and public appointments thrown in for good measure – ‘socialism for the rich’ with barely a mention in the media.
Given this chilling background, compared to the Winter of Discontent of 1978-79, our new Brexit era of immobility and decline could end up more like a mini Ice Age.
This article first appeared in the October print edition of Byline Times. For more exclusive content get the digital edition here.