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The New Political Economy of Post-War Britain
David Coates
Throughout the entire post-war period, the state of the British economy has preoccupied and constrained the British political class with a consistency and a potency unmatched by any other issue. The Attlee Government was confronted, from its earliest days in office, with the awesome consequences of the US’s abrupt cancellation of lend-lease; and it spent the remainder of its term struggling with inadequacies in economic supply, problems of overseas payments, and difficulties created by the exchange rate of sterling. So too did many of the governments that followed. From the Macmillan government’s balance of payments crisis of 1961, the devaluation battles of the 1960s and the IMF loan of 1976, through to John Major’s ‘Black Wednesday’ and New Labour’s difficulties with the economy’s entrenched deficit on its balance of payments, the British economy has been a persistent source of difficulties for its politicians. But it has also been an immensesource of strength to them as well, generating as it has a rising level of general prosperity that was literally beyond the conception of both politicians and their electorate as the post-war period opened. Since 1945 the more favoured section of each successive generation has known a new plateau of prosperity: a plateau in the 1960s for perhaps two-thirds of the baby boomers in their young adulthood; and an even more bountiful plateau of prosperity in the 1990s, for the same segment of that same generation in their middle age, and for their children. The post-war British economy has thus generated prosperity and poverty among the electorate, and problems and possibilities for the politicians; and it has imposed its janus-faced presence on all aspects of post-war British social and political life. Because it has, if we are adequately to grasp the complex interplay of politics and society in Britain since 1945, it is with issues of political economy that we ought properly to begin: by looking in sequence at the changing shape of the British economy (Section I of this chapter), at its changing performance over time (Section II), and at the political projects which have competed to enhance that performance over time (Section III).
I. THE CHANGING SHAPE OF THE BRITISH ECONOMY
The British economy that emerged from the Second World War possessed a manufacturing sector stretched to full capacity, the legatee in its troubles of a powerful mixture of inter-war under-investment and wartime erosion. It was an economy in which employment was still heavily concentrated in the primary sector and in heavy industry. The civilian labour force in 1946 was just over 18 million in total. More than a million of those workers were still in agriculture, and just under three-quarters of a million worked in the mines (Cairncoss, 1985: 394). Shipbuilding, railways and textiles remained major employers of labour; and they remained so well in the 1950s. Employment in the textile industry, for example, peaked as late as 1951, at 1.1 million; twice as many as were then employed in the key motor vehicle and component industries that were later to fuel post-war British manufacturing growth. The new industries (and the new geographical centres) of major post-war employment and output growth were there in embryonic form during the Attlee years, but the bulk of the immediate post-war economy remained where the inter-war one had been. It remained centred in the northern river valleys and it remained locked in industries and companies that could trace their heritage (and their periods of greatest success) back to Britain’s brief Victorian period of world manufacturing supremacy.
Wartime levels of demand, and the immediate post-war conditions of pent-up domestic consumption and disrupted overseas competitors, gave this older British economy one last breathing space; but that respite proved both short-lived and (as we will see later) in the long term extremely costly. Thus one important element in the post-war British economic story line is the sequential run down of many of those industries as sources of employment and output growth. Cotton was the first of the old industries to contract dramatically, railways were the second, mining the third: all against a background of steady labour expulsion from an increasingly mechanised and chemical-based agricultural sector. The employment numbers for cotton fell from 200,000 to 54,000 between 1961 and 1980. Those for the rail industry fell from 649,000 to 192,000 between 1948 and 1992. By then agricultural employment was down to 134,000, and the numbers employed in mining were in free-fall. 697,000 people worked for the National Coal Board in 1956. That number was down to 287,000 by 1971. It had fallen to 184,000 by the start of the 1984-5 miner’s strike; and by 2000 (in the tiny privatized remnants of a once proud industry) was down to 13,000. In the last forty years of the twentieth century, most of the old industries on which Britain’s Victorian supremacy had been built shrunk away to a shadow of their former selves. The British mining industry just went that one stage further, and quite literally disappeared.
For a generation however, this contraction of the older industrial base was more than matched by the employment and output growth produced by Britain’s new industries. These were, in the main, located further south than their older predecessors. The centre of gravity of the new industries lay in the British Midlands rather than the British North. The new industries were also more consumer focused than the old ones – directed at mass markets both at home and abroad in a way that only textiles had been in the Victorian period. The British car industry was the flagship industry of this industrial renaissance, driving an expansion of employment and output in a series of component industries, and integrating with linked processes of expansion in the production of other consumer durables, in new science-based petrochemical and pharmaceutical industries, and in the new energy industries (electricity, oil and even to a limited degree, nuclear power). In fact, ‘nearly one-third of industrial growth in the economy in the 1950s and 1960s has been attributed to the motor industry and its suppliers’ (Church, 1994: 54). Whole new communities sprung up around its new production sites, communities which in their turn stimulated employment in the construction of houses, factories and roads. Employment in the car industry (and its linked suppliers) reached 800,000 by 1973 as manufacturing employment in total (which had stood at 4.3 million in 1946) peaked in 1966 at 9.2 million. More than one worker in three in Britain in 1966 worked directly in the UK’s expanding manufacturing sector.
The other two-thirds then worked either in that shrinking older base to which we have already referred, or in the other two great growth points in employment and output in the post-war UK economy in its pre-1973 prime. They worked in either the expanding private service sector – in retailing, and in banking (though the great expansion in banking employment was still yet to come) or they numbered among the expanding ranks of public sector welfare employment. By 1975 public sector employment had reached 7.2 million in the UK, with 2 million people working in the nationalised industries and three million in education, welfare and local government (Coates, 1984: 220). Then as employment in publicly provided services stagnated after 1975, private sector service employment soared. Employment in distribution, hotels and catering rose between 1980 and 1997 from 4.3 million to 5.1 million. Employment in banking and finance rose even more quickly over the same period: from 2.4 million to 3.9 million (Financial Times, 2.3.98: 8). As the domestic strength of British retailing and the international standing of British-based financial institutions emerged as powerful new points of strength in the British economy in the 1980s, employment in those sectors began dramatically to outstrip that in a manufacturing sector that was by then rapidly shrinking. In fact by the year 2000 twice as many people worked in retailing and banking as in the entirety of British-based manufacturing, so giving credence to the claim that Britain had genuinely become, by then, a nation of shopkeepers.
For by the 1980s the earlier expansion of employment in manufacturing in the mass production consumer industries of the British Midlands had given way to substantial de-industrialization. In the wake of the first oil crisis, and lower levels of output and productivity growth in the global economy as a whole, the depth and range of international competition in manufactured goods intensified, and British-based producers found themselves increasingly threatened in first export and then domestic markets. Occasionally, whole British-based industries succumbed to that competition: for a period, that was true of the British motor-bike industry, and of British-based white goods and television production. Foreign-owned transplants would, in the 1990s, restore some of that British-based output; but for two decades at least British-based manufacturing industries that were geared to mass consumer markets shrunk (in both output and – more dramatically – in employment) under a gale of foreign competition. The British car industry was the major casualty of that gale. It reset its centres of ownership from British companies (and for a time, the British state) to foreign ones (not just American, as in the past, but also French, Japanese and briefly – with BMW’s disastrous purchase and later sale of Rover in the 1990s – German companies too). It also dropped its employment levels from 505,000 in car assembly in 1971 to 280,000 in 1993 and to 218,000 by 1999. Not all sectors of British-based manufacturing lost out in this way. Pharmaceuticals did not. Aircraft production did not; and in both those sectors Britain remained the home base of leading edge companies in the global economy. But overall, domestically-based manufacturing suffered a significant shrinkage in world strength and in local employment. Overall indeed British manufacturing shed employment – particularly full-time employment – at an unprecedented rate. In the 1980-82 recession in particular ‘manufacturing employment fell from 7.4 million to 5.4 million – a reduction of 2.0 million or 27% of the 1979 manufacturing labour force’ (Wells, 1989: 25). A further 1.8 million jobs were lost in the 1989-92 recession, though this time that job loss spread south as well, taking in not just Northern and Midlands manufacturing jobs, but also service jobs in the hitherto prosperous and recession-immune South East: to leave British manufacturing employment by 1993 at 4 million. By then, only 18% of British workers were employed in manufacturing, against 51% in the non-governmental service sector, and 15% in public service; and the manufacturing sector, which as late as 1979 had contributed 30% to total GDP, contributed only a modest 21% (Beavis, 1997:1)
Insert Table 1
This changing pattern of performance between economic sectors over the post-war period as a whole had three main consequences. It changed the economy’s spatial and industrial centres of gravity. It triggered fundamental shifts in ownership and control; and it created whole new sets of economically-based social and political actors.
Shifting Centres of Gravity
The spatial rearrangement of the economy’s centre of gravity in the post-war period was particularly stark, leaving as it did once prosperous areas in decay and decline. Over the last 50 years the broad movement of prosperity in post-war Britain has been south and east. Immediately after the war, industrial activity remained largely the business of northern England, Scotland, Northern Ireland and southern Wales. Britain in the 1940s was still an economy based primarily on coalfields, located in river valleys, and positioned alongside major ports. By the 1960s however all that had changed. The new industries of the long-post war boom were largely Midlands-based and electricity-powered. As Newcastle and Glasgow slipped in prosperity, Birmingham and Wolverhampton rose. But by the year 2000 much of that prosperity too had gone. Now the new industries strung themselves out along the M4 corridor (and in Scotland’s ‘silicon glen’), or huddled together around the financial institutions and large corporate headquarters firmly fixed in London and the South East. For by then both the earlier industrial leaders (textiles and coal) and the later ones (cars and steel) had been replaced in dominance by new knowledge-based industries and by financial institutions, industries and institutions that no longer required either northern coal or midlands semi-skilled labour. By the end of the century the successful parts of Britain’s manufacturing base were primarily those within/alongside the military industrial complex (particularly aero-space and defence electronics), or those re-implanted into greenfield sites by foreign investment (Japanese car plants being the major example). The economy by then had world-quality companies only there, and in petroleum, in pharmaceuticals and chemicals, in food, drink and tobacco and in international financial services (Porter, 1990: 484-94; Walker, 1993: 168-9; Coates, 1996a: 14-17). This new distribution of leading sectors left Britain as a whole regionally unbalanced – with pockets of high prosperity outside the South East (particularly in those parts of Scotland possessing the new oil and computer industries), but with the bulk of the nation’s prosperity heavily concentrated well south of a line from the Humber to the Wash.
Shifting Structures of Ownership
These changing patterns of performance and employment both triggered (and were then accentuated by) changing patterns of ownership within the post-war British economy. Under-performance by particular industries (and in the 1970s even individual companies) triggered a changing pattern of public ownership. The boundary of the public and the private ebbed and flowed persistently in the post-war period. Public ownership expanded in two great waves. It expanded first in the 1940s, with the nationalisation of a series of industries hitherto starved of extensive investment (mining, rail and road transport, and eventually the steel industry). It expanded again in the 1960s and 1970s, as both new industries came into public ownership (steel once more, ports and shipyards, even sections of the car industry) and as individual large but struggling firms were bought by the state (most notably Rolls Royce and Ferranti). Then, of course, the whole expansion process was sent into reverse by the Thatcherite privatizations of the 1980s: privatizations which (as in coal, and in steel) were then followed by significant reductions in employment and production outlets. The resulting boundary lines of public and private ownership are captured in Table 2.
Insert Table 2
Alongside this ebb and flow of public ownership, the British private sector went through its own process of ownership restructuring. The 1960s and 1970s in particular witnessed a merger boom of unprecedented proportions. By 1980 the British economy still retained a significant small and medium size business sector in which even its micro-businesses (those employing 10 workers or less) still provided 28% of all employment (Storey, 1994:20). But by then the entire economy was nonetheless dominated by a series of large companies – six or less in each of the 22 industrial sectors listed by the Department of Employment – which were collectively responsible for probably two-thirds of the economy’s output as a whole. In fact, as early as 1976 ‘a mere 87 giant enterprises were responsible for over half of British exports’ (Harris, 1985: 12); and by 1986 over one and a quarter million British workers – some 5% of the total – had jobs with the largest 40 largest manufacturing firms in the UK (Coates, 1995: 83). By the 1990s a significant element of those large companies had themselves become foreign owned. Japanese, German, Swiss and American companies were all big players in the British economy by 2000: to the point at which that probably ‘one in seven workers in manufacturing is [now] employed by a foreign-owned firm’ (Auerbach, 1989: 263). Behind the surface of company names, large degrees of cross-ownership were by then evident; and leading British banks had at long last begun to link blocs of companies together in complex networks of ownership and control. By as early as 1980, London’s four major banks, seven insurance companies and nine merchant banks between them had a controlling interest in ten of Britain’s top 50 manufacturing companies (Coates, 1989: 26); and many of the familiar industrial names in the post-war British economy (ICI, Unilever, GEC and the like) were already transforming themselves from local concerns into genuinely global companies – and ones with a developed propensity to relocate employment and production out of Britain into Europe, the United States and East Asia. Karel Williams and his colleagues calculated that their sample of 25 of Britain’s largest companies created some 200,000 jobs abroad between 1979 and 1989 while shedding more than 300,000 jobs at home – in a veritable ‘hollowing out’ of British manufacturing that continued apace through the 1990s (Williams et al, 1990; 472).
Shifting Patterns of Class
These changes in location and control had profound effects too on those who worked in the post-war British economy, and on how those working there defined their own position and their relationship to others. In the broadest sense the rise of large private companies, the development of extensive service provision, and the expansion of public sector welfare bureaucracies expanded dramatically both the number and proportion of workers who occupied managerial positions or worked as administrators and clerks. Britain in the post-war period, that is, like other major industrial economies, experienced a rapid growth in white collar employment. It also experienced the destruction of skilled and semi-skilled manual work in declining industries, and the creation of new skill categories and new semi- and unskilled positions in the new industries and in the expanding service sector. Most of the jobs lost in that process (certainly those lost in the 1980s) were full-time jobs, traditionally filled by men. Many of the new jobs created were part-time or even temporary ones – many now filled by women. 7.3% of all jobs by century’s end were of a temporary nature (fixed contract, temping, casual and seasonal), where two decades before the figure had been only 5% (Philpott, 1999: 1,3). In 1971 the British economy employed 21.6 million workers, 18.3 million of whom worked full time. A generation later, in 1993, the total was down to 20.7 million, of whom only 15 million worked full time; and by 1997, after half a decade of recovery, the numbers were still only 22.8 million and 17.1 million respectively. In 1997 83% of the by then 5.7 million part-time jobs were filled by women workers, and 44% of all women working for wages in Britain were doing so on a part-time basis (Employment Audit, 7, 1998: 8) .