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International Socialism, November 1977


Notes of the Month


The New Consensus


From International Socialism (1st series), No.103, November 1977, pp.4-5.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Fleet Street comments on the Labour and Tory party conferences stressed one thing – the extent to dissent was muffled at both conferences for the sake of the general election which everyone sees round the corner. One columnist summed it up by heading his piece: ‘The election is all they care about’ (Sunday Times, 16 October 1977).

And certainly at both party conferences the slogan seemed to be unity at any price. The cracks revealed by the row in the Tory leadership over the closed shop were papered over (see Notes of the Month, IS 102, October 1977), as James Prior’s policy of conciliation with the trade union leadership was pressed on a very unwilling conference. Meanwhile, at the Labour conference. Tribune group worthies like Neil Kinnock and Eric Heffer fell over themselves to praise the virtues of the Callaghan/Healey leadership.

But the unity was about more than the election. There are signs of a new political consensus emerging. The old consensus involved a mixture of Keynesian demand management and welfare state measures. It was blown apart by the crisis of the early 1970s. A new orthodoxy is emerging to replace it.

The most important shift concerns the role of the state. In the 1950s and 1960s state intervention in the economy seemed to be the source of the steady growth of those years. At the same time, the state was seen as an agent of the redistribution of wealth – taxing the wealthy in order to finance social services.

The new orthodoxy views the state with suspicion. The monetarists like Milton Friedman who argued that public spending increased the money supply and so caused prices to rise have won the debate with the Keynesians. The priority is now to cut public spending and so reduce welfare services.

The technical economic argument about inflation is backed up by the general revival of free enterprise ideology. The idea of state intervention is now disreputable in ruling-class circles. Instead, it is argued that market forces should be permitted to operate freely and decide what and how much is to be produced. Taxation should be cut in order to encourage private initiative by offering the incentive of higher profits.


The ideological powerhouse for these ideas has been the right wing of the Tory party. The critics of the Heath government’s policy of subsidising ‘lame duck’ firms like Rolls Royce now occupy the inner sanctums of the Tory leadership.

However, the rise of the Tory right should not be allowed to obscure the changes that have taken place within the Labour party. For the new orthodoxy places a dominant role in the Labour government’s policy-making. Healey has been responsible for piloting through major cuts in public spending. Nor is the policy of controlling the growth in the money supply simply a product of dictation by the IMF. Even now, with sterling rising on the foreign exchanges and the prospect of growing oil revenues from the North Sea, the Cabinet is discussing plans to cut public spending’s share of the economy from 46 per cent of gross domestic product in 1975-76 to 40 per cent in 1979-80 and 1980-81 (Financial Times, October 22 1977).

Nor is the policy confined to public spending. A series of cuts aimed at boosting private profits have been introduced. Recently the government announced that it would take steps to encourage small businesses, the Tory party’s pet project.

The editor of the Sunday Times Business News wrote alter Healey’s October mini-budget:

‘To barely concealed Tory dismay Denis Healey has become the best Conservative Chancellor we have. In his latest Budget he again observed, almost entirely, the conditions laid down by the International Monetary Fund; he showed proper economic respect for the modern economic god called monetarism; and he brought substantial relief to the backbone of the Conservative Party, namely the small businessman.’ (30 October 1977).

The monetarist right has won the ideological battle. The result can be seen in the disarray of the old Labour party right wing. The traditional equation offered by Roy Jenkins, Anthony Crosland and the rest – that socialism was economic growth plus the welfare state – is no longer valid. The economy is not growing and a Labour government is cutting the welfare state to pieces. Jenkins has retreated to Brussels to sulk. Crosland is dead. The rest are in disarray, as a growing number of renegades (the most recent is Reg Prentice) join the Conservative Party.

The Tory free enterprise/monetarist ideology is filling the vacuum left by the collapse of the Labour right. It is this that helps to explain the flight to the Tory party – why Paul Johnson, onetime editor of the New Statesman can write this sort of drivel:

‘In a system of belief where conscience is collectivised (i.e. in the Labour Party! – Ed.), there is no dependable barrier along the highway which may ultimately lead to Auschwitz and Gulag.’ (New Statesman, 9 September 1977)

Not that one has to leave the Labour Party to subscribe to the new consensus. Peter Jay, son of a former Labour cabinet minister, Callaghan’s son-in-law, former economics editor of the Times, and now ambassador to Washington, can be regarded as the potential Crosland of his generation even though he is one of the chief propagandists of monetarism in the British press.

But the new orthodoxy involve concessions on both sides. The significant feature of last month’s Tory conference was that Prior’s conciliatory policy towards the trade union bureaucracy won out against Keith Joseph’s strategy of confrontation. The reason, undoubtedly, lies in the fact that however much the Tories (and the Labour right) dislike ‘collectivism’ (a codeword for the strength of the organised working class in this country) they believe that the experience of the Heath government shows that it is better to collaborate with trade union officialdom than to confront it.


The new orthodoxy is a compromise. The profitability of British capital requires a massive transfer of resources from consumption. This can only be financed by cuts in real wages and in the welfare state. Hence the drive against public spending. On the other hand, such a policy is feasible only if working-class resistance is contained and dissipated through the active support for the policy of the trade union bureaucracy.

The hostility to the state reflects, in part, a cloudy perception on the part of big business that its integration with the state makes it much more difficult to solve the crisis through a rash of bankruptcies. Instead the state steps in to prop up lame ducks, if they are sufficiently important (e.g. Leyland). Even so, big business needs the state. Even Thatcher is hedging her bets. One commentator pointed out that the new Tory policy document on the economy ‘hedges many bets, notably on lame ducks, to which the aid is to be “temporary and tapered” ... Mrs Thatcher herself is now willing to defend the Rolls Royce rescue and acknowledge that similar interventions in future are not unthinkable’ (Observer, 16 October 1977).

The anti-state, ideology fits best the ‘middle classes’, the professionals, the middle managers, etc. who identify with the bourgeoisie but who did not possess the economic and political strength of big capital, and so have been hit badly by taxation, inflation, incomes policy, etc., over the last few years. Attacks on the ‘corporate state’ go down well with these groups, who make up a high proportion of the Tory rank and file. They are likely to be disillusioned if Thatcher government ever takes office.

The factor that could disrupt this equilibrium is the working class itself. Big business is frustratingly aware of that fact that workers’ organisations survived the recession more or less intact, therefore continuing to present a major obstacle to their attempts to restructure industry. Hence, for example, the ideological offensive against ‘overmanning’ that is going on at the minute. This campaign was given sanction by the editor of the Times, William Rees-Mogg, in two major articles, (Times, 28 September and 5 October 1977).

Overcoming the obstacle of workers’ organisation with the aid of the trade union bureaucracy means a long process of bargaining and compromise, with the danger that the rank and file may anyway get out of hand. The temptation is to resort to the state to hammer workers into line. In this context the new CBI policy document, Britain means business, with its call for the banning of sympathy strikes, is a straw in the wind. The era of confrontation did not die with the Heath government.

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