Thirty years ago Harold Macmillan warned Margaret Thatcher against excessively deflationary policies. The advice holds good today
So it transpires that, back in 1980, Margaret Thatcher's pro-cuts economic policies were under pressure from within her own coalition ? consensus Tories v free market Tories ? in ways that make tensions inside David Cameron's cabinet look quite feeble in 2010.
As with most of the WikiLeaks revelations of recent weeks, we knew the broad outline of the resistance, which was pretty vocal at the time. Thatcher sacked the first batch of "wet" cabinet rebels in January 1980 and repeated the performance in September. It took nine more years before they sacked her.
But the details emerging today from the National Archives at Kew are enjoyable. Who knew, for instance, (certainly not me) that Harold Macmillan, a disciple of the great JM Keynes for 50 years, had sent her a note warning against excessively deflationary policies after spending a weekend as her guest at Chequers?
Macmillan could just have easily sent it to George Osborne last summer as he geared up to repeat the Thatcher experiment ? egged on, as she turns out to have been, by international bankers safe in their ivory towers despite ? far more than in 1980 ? being responsible for the current mess.
Then, as now, their own jobs, bonuses and products would not be put at risk by the harsh consequences of the squeeze on inflation, public spending and inefficiency which Thatcher/Cameron and their chancellors, Geoffrey Howe/Osborne envisaged. No wonder that Macmillan privately called them "banksters".
The ironies are obvious, albeit complicated. Thatcher, Howe and their emerging lieutenant, Nigel Lawson (more about him in a moment), had a point: whatever old Labour types still insist, the postwar style of social democratic consensus had run into deep trouble by the late 70s, domestic tensions over union power and economic decline enhanced by emerging globalisation and the Opec oil cartel's new muscle.
But the Thatcherite medicine almost killed the patient as it pushed unemployment above 3m and overlooked the thousands more left to rot quietly on early versions of invalidity benefit which now cost so much. Industry was needlessly savaged, regions left to rot ? which is why Scotland and parts of the north still find it impossible to vote Tory. As ye reap?.
Even Thatcherism's successes, and there were many, contained fatal excesses of their own. The revitalised City, whose financial services clout spread prosperity to many parts of Britain ? Edinburgh, Manchester and Leeds, to name but three ? turned out to be nurturing arrogance and free market folly, which burst open in the financial collapse of 2007-09.
Not even Arthur Scargill could dream of causing disruption on that scale. But the ironies of history are often missed by policymakers too busy to read.
Thus, if British and US policymakers had known more about the darker corners of Muslim fundamentalism in 1981 ? as plenty of scholars did ? they might not have been so eager to fund the mujahideen fighters who were starting to attack the latest ? Russian ? invaders of their country 30 winters ago. They are fighting still, only now it is British and American troops whom they kill.
Reporters never know what discoveries they may unearth when they troop out to Kew in late December to trawl through the latest batch of official papers released under Britain's 30-year rule. Missed opportunities, careless ironies, misunderstandings, they are all there ? along with acts of wisdom or courage.
Thatcher was more cautious than suggested by her carefully nurtured reputation as the Iron Lady ? you must confront your cabinet, ideological advisers like John Hoskyns privately advised, so we also learned today.
But she was rarely less than brave. Her style, much admired, led to further difficulties when Tony Blair tried to clone it.
The 30-year delay is a rule designed to protect government confidentiality over policy discussion ? and personalities ? for a decent interval, a procedure which may be curling Julian Assange's lip as the bailed WikiLeaks chief reads today's papers in his Norfolk retreat. Time will tell who is right. So far I'm with Kew.
But it is the battle over economic policy at home which has rightly attracted most overnight attention. Thatcher and Howe came to power embracing monetarist theory which said that inflation was purely a monetary phenomenon. Switch off the presses and all would be well. Cut public spending, privatise inefficient nationalised industries, lower taxes and the private sector could again flourish in the space now devoured by state socialism.
It was a simplistic creed, the free marketers' clause 4, and inflation rose again to 22% under Howe; the succeeding decades have exposed its weaknesses as well as market power's undoubted strengths.
No one now has to wait three months to get a telephone line installed or buy a badly-built car produced by craven management and militant unions, though we are back to queuing for mortgages just like the 70s.
But who needs the 1,000 TV channels we are now reaching (in 1980 there were three) and there was much to commend the more consensual approach that Macmillan ? six times wounded in France and MP for ravaged Stockton in the 20s ? had urged upon Thatcher.
Her complaint against him was a powerful one too. He (and Churchill before him) had been too accommodating to the unions, their coalition allies in the second world war, too indifferent to the rising (but little understood) problems of inflation, which bastard Keynesian demand management had begun to entrench in the postwar boom economies of Europe, north America and Japan.
Then as now the monetarists and hardliners had a point as they scrambled around for cuts (state pensions? Charges to visit the GP? Even the replacement of income tax by a poll tax? Howe considered them all) that would roll back the state and keep the international bankers off their backs.
But they were driven further than was prudent or necessary by ideological zeal, just as the retrenchers had been after the Great Crash of 1929 ? free market excess again ? and in their zeal had made a bad situation worse. That is the risk again today, made worse by the fact that inside the Cameron cabinet only Vince Cable appears to have the Keynesian clout and commitment to challenge the new orthodoxy.
That is almost certainly why the Daily Telegraph, again in the hands of zealots who would have appalled Bill Deedes (a Macmillan cabinet minister, later its editor), targeted him this month ? egged on by people who should have known better.
As in the 30s a retrenching government is being supported by the central bankers ? most of them ? in the shape of Mervyn King, governor of the Bank of England.
WikiLeaks again confirms a role which was already visible to outsiders. King did not have a good war when the banks first tumbled ? few central bank regulators did ? but seems happy to join in blaming elected governments (who do deserve their share), not bankers for what went wrong in 2007-9. We are not out of the bankers wood yet.
In the 80s, Gordon Richardson, then governor, was berated by Thatcher ? at the behest of her Swiss banker friends (she met them on what passed for a Maggie holiday in Zug) for not being zealous enough in controlling money supply, in cutting spending and in being too eager to lend to hard-strapped businesses.
It is not hard to guess why. Treasury officials had pressed excessive cuts on Denis Healey, Labour's chancellor in the turbulent 70s. But at least they were well versed in the hard-won lessons taught by Keynes of whom his arch-rival, the Thatcher hero, Hayek, once said he was "the only truly great man I ever met". Nowadays Whitehall's collective memory is core Thatcherite in outlook. How could it be otherwise?
For all his faults the old show pony that was Harold Macmillan was deeply read and wise. When the leftwing playwright Howard Brenton came to write his National Theatre play, Never So Good, about Supermac in 2008, the result was highly sympathetic.
One night I chaired a pre-show panel discussion with DJ Thorpe, Macmillan's biographer, and with the ex-PM's former speech writer, later Thatcher's chancellor until they fell out over monetary policy, Nigel Lawson. It was he who revealed that Macmillan called bankers "banksters". As I say, a wise and clever man.
Source: http://www.guardian.co.uk/uk/blog/2010/dec/30/supermac-was-right-1980-and-right-now
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