Those Crazy Days of ‘Socialism’: The 1970s and the Strange Death of Social Democracy

by Bryn Jones

Political memories of the 1970s are influenced, to varying degrees, by an Establishment, neoliberal narrative.

First published: 01 November, 2013 | Category: Corporate power, Economy, Employment & Welfare, History, International, Labour movement, Media, Politics, The Right

Do you remember ‘The Socialist 70s?’ If you’re under 40 you shouldn’t have a personal memory of them. But you will have a second-hand ‘memory’ from media and popular culture. Even if you’re biologically capable of remembering, your political memory probably won’t be personal but one influenced, to varying degrees, by an Establishment, neo-liberal narrative.

This account - one of economic disaster, public insolvency, industrial relations chaos and semi-authoritarian state diktats - has dominated media, popular histories and artistic portrayals for decades. Its power is such that the Establishment and mass media reaction to recent Labour proposals for an energy price freeze can invoke a rejection simply by slapping the terms ‘socialist’, ‘seventies’, and ‘state controls’ onto its reportage. Once this none-too-subtle code is applied, public opinion knows what judgement to make. In the struggle for popular support, this ‘politics of memory’ has been a crucial and, for champions of right-wing and neo-liberal policies, a successful battle ground.

Of course, it is usually the victors’ version that becomes the accepted history of a conflict; and Thatcherite neo-liberalism ‘won’ the resulting ideological and political contest. But the ‘70s’ phenomenon needs more explanation than that truism. Opening up this particular political memory is a critical factor in moving beyond the neo-liberal ideology of market freedoms. It is also a chilling reminder of how a tacit conspiracy of power brokers in government and media can shape the beliefs of a society. To challenge this memory and its hegemony, two points need emphasising. First, the main themes of the neo-liberal memory of the 70s were actually created by the nascent neo-liberal forces of that time. Today’s memories, of economic and social disorder, over-bearing state controls and fiscal recklessness, are really memories of how contemporary media framed and reported the key events of the period. Secondly, several of the key events in the seventies crisis and fall of Keynesian social democracy in the UK were precipitated or exacerbated by neo-liberal players, both domestically and internationally. Before considering an alternative memory, let’s revisit the period’s key events: the IMF crisis of 1976, the contemporaneous Grunwick dispute, and the industrial relations conflict that was dubbed the ‘Winter of Discontent’.

Faced with a budget funding deficit and pressure from international money markets, Callaghan's Labour Government requested a loan from the International Monetary Fund. Today, the neo-liberal consensus regards ‘going cap in hand’ (David Cameron) to beg for an IMF hand-out as the ultimate shame of a bankrupt Britain. That demonology is part of the Tory Coalition’s justification for their evisceration of public spending. In 1976, however, the loan should have been unproblematic. Until the late 70s most of the IMF’s lending was to the established industrial nations. Northern hemisphere capitalism in the mid-70s was undergoing a severe recession brought on by OPEC’s first hike of oil prices, and the UK’s currency was at risk of drastic devaluation; a currency crisis exacerbated by the significant holdings of former British Empire countries in sterling. However, instead of sanctioning a straightforward line of credit, the Fund’s officials were constrained by neo-liberal economics officials in the U.S government. .

As US Treasury Secretary, and thus the biggest ultimate backer of IMF funding, William Simon was keen to make an example of what he saw as the UK’s profligate public spending on the welfare state. In clandestine meetings with UK ministers in February 1976, Simon demanded state spending cuts. After haggling and Cabinet disputes, public expenditure cuts of £2.5 billion (almost a 20% of total spending) were agreed in return for a £2.3 billion loan. As Treasury officials subsequently scaled down the predicted state borrowing requirements for 1977-78 from £10.5 billion to £5.6 billion, at least some of the loan facility was superfluous. There is still a suspicion that neo-liberal sympathisers in the Treasury might have been responsible for the over-estimate. As part of the squeeze, Callaghan’s government also announced a pay policy aimed at reducing the rate of wage inflation. The success of these two measures - cuts in spending on state services (read: jobs and pay) and a general pay freeze – fed worker resentment, especially amongst public sector workers, which exploded two years later. 

The right-wing media's treatment of these subsequent events as orchestrated union anarchy might have been more difficult to achieve had it not been for the intervening episode of the 1976-77 Grunwick dispute. A group of mainly female, Asian workers walked out of Grunwick’s London photograph processing plant over pay and conditions. Suspended by management, the workers joined the moderate APEX union demanding union recognition and re-instatement. Faced with an intransigent management and a cumbersome and ineffective employment disputes system, the strike dragged on until the summer of 1977; by which time hundreds of police were containing thousands of supporters and sympathisers in a mass picket of the factory entrance. Gift-made for the mass media, the dispute became portrayed as mob violence against a plucky, independent business and courageous and abused police officers. Despite the weakness of the ACAS dispute resolution service, the saga might have been ended by a compromise had not the factory owner been given open and covert support by neo-liberal and right-wing political figures. The National Association for Freedom quickly became unofficial advisers and aides to Grunwick boss George Ward. Aided by sympathetic Conservative MPs, NAFF launched legal actions against the Post Office for tolerating their union’s boycott of Grunwick mail deliveries. NAFF also undermined a subsequent postal workers’ boycott by smuggling out photo orders from the plant; and, after storing them in a secret rural location, hand-posting them to customers. Thus neoliberals played a significant role in staving off union attempts to block Grunwick's trade. Moreover, by extending the dispute they contributed indirectly to the unions’ last-ditch tactics of mass picketing. Their influence on the neo-liberal wing of the Conservative Party ensured that leaders such as Thatcher, Keith Joseph and Norman Tebbit amplified NAFF's interpretation of the dispute into anti-union and 'anti-Communist' (sic) rhetoric which cemented the narrative developed in the media;[1] slotting neatly into the developing neo-liberal narrative in the right-wing press.

This image of leftists and trade unionists as callous and violent trouble-makers could then be reprised in the Winter of Discontent. In order to moderate wage inflation, the Labour Government and trade union leaders established a renewable Social Contract between 1975 and 1978. Intensified by the constraints of the 1976 IMF deal, this pact reduced national wages by over 13 per cent in real terms; with routine public sector workers hit especially hard. As a by-product rises were, in effect, redistributed from public to private sector workers. The government’s attempt to enforce prescribed curbs on motor car workers and road haulage drivers, in the Autumn and Spring of 1978/9, was defeated by a wave of strikes and fears over deliveries of essential goods; amplified by the press. Taking their cue from the success of these militant tactics, public sector workers in health and local government staged a succession of local stoppages and demonstrations; often organised independently of the official union leadership by local activists. Building on the memory of the Grunwick disorders, these events were portrayed, especially in the tabloid press, as selfish and lawless actions, endangering the lives of hospital patients and abusing the grief of the bereaved who, in one well-publicised case, were unable to get their loved ones buried. Thus, in the media narrative the Winter of Discontent (itself a newspaper appellation) usefully brought together the bogey themes of left-wing militancy; trade union leadership arrogance in trying to ‘run the country’; and incompetence and cowardice by social democratic governments. In reality, and as revealed by subsequent research,[2] the union leaderships were outflanked by the anger and militancy of ordinary workers and shop stewards frustrated by three years of cuts in living standards enforced to meet the IMF conditions. The heinous accounts of unburied dead and deprived hospital patients were confined to a few well-reported cases, and there were few national shortages of undelivered supplies. As a Fleet Street editor of the time later revealed: ‘We made it look like it was general, universal and eternal, when it was in reality scattered, here and there, and no great problem’.[3]

Although the strikes and stoppages of 1978/9 undoubtedly caused much local disruption, their general economic impact seems to have been minimal. Considering all these events took place during a structural economic crisis, common to all of the industrialised countries, the overall performance of the final years of social democratic governance in the UK stands up well to the subsequent decades of Thatcherism and neo-liberal leadership. Public net debt in the final years of the 70s was only slightly higher than in the mid-90s; and way below the latest crisis phase since 2008 - not so profligate after all! The average annual increase in personal disposable incomes in the neo-liberal boom years (1987-1996) was 3.1%; only slightly above the 2.0% average that the struggling dirigiste and social democrat regimes managed to procure in the crisis years 1968-1978. (Even the credit-fuelled New Labour boom managed only 2.6% during 1999-2008).

Nor does the ‘tax and spend’ label attached to the 70s governments stand up to closer scrutiny. Headline-catching Thatcherite cuts in income tax were offset by higher VAT rates and increases in National Insurance contributions, which went up from 6.5% in 1978/9 to 10% in 1995/5. Indeed, after the fall of the last social democrat Labour government, personal taxes and N.I. as a proportion of GDP hardly changed under the neo-liberal, ‘tax cutting’ Conservative governments: in 1978-79, it was 32.8 and by 1997/8, 34.8%. As is often pointed out, once the Thatcher governments got into their monetarist, high interest rate stride the real economy was permanently wounded. Manufacturing shrank but services have failed to fill the export gap. Consequently the UK has not achieved a balance of trade surplus since the period 1978-82; with a corresponding loss of better paid and stable industrial jobs.[4]

Despite several manifest failings, the social democracy that preceded the neo-liberal consensus delivered more tangible benefits for the mass of the UK population. It is also worth countering the right-wing media’s lazy conflation of the Wilson, Callaghan and in some respects Heath, governments with ‘socialism’. Advocates of a stricter socialism were plentiful and vocal within the Labour governments, but it was not until the fall of Callaghan in 1979 that comprehensive nationalisation and industrial democracy measures were seriously – and ineffectively – adopted as central Party policies. The Bennite faction within the Labour cabinet opposed the debilitating conditions of the 1976 IMF loan but was defeated by the social democrat majority.

Like Jim Callaghan’s son-in-law and informal economics adviser Peter Jay, Ed Milliband’s current nemesis Paul Dacre seems to have imbibed his antagonism for 70s social democracy from a spell in the free enterprise nirvana of the United States. The current Daily Mail editor came back: ‘enthralled by the energy of the free market... the power of the free market, as opposed to the State, to improve the lives of the vast majority of ordinary people.’[5] Perhaps it was contemporary tabloid depictions of the struggling social democratic state that helped Dacre form this view during that 1976-79 period in the US.

Certainly, the related monochrome image of the 70s landscape as grey, industrial, blotched with council housing, strikes and civil disorder has been central in more recent literary and dramatic narratives. TV’s time-travel, cops ‘n robbers series, Life on Mars, for example; with its colour contrasts between the vivid 2000s and grey 1970s and its football hooliganism and striking worker plots. As contrarians have, largely unsuccessfully, tried to point out, these depictions would have seemed strange to both the glam rockers of the late 70s and the mass of the population whose combined quality of economic and environmental life, according to one formula, was higher than anything since.[6]

Nor did the country as a whole subsequently embrace Thatcherite neo-liberalism to the extent that established memory often implies. It is worth repeating a troublesome electoral fact for that claim. The combined votes of the erstwhile ‘socialist’ Labour Party and its social democratic rivals in the Liberal/Social Democratic parties alliance, comfortably exceeded those of Mrs Thatcher’s Tories in both 1983 and 1987. A majority of the voting population preferred social democracy or something stronger.

Ed Milliband’s Labour Party seems to be taking a few, highly tentative steps in the direction of an updated social democracy . If it is, then Labour – and its supporters – need to reclaim the imagery of social democracy’s demise by identifying its neo-liberal assassins and to refute the false memory syndrome laid down and perpetuated by right-wing and Establishment media. It was, arguably, the failure of the New Labour project to attempt such a challenge that led ultimately to its capitulation to neo-liberal policies, and electoral alienation from the constituencies who have suffered most from the not-so-strange death of social democracy.

Bryn Jones is an ex-Labour Party member and co-author of 60s Radicalism and Social Movement Activism (Anthem Press, 2012). He teaches and researches at Bath University. 



[1] Joe Rogaly: Grunwick, Penguin 1977, pp 77-78

[2] Reviewed in: Bryn Jones. Neo-liberalism, the Politics of Social Memory and the Strange Death of Social Democracy, paper for the British Sociological Association Annual Conference, London, 3rd April 2013.

[3] Sources: Chantrill, ukpublicspending.co.uk,

[4] Sources: Chantrill, ukpublicspending.co.uk,

http://www.ukpublicspending.co.uk/spending_chart_1970_2015UKp_13c1li011tcn_G0t;

How UK incomes have risen (and fallen) since 1948, http://www.telegraph.co.uk/finance/economics/8414447/How-UK-incomes-have-risen-and-fallen-since-1948.html;

Historical Information on the UK Tax Regime. Historical Tax rates and Allowances

http://www.taxhistory.co.uk/National%20Insurance%20rates.htm;

Tax receipts since 1963, Guardian Datablog, http://www.theguardian.com/news/datablog/2010/apr/25/tax-receipts-1963

[5] Bill Hagerty 2002, Paul Dacre: the zeal thing, British Journalism Review, Vol. 13, No. 3, pp. 11-22.

[6] Peaking at between 180 and 160 between 1976 and 1979, the Index of Sustainable Economic Welfare fell to just above 100 (1950s levels) in 1987. It did not approach the 1970s levels until 1999: Tim Jackson, 2004, Chasing Progress? beyond measuring economic growth. London: New Economics Foundation.

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