The 70s? Not again.

If you remember the 70s then you weren’t there. That was the oft-cited summary of the time as shrouded in a narcotic haze. I, however, do remember the 70s quite clearly. And the recurrent theme for me was largely the noise of class conflict (and Supertramp).

Yes I was a teenager with flared trousers and cowboy boots; but in a firmly Tory-voting household. My parents were even part of the local Conservative Association as were most of their friends. 

My parents were worrying about money as the real value of my father’s salary dropped. Still candle-lit evenings during power cuts were quite fun. And in absolute terms, we were very well off, but relativities tend to be what matter most to people.

One thing was very clear though: my parents had no time for unions. In their minds, they were holding back the country with their unreasonable and inflexible demands. And they were hand-in-glove with the Labour government. My father, as a manager in industry, claimed to see this at first hand.

Unemployment soon doubled after Thatcher took power but the blame for the crisis had already been very effectively laid at the door of the unions and the Labour government.

They weren’t alone. “Labour isn’t working” was the famous Saatchi & Saatchi-devised slogan that drove the Conversative Party’s 1979 election victory. Unemployment soon doubled after Thatcher took power but the blame for the crisis had already been very effectively laid at the door of the unions and the Labour government.  My parents shouldn’t have been so worried. 

Out of this conflict, Thatcherism, Reaganomics and neoliberalism rose to dominance, overturning the previous Keynesian consensus. There was a new narrative of globalisation, entrepreneurialism and individualism. And the trend towards more equality in the global north began to reverse as the power of unions faded. 

Development in the global South was also dealt a major blow. The huge hike in interest rates in the 1980s by the US to “control inflation” caused a financial crisis in many developing countries pushing them into the arms of the International Monetary Fund and World Bank, who demanded austerity in return for bailouts.

So are we there again?  There are a number of parallels.

Claims told enough times can become perceived as truth even if they have very limited evidential support.

As with the 70s, the main cause of inflation seems to be a supply shock. Then, it was  the huge hike in oil prices driven by the newly formed Organisation of the Petroleum Exporting Countries (OPEC). Now it is energy, food and commodity price rises driven by war, Covid and more controversially, concentrated economic power.

As with the 70s, the UK government is seeking to shift the blame for the current crisis onto unions and workers demanding pay increases. They are claiming they will cause a “wage-price spiral”, which many commentators find unconvincing. But claims told enough times can become perceived as truth even if they have very limited evidential support. 

And again like the 70s, the main policy response being promoted is to raise interest rates with a potential for a rerun of the 80s debt crises particularly for the global South.

But there the parallels seem to end. So far the most prominent union leader, Mick Lynch, is being feted as a media star and searches for “join a trade union” were up by 10% in the US and UK in the first six months of 2022.  In the world of gig economies, the value of unions could actually be rediscovered, particularly by many who have no memory of their previous role and indeed dominance.

However the biggest difference is that in the 70s, freeing markets could be sold as the solution to the crises, upending the post-war consensus and ushering in a new ideological age.  Now we have had 40 years of the great neo-liberal experiment and its shine has certainly dulled.  So as the 70s inflation crisis ended an era, could our current crisis finally bring an end to our current ideological rut?  If so, what is the new ideology and who is going to lead it?  Who, indeed,  are you gunna call?

In this issue Ann Pettifor and Steve Keen discuss the state of the political economy in the current crisis, the parallels with the 70s and where we can maybe find some hope, while Alex Tziamalis and Yuan Wang propose that underlying structural issues driving inflation are not going away anytime soon, and Frances Coppola in her column explains that it all comes down to supply.

Those on the poverty line around the world are likely to be pushed (further) into debt so we look at their access to credit. Grimot Nane suggests microfinance is never going to be the answer and Nick Bernards considers the new fintech version as more of the same inadequate solution. Tom Levitt sets out a new system for fair access to credit in the UK, while Anthony Uagboe talks about his initiative in Nigeria to include small traders in the banking system.

Amid calls for a fairer tax system, Paul Frijters suggests it is time to revisit an old approach to taxing the powerful. Rick Rowden helpfully reviews a book proposing how the international finance system can be fixed, James Patriquin and Caroline Shenaz Hossein how national regulation of financial systems could have unintended consequences and Katy Weis looks at the importance and inherently undemocratic nature of EU financial regulation of Member States.

As we look for hope from the green agenda, Richard Douglas sets out why escaping growth dependency should be the new narrative, Bruno Bonizzi explains why better pensions help the climate and Mandy Stoker looks at the realities of emerging carbon credit markets.

Last but not least our own Verity Bastion remembers her heady days in the 70s at the heart of the action in Chicago.

Wishing you a good break over the summer at least if you are in the Northern Hemisphere.

Henry Leveson-Gower

Henry is the founder and CEO of Promoting Economic Pluralism as well as editor of The Mint Magazine. He has been a practising economist contributing to environmental policy for 25 …

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