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Wednesday, 21 March 2012

National versus Local Pay Rates: Part Two

More millions of migrant Chinese are moving into the cities, where they accept low-paid jobs in terms of the average incomes of residents of that city. Migrants leave behind their homes, their parents, often their partner and their child; because they see no chance of entering the consumer economy in their native villages. In the city the 'lucky' migrants get jobs requiring seventy hours a week attendance, often in repetitive but meticulous tasks. They get low wages - even by the standards of that city - and they sleep in cramped and unhealthy conditions The gain that comes from such pain is that they are able to buy some desired consumer goods: and on their rare, brief visits home they can take commodities - including rare western-branded [possibly fake] items which would never otherwise break in to the constricted economy of their home villages. Many migrants are inspired by the hope of being able to bring enough money back to the village to rebuild the house, and take on more farmland or start a business there: some achieve that, but the majority come to accept the alternative aspiration to bring their partners into the city  - or to marry somebody met in the city - and aspire to own an apartment. Some learn business acumen and acquire the requisite technical ability to rise within the company that has employed them, others can branch out into their own businesses and have the chance to build fortunes; though the 'shadow banks' that are the only source of capital available to many such people to accelerate the growth of the business often bleed them dry or capture their businesses.

The geographical mobility of people within the country and the openness of the economy to entrepreneurial success that characterise contemporary China were strongly approved in Britain from the days of Dick Whittington [Mayor of London in 1397, and of London and Calais simultaneously in 1407] to the nineteen fifties. The proto-statisticians Petty and Graunt [1668] demonstrated [in their Observations of the Bills of Mortality] that many more people died than were born in London, inferring that the dynamic growth of the City as the hub of trade for the whole country depended absolutely on immigration. Many of the migrants lived short and deprived lives ending in an early death: but always some prospered hugely and their stories attracted others to try their luck. Social mobility increased with rising prosperity and in the eighteenth century exceptional individuals were able to implement inventions and create world-beating businesses: great names from the era include Wedgwood, Boulton and Arkwright who built their businesses well away from London [though they marketed their products through London and relied on the system of patents that was administered from the capital]. The nineteenth century was the great era of innovative industrial capitalism, but even now exceptional individuals like Sir James Dyson demonstrate that the route is still open to high-quality graduates: though it is now much constricted by the dominant alliance of rotten politics and degenerate education.

When was the turning-point? When and how was the long-prevalent dynamic spirit extracted from the British economy? It seems to me that the narrow defeat of the radically reformist Labour government in 1951 foreshadowed the catastrophic events by which - over the next half century - the British economic and social systems were set in reverse.

The king who had supported Churchill and triumphed over huge personal stresses died early in 1952 and he was succeeded by his young daughter, Princess Elizabeth. The new Queen's reign began with the anomalous near-octogenarian Winston Churchill as Prime Minister. He was a deeply ambiguous character who had been an enthusiastic member of the most radical government that the country had ever had, between 1906 and 1914, when the Liberal majority in the House of Commons [with lukewarm support from the few Labour MPs] introduced pensions for citizens over seventy, unemployment insurance and medical  insurance for the working man, and the widespread grant of cash benefits - rather than automatic committal to the workhouse - for the [economically] 'impotent poor'. Despite this radicalism, Churchill as Home Secretary was blamed for soldiers shooting striking miners in South Wales, earning the lifelong enmity of a core cohort of trade unionists and contributing to their determination to create their own political party - Labour - on the assumption that the Liberals were not to be trusted. Labour precipitated the dramatic decline of the Liberals' electoral support after the First World War, bolstered by the radicalism of many women who had been given votes for the first time. Churchill accepted Stanley Baldwin's invitation to change sides in the Commons and became the Chancellor of the Exchequer. The subsequent collapse of Baldwin's government in 1929 put Churchill out of office, as a member of the Conservative party where he was little trusted and not widely liked. In exceptional circumstances he emerged as Prime Minister of a coalition government in 1940, and that government laid the plans for a post-war welfare state to which he declared his own adherence. Labour won the 1945 election by a landslide, notwithstanding the personal popularity of Churchill who had been appointed officially as Conservative Party leader, and the Labour government combined the introduction of the welfare state with a major programme of nationalisation of basic industries and utilities, that the Conservatives vigorously opposed.

Churchill's 1951 government inherited the nationalised industries and the new National Health Service, and took on the military burdens of the Korean War and other overseas campaigns to arrest the spread of communism. Finances were very tight; wartime rationing and price control over many consumer goods was retained. The huge loan that had been provided by the USA to help postwar reconstruction had largely been dissipated to alleviate austerity: imports of American films, stockings and cosmetics soaked up dollars that had been intended for  machine tools and farming machinery. A balance of payments deficit continued and it was clear to Conservative political strategists that they could only win elections by offering people a rising standard of consumption of branded goods, without rationing, in combination with the welfare state. This huge support for consumption rather than production would obviously make the negative balance of trade worse. Churchill was followed by his long-standing 'heir apparent' Anthony Eden who collapsed under the stress of the Americans' repudiation of Britain's 'intervention' in Egypt - the Suez Campaign. The next Conservative leader was at the extreme 'left' of the party, a millionaire supporter of the welfare state, Harold Macmillan. He won the 1959 election by promising to develop both the Health Service and the rise of consumerism: and he could point to his track record as Housing Minister. Wartime bombing and demographic change had meant that by 1950 the country needed at least a couple of million new homes to provide the population with what every family regarded as a basic necessity, and in the early 'fifties Macmillan had led a ministerial team that pushed through the tangle of planning laws and supply controls to orchestrate the amazing achievement of building more than 300,000 homes each year [something the present government dare not even aspire to].

Macmillan's election slogan - You've never had it so good! - both reflected the mood of the times and was simply true: most voters had never previously had so much social security, health support and access to consumer experiences: television, record players, fitted carpets, bathrooms, constant hot water [and, in more households each year, central heating], washing machines, cars and even holidays in Spain. The concept was embedded into electoral politics, that the Labour Party could only beat the Conservatives if they could convince voters that they would enable people to retain their gains in standard of living and, in addition, that a Labour government would provide improving health, social and educational services. By 1960 it was clear that the policy of encouraging consumption [especially as a growing minority of the population were maintained n benefits that were set at levels that allowed a 'reasonable' living standard] was causing government spending to increase; in some years at the cost of increasing the national debt. The balance of payments steadily got worse. The Labour leader, Harold Wilson, captured the principle that the economy had to grow quite spectacularly if the delusional consumerist state was to be maintained: how was the necessary productivity boost to be achieved? His answer was to enlist pure and applied science: wealth was to be generated by the 'white heat of technology'. On this slogan, with the electors displaying widespread boredom with the Conservative government, Labour narrowly won the 1964 election. A larger majority was obtained in  a snap election two years later, even though it was becoming apparent that technology was not a magic force: so the government turned to the old socialist idea of comprehensive economic planning.

By the late 'sixties the policy of plenty combined with worsening balance of payments was producing rising prices. The trade unions began a round of strikes, that made nonsense of the targets that had been set in the National Economic Plan. The government party depended on the financial support of the unions, whose leaders were increasingly at odds with the government. The government tried to control the situation by legislation and became factionalised: in 1970 they lost power to a superficially renovated Conservative party which quickly lost control of labour relations as inflation increased: then inflation was stimulated further by a huge increase in the global price of oil.

By 1970 it was inescapable that the way in which the two 'parties of government' competed by offering the population better and better living standards without requiring commensurate increases in real national earnings was undermining the economy. Rising inflation of prices was being met by increasing demands for more wages, in which the trades unions were usually successful. The declining Wilson government divided into acrimonious factions in the late 'sixties, in response to a paper - In Place of Strife - adopted by the Secretary of State for employment matters, Barbara Castle, which would have subjected pay demands to government oversight and to the possibility of a veto. It was thus a deeply divided Labour Party that lost the election of 1970; ceding power to Edward Heath's supposedly 'technocratic' Conservatives, who had no satisfactory understanding of the fundamental problem that had been embedded on the economy. The Tories quickly superseded Labour as 'the worst-ever government': and the sad saga of the 'seventies will from the next episode in this series of blogs on National Versus Local Pay Rates.

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