Economic Theory

The proto-Corbyn years of the 1970s were awful


Trade, Development, and Immigration
During the late 1990s and early 2000s, think tanks such as the IEA had a difficult time. We were told that the argument for the market economy had been won. A so-called neo-liberal hegemony had been created, and even a Labour government had accepted free markets.

Meanwhile, water was being poured into the foundations of our economy. Gordon Brown promoted a huge system of income redistribution that has led to most families with children facing the loss of 70p in every extra pound they earn. There was an enormous increase in the amount of employment regulation and financial regulation. The energy industry was almost renationalised through the back door, with the government once more deciding what types of energy should be produced at what prices, and blunting competition.

The tide has not turned with the Conservative government. It is also expanding financial regulation, intervening more in the labour market and we even have Transport for London wanting to regulate Uber in a way that would have befitted the 1970s Labour government at its worst.

But however bad policy is today, it could be worse. Indeed, two-thirds of people believe that the energy sector should be renationalised, despite a near 30 per cent fall in prices in the period when the government promoted private ownership, deregulation and competition.

And we have been reminded of how much worse things could be with a series of policy pronouncements by the new Labour leader, Jeremy Corbyn. Not only does he believe in nationalisation and central planning, he also is willing to countenance the central bank printing money to directly finance government expenditure.

Robert Miller, who many years ago wrote a superb book about the tragedy of exchange controls, has reminded us how bad things could be, in a new co-authored IEA publication. In Britain’s Baker’s Dozen, Miller and Peter Clarke look at 13 of the worst policy mistakes since 1900. Some of them are still with us. The welfare reforms of the early 1900s might ultimately end in financial disaster as the country’s population ages. And our land-use planning system is the main reason why most readers of this column cannot afford to buy a house.

But, it was during the post-war period, when continental European countries were (at least relative to Britain) liberalising whilst we were following policies of high taxes, monetary laxity and state ownership that the economy under-performed so badly. For example, from 1955 to 1963, German productivity rose at more than twice the UK rate.

And these policies are being proposed again. The economists, and other advisers, such as Richard Murphy, from whom Corbyn takes counsel, believe strongly in government planning. His shadow chancellor believes in much higher taxes – despite the fact that higher taxes on the rich will lead to lower revenues, as Clarke and Miller explain – and therefore to higher taxes for the poor as well.

Economic performance was awful during the “proto-Corbyn” 1960s and 1970s. Britain was a country of industrial conflict, grime and stagnation. One ironic event described by Clarke and Miller illustrates the failure of central planning. When Harold Wilson’s government revealed its national plan in 1965, it sold out. Too few copies had been printed. The government could not even plan properly the printing of the document that told the private sector what resources would be needed in each industry over the next generation.

We must fix the items in the Baker’s Dozen that are still afflicting us, and not return to the errors of the past. And to ensure that we do not repeat those mistakes, we must understand our recent economic history.

Prof Philip Booth is the IEA’s Editorial and Programme Director. This article first appeared in City AM.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

1 thought on “The proto-Corbyn years of the 1970s were awful”

  1. Posted 05/10/2015 at 15:11 | Permalink

    “And our land-use planning system is the main reason why most readers of this column cannot afford to buy a house.”

    Yet we see the highest house prices, where the supply of housing is also at it’s greatest. We have seen this in every Country in the World throughout history. But no, we are told by the IEA. Everything must be the fault of rules and regulations, so a large city of people and high house prices can only be coincidental.

Comments are closed.