by Norman Stone
The economy itself was losing the lead that it had had over all others, and, again, inflation had much to do with this. Unions, on the whole, could resist it, at least in the big industrial firms, where blue-collar wages kept up. Labour was all-important for the Democrats, and AFL-CIO grew, up to 1978, as ‘corporatism’ prevailed, but it was increasingly not so much blue-collar workers as soft-professional teachers in the lead. There were alarms as to the competitiveness of American industry. Kenneth Hopper, a Harvard Scottish warhorse, noted (‘American Machinist Special Report’ of July 1970) that output per hour in factories had increased by 20.1 per cent between 1961 and 1965, but by less than half of this figure in the following five years; the growth in take-home earnings fell from 23 per cent to −1.5. The point was that ‘of the major nations of the world, the US reinvests the lowest proportion of its GNP’ — 16.6 per cent as against 23 per cent in Germany and somewhat more in France, or 34 per cent in Japan, such investment including machinery and housing. In engineering, from the mid-fifties onwards, investment was far lower, per $1,000 deliveries, than in Europe or Japan (about $12 as against $60-80), and fixed assets were even below England’s. There was some official dishonesty involved in defence of this: a strange myth was propagated by the OECD that American equipment was only four to five years old, that investment had really been quite adequate, that overinvestment needed to be taxed. The Department of Commerce knew better. America, or parts of it, had been vastly spoiled and had not had to work; even in 1968 some essential structures were over fourteen years old. Congress sometimes ascribed the inflation to business’s desire for capital investment, but in fact new equipment was indeed needed, and what had confused the figures was tax. Depreciation allowances were unreal, and old equipment was recorded as relatively recent. There was also much grumbling that Americans had a low propensity to save (6.1 per cent of their income, whereas the German figure was 13 per cent and the Japanese 20 per cent). But only a fool would have saved in countries where inflation ran in double figures and interest rates in single (or, after tax, half of these).
This was an era when the vast industries and dam projects of the New Deal era lost ground. General Motors, ITT, Union Carbide, US Steel went on in the old way: Cadillacs and Chevrolets were much the same as before, representing strange and classless aspirations for boat-like motor cars; but the Japanese were more subtle. The American share of automobile sales went down from 32 to 19 per cent, of steel from 20 to 12 per cent, and in manufacturing generally from 26 to 20 per cent (1981). The standard of living fell below that of Germany or Sweden, as the GDP per head stood at $6,000 to Switzerland’s $7,000. All in all, much of American industry was now ‘rust belt’. The trade deficit with Japan rose ten times in a few years (to 1978) to $11bn and Japanese goods accounted for a quarter of imports. A good part of the economy appeared anyway to be unreal. In January 1968 credit card debt amounted to $1.5bn, 5 per cent of which went on car loans, and by 1982 grew to $64bn (and by 2004 $576bn). The great new fortunes were built on borrowed money, and inflation now helped to wipe out the debts. Meanwhile, governments struggled to find money for essentials, and America’s infrastructure was shockingly bad. The notion of a direct rail link between Kennedy airport and Manhattan was beyond America’s powers, and no new runway was added to Los Angeles airport between 1970 and 2000. Health care in the United States became yet another piece of black-humour surrealism: a great deal of money spent, but 50 million people not covered by the existing system, such that infant mortality was greater than in blockaded Cuba.
The Great Society was running into the sand, and so were the Democrats, now badly divided between Northern, liberal wing, Southern illiberal wing, and corrupted city-boss body. By this time, there was no commanding figure on the Democrat side to stand for the presidency, and ‘Jimmy’ Carter emerged, from a peanut farm; he had been Governor of Georgia. When his mother was told that he was standing for the presidency, she reacted: president of what? He scraped in with 40.8 million votes to Ford’s 39.1 million. Carter’s regime symbolized the era (1976-80). It was desperately well-meaning. It jogged; it held hands everywhere it went with its scrawny wife; it prayed, Baptist-fashion; it banned smoking where it could; it sent bossy women to preach human rights in places where bossy women were regarded as an affront to them. There was a whole lobby around these in the Carter administration, and it took over part of the State Department. Carter’s initial idea was to make the presidency popular: hence jumpers and jeans, and a dispersal of the Nixon trappings (the parade ground uniforms were sold to Bolivia). The man started his day at 6 a.m. and was generally exhausted; his wife was somewhat more ordered, and sometimes attended Cabinet meetings. There was fighting between the State Secretary, Cyrus Vance, who had had direct experience of Vietnam, and Zbigniew Brzezinski, as National Security Adviser, who resented the world’s not putting him on the same level as Henry Kissinger. He was one for verbiage: ‘the need is not for acrobatics but for architecture’ were his words of wisdom to the world. Carter was a hapless fellow, everything, sunny side up, curdling: even after his lengthy retirement, as he kept pushing himself forward as a sort of sexless Clinton, the pattern prevailed, as North Korea fired missiles over Japan about two weeks after Carter had announced that she did not have any, and as Haiti collapsed into mayhem after he had announced that the great and good had come to power there. There was a similarly naïve attitude to matters Soviet. Carter scrapped the B1 bomber unilaterally, and cancelled the neutron bomb (telling an enraged Schmidt only later). There was also an absurd neglect of the Soviet navy — the expansion of which went back to the Cuban Crisis in 1962, after which 1,323 ships of all classes were built, to the Americans’ 120 major surface battleships and 188 nuclear submarines. In 1975, through Cuban proxies, the Soviets moved into Angola; and Ethiopia collapsed, on the edge of the now volcanic Middle East.
This regime will be remembered only for its failures. Of these, inflation and the mismanagement of the oil problem were the worst, and together they badly weakened the country. The only success of the time was the Egyptian-Israeli agreement (Camp David in September 1978, followed by the treaty in March 1979, but its Egyptian maker, Sadat, despised Carter so much that he did not even say in advance that he proposed to visit Israel). Carter’s worst failure came over energy policy. The great problem was American. There was huge demand for the oil companies to be controlled because of what were said to be ‘obscene’ profits (the word probably intended was ‘obese’ but the misuse has stuck). True, the profits had been enormous, rising from $7bn in 1972 to $16.5bn two years later, because oil which had been bought at the old price was sold at the new, and chemical operations had also flourished, given the weakness of the dollar, which encouraged exports. But the companies had been nationalized abroad, and their profits overall were, if anything, somewhat below the American average. Besides, oil policy had become a terrible tangle. Nixon had imposed price controls in 1971, to stop the then prevailing inflation of 5 per cent, and these had been kept, with extraordinarily complicated rules, for oil. The standard reporting requirements for the Federal Register required 200,000 respondents and five million man-hours; and ‘for the oil industry [it] became more important than the geologist’s report’. The direct costs ran into thousands of millions, and there were tales of extraordinary waste and maladministration. The regulation was meant to ensure fair shares, and to bring back refineries that had been kept out of service. It seems only to have profited lawyers. Administrations lurched, unwilling to accept that the price mechanism was in the end valuable. President Gerald Ford, in January 1975, talked nuclear power and coal; ecologists went to town. However, two things were at last put through. The Alaskan Pipeline, set to cost $10bn, was allowed; and in 1975 American automobiles had to have fuel efficiency standards. In 1977 Carter took over, appointing a multipurpose warhorse, James Schlesinger, as his maker of energy policy, in effect hoping for rationing because a CIA report of 1976 had predicted another oil shortage. In his plaintive moraliz
ing way, Carter wanted oil use to be subject to even greater regulation, and proclaimed (April 1977) ‘the moral equivalent of war’, subsequently dismissed as the acronym ‘MEOW’. The point was that US oil prices were well below the world level, with absurd effects — the US at times even subsidized imports. A complicated effort was now made to revive coal, and to loosen the controls on natural gas: a very good time for lobbyists. Utility companies, oil producers, liberals, ecologists, coal producers all fought, and Schlesinger himself said that the decontrolling of natural gas had been ‘Chinese water torture’.
It was true that America was experiencing tissue regeneration under all of this. Whereas in other countries people tended to stay close to where they were born, Americans packed their bags and moved. Modern industries could shift, given air-conditioning technology, to the old South, the south-west and California, now gaining population at the expense of the north-east, and by 1964 California, with 30 million people, had become the largest state, Texas soon following. Shoots of ultramodern industry were coming up, and much ingenuity was shown as regards substitutes for oil. But the middle and later seventies were a demoralizing period.
17. ‘The British Disease’
The overall Atlantic crisis was displayed at its worst in England, where the entire civilization had — with a Dutch contribution — started. The positive sides were enormous: the rule of law, the Industrial Revolution, a habit of non-violence in politics. France, rights of man and all, had not contributed anything like so much to the world and, comparing British experience with French, Edmund Burke had said, ‘We go from light to light; we compromise, we reconcile, we balance.’ In the nineteenth century the British had had to face the problems of the modern world, the organization of what came to be called ‘mass society’. They had done so, preserving and adapting old institutions, using them for new purposes. For instance, local administration was carried out through the vestry, and the Church of England had a social role; the colleges of Oxford and Cambridge, which were originally religious places, of a sort that collapsed on the Continent, made for world-class universities. The oldest and most adaptable of these institutions was of course the monarchy itself, and in 1953, when Queen Elizabeth II was crowned, complete with archbishop, sacred oil, orbs and sceptres, it was an extraordinary spectacle, watched by tens of millions on the relatively new black-and-white television sets. A film-maker of genius, Lindsay Anderson, remarked, later on, that the monarchy was a gold filling in a mouthful of rotten teeth. That fitted the England that emerged, a generation after the coronation. However, the early fifties were a good time. Western Europe was not yet quite competitive, British exports did well, and there were good markets in the old imperial area. Decolonization during the 1950s had been, at least in comparison with French experience, a success, and the new Queen became a considerable expert in it. At home, taxes on income were absurdly high, but there was no tax on fortunes made out of equities, and the banks were generous with overdrafts, charging a low rate of interest. The old England (and Scotland) had an Indian summer, and the great Victorian cities, with Glasgow in the lead, were still the great Victorian cities of industry and empire. But the later fifties showed that this could not last.
Her worldwide troubles in 1947 had led to the creation of an Atlantic system; now, her domestic ones revealed its central weaknesses. The great British economist John Maynard Keynes had somehow lent his name to the Pursuit of Happiness: he could reconcile welfare with progress. Government waved its wand, the poor had money transferred to them from the rich, spenders were encouraged rather than savers, the economy grew accordingly, and unemployment was kept low. ‘Keynesianism’, though no-one could quite pin down the Master, reigned, and dissident economists were unfashionable, or even slightly ridiculous. Their chief argument against Keynesianism was that it would promote inflation: if governments overtaxed then money would go abroad, and an overhang of paper money would translate into higher prices; in the end, when workers, through trade unions, wanted higher wages to defend themselves against a rising of basic prices, then they would expect inflation in the future, and want even higher wages. That would in turn add to the paper money and to the inflation. There were a few bright sparks who suggested that there was a relationship between the amount of paper money and pyramids of credit on the one side, and rising prices on the other. This was called ‘monetarism’. Such bright sparks were not fashionable. In the sixties, the Keynesians made the running, had the answers, were constantly in the newspapers and on television, and then, in the seventies, ran into very choppy waters.
The oil crisis had its worst effects here, and the quadrupling of energy prices pushed England into a trouble that called in question the whole post-war order. Strikes in the seventies meant that the average worker was not working for nearly a fortnight every year (‘average’ is not the right word: large unions alone were involved, and not all of them) whereas in the fifties the figure had been three days. The Prime Minister, Edward Heath, who had the face of a large and angry baby, would harangue the nation on a television that was switched off after 10 p.m. In 1974 he launched an election distinguished by the abstention of 2 million of his natural supporters, lost, and was replaced by a man who pandered to the unions. The Stock Exchange sank to a pitiful level and banks went under. The country was about one third as well-off as Germany, and in parts of the North there were areas that even resembled Communist Poland. In 1970 a rising figure in the political-media world of London, Ferdinand Mount, remembered that, from the capital, ‘the main railway line to the north passed through great swathes of devastation — industrial wastelands with rows of roofless workshops — the roofs had been removed in order to avoid taxes’. Why had this decline come about, in a country which, after the war, had been still the second-greatest exporter in the world? It was partly that the pound had become a very strong currency, and latterly because there was oil in the North Sea, but the fall of exports was really to do with ‘poor quality, late delivery, trade union restrictions, timid and defeatist management’. In fact Keynes himself, towards the end of the war, had bitterly hoped that the Germans would still have enough bombing power to obliterate some of the worst-managed industries. As things were, the obliteration happened painfully a generation later.
There was of course a great British problem, that the old industries had been the very first in the world, and, to a lesser extent, that their old markets were declining. In its way, the London Underground symbolized the entire national problem. It had been the first network in the world and was a triumph of engineering in the 1860s. But back then tunnels had to be extremely deep, whereas a generation later engineering had advanced and the Paris metro, say, was far shallower. London was stuck with a museum piece, and still is (the government at the time of the Millennium opting, quite characteristically for governments of the epoch, to build an entirely pointless structure, the Dome, at great expense instead of appealing to Londoners to put up with trouble for five years in order to have a state-of-the-art transport system). British industry entered upon a decline, and the means selected to stop it only made things worse. The facts were indeed as Ferdinand Mount had said, an awful litany of uncompetitiveness, and it had happened to other country-empires in the past. An economic pundit of the sixties, Thomas Balogh, opined that England was going the way of Spain: she too had run an empire upon which the sun never set, and in the seventeenth century had declined very rapidly, as the contrast, to this day, of North and South America shows. But this was the wrong parallel. There was a much closer one, with Holland. The British Empire had not been, like Spain’s, a military-religious affair, involving wide settlement and the forcible conversion or assimilation of natives: it had been, like Holland’s, a commercial business, and it was abandoned when commercial logic dictated as much. Once India had gone, in 1947, there was little sense in trying to retain the rest in the face of local nationalists who, if given their way, would agree to keep the commercial ties going.
In fact the thirties had se
en what amounted to a collapse of prices in the goods that made empire worth the game, and in any case the expense of running empire became prohibitive, especially after the Second World War. In the mid-fifties the imperial trade was still larger than the non-imperial, and there was a last flourishing of old exports and capital investment. But then Europe recovered spectacularly, and these markets counted for more and more, quite soon half of British trade. Governments in the later fifties therefore wanted rid of colonies; a process of decolonization got very rapidly under way. The older colonial hands (and some of the younger officers, who were hard-working and idealistic) knew that problems on the ground were not simple, that decolonization was not a matter to be rushed in case majorities coalesced around expropriation or worse of minorities. That was to be the pattern in many places, from Burma to Cyprus, but by now the British had had enough of these endless insoluble problems, and colonies were abandoned, helter-skelter. There was a formula: identification of least unpalatable power-wielder; minor member of royal family declares country open; Union Jack wobbles down masthead, cock-feathered-hatted governor at the salute; a few tears here and there; old hands stay on, to manage schools; new hands arrive, as advisers; native dances begin; new flag wobbles up; new anthem is sung; parliamentary mace is handed over; mayhem begins. Opinions vary as to why this happened and as to whether the British could have avoided it; but at any rate they were able to walk away with very, very few casualties, and kept bases and markets.
