by Norman Stone
Later on, Mrs Thatcher did admit that she wished she had handled some of the real, longer-term problems earlier. This was right: Britain became a country where local government, education, health and transport were sometimes lamentably behind those of other European countries. However, there was always the excuse, a perfectly fair one, that major enemies had to be disposed of first. ‘The conflict between good and evil’ was what Mrs Thatcher saw at work in British politics. Nationalized industries, an absence of competition, parasitical trade unions, inflationary finance and taxation which destroyed the most valuable habits and institutions: these had to be defeated. She had already chipped at the unions’ privileges — the right to picket had been limited, and in 1982 individuals’ rights as against their unions were greatly increased (union funds became liable for damages in the event of unlawful action). Public service strikes had occurred, and perhaps, through calculation, had been allowed to last longer than they needed to do before being settled: inconvenience or worse to the public from transport or civil service unions was a great help to the government. But early in 1984 the challenge came from what had been the most troublesome element of all, the National Union of Miners. There was some play-acting involved in this: attitudes being struck. Arthur Scargill was an extraordinary fellow, who thought that he could overthrow the Thatcher government as other miners’ leaders had defeated Heath’s. This was to mistake the enemy. The Thatcher government (in this case, Nicholas Ridley and Nigel Lawson) had made sure that there were reserve stocks of coal, for energy and heating. The police were better paid so that their loyalty could be rewarded. A sustained effort was also made to persuade the trade unions of ‘a new realism’ (the phrase used by their general secretary, Lionel Murray — characteristically in the new England, ‘Sir Len’). Some — the electricians, who understood what could be done with computers — were to be easily persuaded. Scargill, and some old-fashioned unions, had to be defeated. At the time, this appeared to be an all-important cause if England were not to sink into the ‘Third World’ status that so many people predicted for her.
Meanwhile, Scargill had said that opposition of an extra-parliamentary order was legitimate, the government not having had a majority of the vote. In characteristic apocalyptic style, he announced that ‘extra-parliamentary action will be the only course open to the working class’. What he meant was action contrary to his own union’s rule book. He could on his own authority organize a banning of overtime. He could only organize a strike by flouting rules to gain a majority, which he did, in a tradition that went back to Lenin’s own management of the Russian socialists in 1903: ‘Bolshevik’ means ‘majority’, the first, in this case, of many lies. But the government’s intelligence connections were sufficient for a rival union, based on profitable pits with the chance of substantial wages, to challenge Scargill. The Coal Board was now managed, not by comfortable upper-class appeasers of the Carrington class, but by an elderly Scots-man, Ian MacGregor, who had been brought back from America and who knew a great deal about managing such matters: he had already proved his worth at British Steel, though, there, he had had intelligent union leaders to deal with. He announced that loss-making pits would have to be closed, that a third of the miners (70,000) would have to be given compensation, and Scargill responded absurdly, as if he wanted all of his men to continue with their obsolete, filthy and dangerous jobs. He banned overtime in October 1983, and then, with ridiculously inappropriate timing, started a strike on 6 March 1984, at the end of winter. Most productive pits did not follow; attempts to picket and stop the (Nottingham) miners failed, despite a murder, because the police were firm. Scargill, with a baseball cap that went badly with this image of the last Leninist insurrection, failed to break through a police line. Then again, the power stations functioned, because stocks of coal were high, and imports, even from Poland, a supposedly Communist country, went ahead. This time round, government legal action was successful, as it had not been in 1972. In August, for instance, some of the miners took their own union to court over its failure to stage a proper strike ballot. A writ was even delivered at the Labour Party conference. Scargill tried to involve other heavy-industrial unions, the famous ‘triple alliance’ of coal, docks and railways which had been very effective with strikes in the past, back to before the First World War. The government had already managed to privatize some of the docks, and the pockets of dockers who still maintained a local monopoly were isolated and relatively powerless — as well as, in Liverpool, bereft of sense. The railwaymen were simply bought off. This time round, new technology — always an enemy of these old unions, at least if they had an unregenerate leadership — had weakened the old guard. British Steel, for instance, managed with Ro-Ro and free ports; it would no longer be held up by absurd dockland practices, which in the Heath era had involved gangs simply standing, watching other gangs do the work. There was much sentimentality as to the ‘communities’ of the miners, and efforts were made to enlist middle-class sympathies, which had mattered so much in the seventies. But in the end Scargill had a self-destructive urge, and, early in 1985, the strike crumbled. Yes, it had cost a great deal — the Coal Board had losses of over £2bn. MacGregor himself, who had been less forthright, in private, than Margaret Thatcher would have wished, was dissociated within weeks. Curiously enough (and an echo of earlier patterns) the loyalist miners and civil servants were not rewarded, getting only small pensions. It would have been fitting had they been given decorations, but the honours system in England was for appeasing enemies rather than rewarding friends. Still, the old industrial unions, which had made so much trouble for earlier governments, Labour and Conservative, had in effect been defeated.
Coal and railways were of course the old world. One of these union troubles concerned the new — at that, an immensely important part of the new: the media. The British press had been greatly respected, especially The Times, and it generally managed its affairs with genial informality that somehow, mysteriously, produced results (there was a practice of shutting the leader-writer in a room with a typewriter and two bottles of wine, which went on until one such writer was found slumped over his machine, having typed the word ‘notwithstanding’). Under William Rees-Mogg, in the later seventies, economic journalists such as Peter Jay or Tim Congdon had hard-hitting things to say. However, the paper made severe losses, and there were great economies to be made if new machinery were to be used in printing. The printers’ unions — there were three — resisted and fought each other. After vicissitudes, the newspaper was acquired by a very hard-headed Australian, Rupert Murdoch, who already owned tabloid newspapers that caused some head-shaking as to crudeness, intrusion into private lives and what was soon to be called, in America, ‘dumbing down’. When the Belgrano was sunk in the Falklands War, one headline, ‘GOTCHA’, became famous. However, Murdoch knew how to deal with people, quietly dealt with a rival union altogether, set up a building in the dock areas, which had become derelict because of the dockers’ unions’ ways, and abandoned the original building in central London overnight. The newspapers were instantly produced, by the new methods, without interruption. Early in 1986 there were battles between enraged printers and the electricians or distributors, with police support: not a day’s production was lost, and the printers’ unions came to terms (on television, Murdoch was asked what he would recommend a striking printer now to do, and said, laconically, ‘Find another job’). Some of the journalists took the printers’ part and refused to co-operate, suggesting that a Murdoch Times would betray the newspaper’s status. Others took a different view, and the editor of the Sunday Times, Andrew Neil (like MacGregor a Glaswegian), spoke for many when he took the radical Thatcherite line and advocated an Americanization of the country. Rupert Murdoch astutely used the profits from London to establish an empire all over the globe. He was much hated, but in the end was following an old media pattern: the Manchester Guardian itself had only got away with its moralizing because of the profits made by its sister newspaper, whic
h reported the horseraces. However, here was now an empire based on mountains of debt, with mountains of profit, from media of all sorts which could make or break governments. At around the same time, in London and New York, banks moved into the same world; vast fortunes began to appear from thin air. The Reagan-Thatcher era was associated with a new economy, in which industry of the classic sort meant a degree of backwardness, much as had happened with peasant agriculture in the later nineteenth century. Brazils and Koreas metal-bashed; Turkey produced 90 per cent of the televisions sold in England, and the main road from Istanbul to Kayseri and Antep was choked with container lorries bearing goods to central Europe. London and New York plucked money out of the air.
The tidal change had much to do with technology. Its history proceeds in great leaps. In the middle of the nineteenth century, one of these had involved the railway; electricity had marked another, essentially in the early twentieth century, when it had enabled coal-poor countries such as France and Italy to acquire modern industry (aircraft and motor cars being an obvious instance in both cases). Now came another huge leap, in one view the greatest ever made — electronics, ‘information technology’. In 1980 there was a video cassette recorder in only 1 per cent of American households; by the end of the decade, in three fifths. Cable television, by then, reached half of households — earlier, 15 per cent. Turner Broadcasting survived near collapse and then, by the time of the Gulf War, had become the worldwide network, flattening the old network news programmes. Telephones in 1980 had been very basic, not much beyond the models of fifty years before. Ten years later, there was almost no limit to what they could do, including photography. The old Bell system had encountered some animosity, and in England the national telephone company, like the utilities, was widely regarded as a producer’s conspiracy against the public. Cheap long-distance transmission made for a vast change in this, and the old land-line monopolies were broken (although in some cases they managed to retain a great deal of their power). Cellular phones, fibreoptic cable, flourished, as did the fax machine, which was displacing the, also often despised, earlier methods of post offices. The biggest single item in this technological revolution was the personal computer.
In 1981 there were about 2 million such: seven years later, nearly 50 million — IBM the initial leader, followed by Apple Macintosh in 1984. By 1989 ‘a visiting Russian scientist would be impressed by the computer equipment of his American counterpart, but moved almost to tears by the computer equipment of his counterpart’s secretary’, says Robert Bartley, the Wall Street Journal’s poet in residence, and eighties consumption boomed, to the point at which American clothing or even food styles ran round the entire globe, even, at least for men, in Iran, where there was a forthrightly anti-American regime. The illustrations are endless. The basis was demand from people in new types of jobs — in the USA the participation of women went up from 51 to 57 per cent: almost 60 per cent of families had two earnings (the average family size declining somewhat, to 2.63 members) and the traditional single-earning family now accounted for one quarter of all households (as against nearly one third in 1980). One quarter of the new jobs came from business services and health care; computer and data-processing services led. Some of this followed economic first principles, as they had been established in the nineteenth century. Depression released energy from labour and capital — perhaps women belong in both categories — that had been poorly used. Interest rates, falling, enabled sharp-sighted businessmen to pay for new technology. This process, in the Atlantic world, had been delayed in the 1970s as governments tried to keep the old going — the old now including their own selves — although their unproductiveness was notorious, whether it was bureaucracy or nationalized public utilities. In the USA that process was not as strongly resisted as in western Europe, and there was a whole new breed of entrepreneur — odd, somehow ungrown-up, unappetizingly dressed and outstandingly successful when it came to the understanding of the strange new technology. Steve Jobs and Stephen Wozniak invented the first personal computer in Jobs’s garage in 1976, and their Apple I and Apple II machines beat IBM itself to market. In 1980 they issued their first public stock, brought the Macintosh onto the market in 1984, and by the end of the decade Apple was ninety-fifth in the Fortune list of 500 companies. Another genius who failed to complete his university course (Harvard) was William Gates, who started a small company in 1975 and bought a computer operating system for $50,000; it became Microsoft Disk Operating System, MS-DOS. In 1986 Microsoft raised over $60m by going public, and by 1990 it had thrown Apple and IBM into a defensive alliance: but Windows software had become so popular that a new version, DOS 5.0, sold a million copies in a month. There were other examples — Mitch Kapor, a former disk jockey and instructor in transcendental meditation (Lotus 1-2-3 in 1983, sales of nearly $700 million in 1990); Philippe Kahn, who came to Silicon Valley in 1983, used a clever ruse to persuade a trade magazine to accept an advertisement on credit, raised $150,000 of sales thereby, and set up Borland International, which, in 1991, was the third-largest supplier of personal computer software. There were many similar examples in other industries. For instance, the possibilities for genetic engineering were already clear, in 1980, when Genentech was the pioneer, raising $300m in the capital markets and, by 1984, putting its synthetic insulin in circulation, with sales of almost $500m by 1990. Frederick Smith had suggested a national overnight delivery service — Federal Express, which struggled for a decade until 1980 and then took off as an American institution, with, ten years later, sales of $7bn. There was also Tele-Communications Inc. for cable TV, with sales of $124m in 1980, $3.6bn in 1990; Turner Broadcasting had sales worth $50m in 1980, but $1.4bn — as CNN — ten years later.
There was a considerable revolution, in other words, though it also had its victims. The once great firms came under competitive pressure, and they had to cut costs — ‘downsizing’, as it was unlovably called. The largest 500 companies lost 3.5 million jobs in the eighties, General Electric, for instance, falling from 400,000 to 280,000 employees. The huge conglomerates of the 1960s started to dispose of branches that were not central; and there was a tendency towards small holding companies that simply managed the incentives for almost autonomous operating companies (of these, Kohlberg Kravis Roberts — Wall Street — was a prototype). Gone — or almost — were the days when businesses were comfortable, showing off with huge buildings and endless trotting secretaries. Many companies fell sharply — nearly half of the Fortune list of 1980 was not there by 1990. The losers quite often had merged, and there was much anger against investment bankers’ willingness to finance hostile takeover bids: the short-term results, to impress shareholders, that made their offers attractive, ran the complaint, might mean immediate asset sales that would run counter to long-term investment. But manufacturing itself did not decline, and employment in it did not decline as fast as in the Fortune list. Manufacturing still accounted for almost one quarter of the GNP. What did happen was that productivity, output per man, rose, and did so substantially. It rose at 3.6 per cent per annum and the answer was that management ‘fat’ had been cut, while there was elsewhere a burst of creative energy from the Wozniaks and Gateses (plus illegal immigrants). There was, at work here, a characteristic American quality — it had been shown during the Second World War — of rationalization and risk-taking in pursuit of profit. There was a new financial idea, venture capital. Someone had to raise the initial money for patents, lawyers, etc. for a start-up company; it was a matter of guessing which one. Governments had shown that they were not good at such things, and British mistakes in this respect had been splendidly comic — a prize, stiffly contested, going to the supersonic Concorde.
A molecular biologist, Herbert Boyer, held the patent on techniques for gene splicing. Genentech was founded by two venture capitalists, Thomas Perkins and Robert A. Swanson. By 1980 the market value of the company was $300m. In 1991 Genentech sold part to Roche Holdings for $2.1bn, and an option on the remainder at a p
rice that would have been one hundred times Genentech’s earnings of 1989. Genetic technology is exactly the industry that central planners would love to have developed, but the bureaucracy’s record was very poor, and in the USA congressional lobbying might also have affected the result. As things were, the eighties were a demonstration that venture capital could produce much better results than ‘industrial policy’ ever did.
What caused all of this? Robert Bartley reckons that it was a direct consequence of the tax cuts, both in Great Britain and in the United States, and he cites Thomas Perkins, who was chairman not only of Genentech but also of six other, smaller concerns, and who had been at the start of Compaq and Sun Microsystems, as asserting that a tax cut ‘should make it far easier to raise funds, and it will bring the entrepreneurs forward’. In 1975 there had been only $10m of new net capital, and in 1977 $39m. In 1978, following the first tax cut, the figure was $600m, and with the Reagan tax bill of 1981 over twice this. When the tax cuts appeared in reality, in 1983, the figure quadrupled. Then, in 1986 and later, as increases in the capital gains tax came (from 20 to 33 per cent), the figures fell again, to around $2bn in 1988 and 1989. Initial public offerings, where firms first went public, showed a similar pattern — under thirty per annum from 1974 to 1978, then 103 in 1979 and 953 in 1986 (falling thereafter to 186 in 1990). The public offerings amounted to $9bn in 1972 (constant dollars) but only $142m in 1974, rising to $2bn in 1980 and $24bn in 1986. By 1988 they were back to $6bn. As for England, as John Hoskyns said, a man would have had to be mad to attempt to be any sort of entrepreneur in the 1970s, and the Thatcher governments’ tax cuts did indeed bring in much greater revenue because people worked harder and more inventively. However, there is devil in the detail, not least because some of the new ventures depended in the end on government money — in California, especially, from the largesse of the Pentagon. The other large source for venture capital was foreign, of course, especially where high technology was involved, and that also was brought about by government action, because of the way in which the dollar was managed. The world could not do without it, as the universal currency, and the Americans took what in the foreign-exchange world was known as an ‘arbitrage profit’ — the old word was ‘coinage-clipping’ — on an enormous scale. Japanese and British money flowed into the United States. ‘Deregulation’ broke down some of the internal dams.
