Download Literature Review How important were think

Literature Review
How important were think-tanks in shaping the changing attitudes of the Conservative
Party towards privatisation in the period 1964 to 1990?
Between 1945 and 1951 the Labour Party implemented a far-reaching programme of nationalisation
of Britain’s major industries including civil aviation, gas, iron and steel. 1 It was not until Margaret
Thatcher’s tenure as leader of the Conservative Party from 1975 to 1990 that the idea of privatisation
began to make real headway in terms of party policy. Privatisation was part of a broad package of
liberal economic reforms that sought to reverse Britain’s economic decline. The literature surrounding
privatisation offers a plethora of reasons on why the Conservative Party finally decided that it was a
politically and economically viable project. The role of think-tanks, namely the Institute of Economic
Affairs (IEA), the Centre for Policy Studies (CPS) and the Adam Smith Institute (ASI) is assumed
and referenced but not thoroughly investigated. 2 Therefore, this literature review will look at the
narratives of Thatcherism as a whole before considering what is written about privatisation as part of
the Thatcherite project. Finally, the literature on British ‘New Right’ think-tanks will be explored to
elucidate the research gap: the lack of examination into just how crucial think-tanks were in causing
the Conservative Party to pursue privatisation.
E. H. H. Green argues that the majority of the literature on Thatcherism since the 1980s has been
dominated by either ‘higher journalism’ or political science scholarship. 3 This is illustrated in the
works of Gilmour, Gamble and Kavanagh.
Ian Gilmour was a member of Margaret Thatcher’s cabinet from 1979 to 1981 and belongs to the
One-Nation Tory tradition. 4 This regards Thatcherism as a threat both to the Conservative Party and
to Britain. 5 One-Nation Conservatism became prevalent during the post-war consensus that emerged
in Britain, with the Conservatives adopting a paternalistic stance with regards to the role of the state in
1
M. Lynch, Britain 1945-2007 (London, 2007), p. 16.
A. Denham and M. Garnett, British think-tanks and the climate of opinion (London, 1998), p. 3.
3
E. H. H. Green, ‘Thatcherism: An Historical Perspective’, Transactions of the Royal Historical Society, Sixth
Series, vol. 9 (1999), pp. 17-42, p. 17.
4
I. Gilmour, Dancing With Dogma: Britain Under Thatcherism (London, 1992), p. 3.
5
M. Bevir and R. A. W. Rhodes, ‘Narratives of Thatcherism ‘, Western European Politics, 21:1 (1998), pp. 97119, p. 101.
2
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terms of welfare. 6 Gilmour assesses the effects of Thatcherism and portrays it as dogmatic with little
regard for national unity. He argues Thatcherism was ‘unrelentingly divisive and discriminatory
against the poor, whose human dignity was relentlessly ignored’. 7 He cites how indirect taxes
between 1979 and 1989 were raised by £22 billion to account for cuts in direct taxation, in particular
the top rate of income tax from 83 to 40 per cent. 8 He saw this as a switch that placed the heaviest
burden on the poor, something One-Nation leaders such as Macmillan would not have tolerated. 9
Even with privatisation, a policy that Gilmour largely supports, he argues that dogma took it beyond
acceptable ends. The ‘hands-up’ approach to the economy and belief that ‘markets are always right’
meant that utilities such as water, which the public generally believed should remain in public hands,
were privatised. 10 In Gilmour’s eyes Thatcherism created ‘haves’ and ‘have-nots’. 11
Andrew Gamble in The Free Economy and the Strong State seeks structural explanations for
Thatcherism, drawing on the socialist tradition which included theorists such as Stuart Hall. 12 This
tradition emphasises economic factors and class. 13 Gamble considers Thatcherism from a political
science standpoint, looking at the causes of Thatcherism winning the battle of ideas. He calls
Thatcherism a ‘hegemonic project’, arising in response to ‘the emergence of a pervasive crisis of
social democracy’. 14 The economic crises of the 1970s, in particular the world recession sparked by
the 1973 oil price rises caused support for social democracy to deteriorate, with Thatcherism ‘one
particular national alternative’. 15 He argues ‘authoritarian populism’ was key to Thatcherism
overthrowing social democracy. As Thatcherism meant challenging those with vested interests in
continuing with consensus politics, Thatcher’s governments had to be ‘authoritarian’ to restore the
authority of the state against groups such as trade unions, shown with their uncompromising attitude
6
Ibid.
Gilmour, Dancing With Dogma, p. 172.
8
Ibid., p. 152.
9
Ibid.
10
Ibid., p. 127 and p. 338.
11
Ibid., p. 172.
12
See also S. Hall, ‘The Great Moving Right Show’, Marxism Today, January 1979, pp. 14-20.
13
Bevir and Rhodes, ‘Narratives of Thatcherism’, p. 107.
14
A. Gamble, The Free Economy and the Strong State: The Politics of Thatcherism (Basingstoke, 1988), p. 13.
15
Ibid., p. 20.
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towards The Miners’ Strike of 1984-5. 16 To complement this, Gamble’s focus on ‘populism’
incorporates nation, family, duty and authority with neo-liberal beliefs of self-interest, individualism
and anti-statism. 17 Therefore, Thatcherism was transformed into a moral and social force which
established ‘a new common sense’ as opposed to the ‘old common sense’ of social democracy. 18
Dennis Kavanagh’s Thatcherism and British Politics comes from the Whig tradition of studies on
Thatcherism, a tradition which focuses ‘on the interaction between ideas and institutions’. 19
Kavanagh focuses on the ‘end of consensus’, arguing that whilst normally elections are rarely turning
points in political history, after Thatcher’s triumph in 1979 it was evident many important changes
occurred. 20 Like Gamble, Kavanagh seeks explanations for the phenomenon of Thatcherism, but also
focuses on how this affected the political agenda in Britain. 21 As in Gamble’s narrative, the idea of a
‘strong state and a free economy’ is explicitly referred to as central to Thatcherism. 22 The transition
to the sometimes harsh rules of the market economy needed a government that was prepared to see
the transition through and not ‘U-turn’ when the going got tough, as the Heath administration had.
Kavanagh’s argues that Thatcher ‘dominated the content and style of British politics in the 1980s and
shaped the politics of the post-Thatcher era’. 23 This links in with his study of the decline of the
Labour Party and how the left-wing radicalism within the Party during the 1980s would not result in
re-election because Thatcherism took advantage of the ‘constellation of events and ideas’, forging a
new consensus. 24 25
The main areas commonly explored in the literature on privatisation are: the roots of Conservative
favouring of privatisation pre-1970s; why the Conservative Party opted to pursue privatisation and
what it achieved.
16
Lynch, Britain, p. 127.
Bevir and Rhodes, ‘Narratives of Thatcherism’, p. 108.
18
Ibid., p. 184.
19
Ibid., p. 104.
20
D. Kavanagh, Thatcherism and British Politics: The End of Consensus? (Oxford, 1988), p. 3.
21
Ibid., p. 21.
22
Ibid., p. 13.
23
Kavanagh, Thatcherism, p. 319.
24
Ibid., p. 183.
25
Ibid., p. 318.
17
3
Francis argues that the ideas of the Conservatives in the 1950s and 1960s would ‘inform the rhetoric
and the ideology’ of the privatisations in the 1980s. 26 Anthony Eden advocated widespread private
property ownership ‘to enable every worker to become a capitalist’. 27 This is a recurring theme.
Ramsden argues that the idea of the ‘property-owning democracy’ was a means of heading off
potential conflict between owners and earners. 28 This view is corroborated by Francis who says the
wider distribution of property was a way of safeguarding capitalism. 29 Central to Conservative
concerns in the 1950s and 1960s was public support for the free enterprise system. 30 The large-scale
nationalisations undertaken by the Attlee governments of 1945 to 1951 led to Conservative fears
about the future of free enterprise in Britain, with ownership seen as the prime way of allaying these
fears. Therefore, whilst in the 1950s and 1960s privatisation was not yet viewed as a politically viable
project, long before 1979 there were ‘ideologues’ within the Party who viewed it as the way forward.
Whilst it was clear there were Conservative ‘hankerings’ for privatisation throughout the post-war
period, this does not explain why it became viable as a policy for the Thatcher governments.
Numerous reasons for pursuing privatisation crop up in the literature. Consideration of think-tanks
will be saved for the next section.
A consistent theme is the financial reasons behind privatisation. Heffernan argues that privatisation
was not originally designed to raise revenue and the main priority was always for underperforming
nationalised enterprises to be sold. 31 This is not a view that finds many supporters. The literature
refers to ‘waves’ of privatisation. The first wave arose in response to the macroeconomic conditions
in 1979. Parker points to the economic recession and its detrimental impact on taxation and higher
M. Francis, ‘“Not Too Many Capitalists, But Too Few”: The Conservative Party and the Property-Owning
Democracy, 1945-64’, (Unpublished paper, 2014), pp. 1-12, p. 12.
27
D. Howell, ‘The property-owning democracy: Prospects and policies’, Policy Studies, 4:3 (1984), pp. 14-21,
p. 14.
28
J. Ramsden, ‘“A Party for Owners or a Party for Earners?” How far did the British Conservative Party really
change after 1945?’, Transactions of the Royal Historical Society, Fifth Series, vol. 37 (1987), pp. 49-63, p. 52.
29
M. Francis, ‘“A Crusade to Enfranchise the Many”: Thatcherism and the Property-Owning Democracy’,
Twentieth Century British History, 23:2 (2012), pp. 275-297, p. 278.
30
Francis, ‘Not Too Many Capitalists’, p. 4.
31
R. Heffernan, ‘UK Privatisation Revisited: Ideas and Policy Change, 1979-92’, Political Quarterly, 76:2
(2005), pp. 264-272, p. 269.
26
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welfare expenditure. 32 As the Thatcher government vowed to reduce public expenditure, the intended
result of privatisation sales, in Parker’s view, was to reduce the Public Sector Borrowing Requirement
(PSBR); the difference between state revenues and expenditure. 33 The PSBR is central to financial
analyses of privatisation. Stevens argues, like Parker, that without privatisation sales Thatcher’s
governments could not have cut taxes and maintained a negative PSBR at the same time. 34 The
statistics he offers exemplify this. Public finance figures for 1987-88 showed that without the £5.2
billion of privatisation proceeds the Treasury received that financial year there would have been a
PSBR of £1.8 billion as opposed to a public sector debt repayment of £3.4 billion. 35 A further
reference to the financial benefits of privatisation is offered by Green. He cites that before 1979
nationalised industries took up 21 per cent of national investment, but only employed 8 per cent of
workers and produced 11 per cent of the goods, absorbing more than they produced. 36 In this
instance, privatisation could be viewed as a money saving scheme rather than a money making
scheme, still facilitating the cuts in public expenditure promised. Despite this, Parker does partially
agree with Heffernan when he speaks of a second wave of privatisation. He says this occurred after
1982 once the public finances had improved. For the first time since 1960 the government ran a
budget surplus in the later 1980s, meaning more emphasis was put on the ‘supply-side’ benefits of
privatisation: economic efficiency gains and widened share ownership. 37
Privatisation also had electoral advantages for the Conservative Party. ‘Popular capitalism’ is often
referred to as helping the Conservative electoral cause. 38 By widening share ownership earners could
be turned into owners, with the additions to people’s pay packets acting as an incentive to support the
free enterprise system. The fact that between 1979 and 1990 the number of shareholders in Britain
increased from three million to nine million demonstrated growing support for the market economy,
with the Conservatives seen as its natural allies, particularly considering how the Labour Party self32
D. Parker, The Official History of Privatisation, Volume II: Popular Capitalism, 1987-1997 (Abingdon,
2012), p. 3.
33
Ibid.
34
R. Stevens, ‘The Evolution of Privatisation as an Electoral Policy, c. 1970-90’, Contemporary British History,
18:2 (2004), pp. 47-75, p. 67.
35
Ibid., p. 66.
36
E. H. H. Green, Thatcher (London, 2006), p. 89.
37
Parker, Privatisation, p. 3., Also E. H. H. Green, Thatcher, p. 99.
38
Heffernan, ‘Privatisation Revisited’, p. 270.
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imploded in the 1980s. 39 This view is expanded on by Stevens, who says that by ‘inaugurating’
popular capitalism privatisation ensured it ‘offered a toffee for everyone’. 40 With nationalised assets
being, in Heffernan’s view, ‘woefully under-priced’ when privatised, ordinary people who had
purchased a smaller amount of shares could yield decent profits, benefitting from the market system.
41
Thatcher’s focus on economic efficiency was inextricably linked with the power trade unions held
over nationalised industries by 1979. The 1970s were associated with worsening labour relations
throughout Britain’s nationalised industries, shown by the need to introduce the three day week in
1974. 42 Extortionate wage claims also fuelled inflation which was already rampant due to the 1973
oil price rises, with the rate standing at 19 per cent in 1979. 43 Privatisation could address this state of
economic efficiency by turning earners into owners. With employees now having the power to
increase their pay packets by increasing their own productivity, thus translating into higher output and
profits, enthusiasm for strike action would wane. Furthermore, as Heffernan acknowledges, when
employees registered for free shares like 96 per cent of British Telecom employees it was difficult for
trade unions to argue the workforce was fundamentally against privatisation. 44 Privatisation and
wider share ownership had the advantage of being able to break the strangle-hold the trade unions had
over inefficient industry.
These interpretations largely discount the importance of think-tanks in why the Conservative Party
opted to support the policy of privatisation. The literature on think-tanks of the New Right portrays
just how important they were in forming the foundations of the neo-liberal agenda Thatcherism would
pursue. The role of the three main New Right British think-tanks: the IEA, CPS and ASI, is best
summed up by Cockett. He argues that the IEA provided the general theory and principles, the CPS
won a party political constituency for these theories (the Conservative Party) and the ASI acted as
‘policy engineers’ to turn these theories into practical policy proposals for when the Conservatives
39
Lynch, Britain, p. 132.
Stevens, ‘Evolution of Privatisation’, p. 54.
41
Heffernan, ‘Privatisation Revisited’, p. 269.
42
Parker, Privatisation, p. 2.
43
Lynch, Britain, p. 121.
44
Heffernan, ‘Privatisation Revisited’, p. 270.
40
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came to power. 45 This analysis is expanded upon by Denham in his Think-Tanks of the New Right.
He argues that the IEA had no intention of going beyond ‘severe economic analysis’ into judgements
on ‘political acceptability or administrative feasibility’. 46 The IEA’s former editorial director Arthur
Seldon said that writers for the IEA were told to not worry about the ‘administrative practicability’ of
their ideas because this could not be deduced without the idea being trialled through government
policy, something the IEA did not wish to concern itself with. 47 Rather, as Jackson argues, the IEA
saw as its principal task influencing elite opinion, in particular ‘second-hand dealers’ who pass on
ideas to wider audiences, namely: journalists, academics and teachers. 48
This leads on to the role of the CPS. Given its obvious links to the Conservative Party through figures
such as Keith Joseph and Margaret Thatcher, it was a highly influential body. Cockett argues that
‘much of the essential policy thinking was done at the CPS’. 49 The CPS’s idea of ‘Stepping Stones’
illustrates how important its role in formulating government policy was. Stepping stones was the
strategic thinking that once the Conservatives were in office they should introduce reforms in
particular areas like trade union law gradually and incrementally, rather than all at once. 50 This
appeared to affect how the government pursued privatisation, with the Nationalised Industries Policy
Group Report arguing for the preparation of industries for a partial return to the private sector by
stealth, rather than full out denationalisation. 51 The idea of stepping stones surely played some role in
this approach, although such analyses are not offered by Denham or Cockett. Denham also refers to
the fact that the CPS produced pamphlets and held discussion on particular aspects of policy like
privatisation, without offering examples of when this occurred. Whilst it clear the CPS was important,
it role in privatisation is generalised rather than analysed. Nevertheless, Denham supports Cockett’s
view on the CPS by arguing that rather than fighting the philosophical battle the IEA did, the CPS
45
R. Cockett, Thinking the Unthinkable: Think-Tanks and the Economic Counter-Revolution, 1931-1983
(London, 1994), p. 283.
46
A. Denham, Think-Tanks of the New Right (Aldershot, 1996), p. 18.
47
A. Seldon, ‘Preamble: The Essence of the IEA’, in A. Seldon (ed.), The Emerging Consensus? (London,
1981), p. xix.
48
B. Jackson, ‘The think-tank archipelago: Thatcherism and neo-liberalism’, in B. Jackson and R. Saunders
(eds.), Making Thatcher’s Britain (Cambridge, 2012), pp. 43-61, p. 44.
49
Cockett, Thinking the Unthinkable, p. 243.
50
Denham, Think-Tanks, p. 57.
51
Economic Reconstruction Group, ‘Final Report of the Nationalised Industries Policy Group’, 6 th July 1977, p.
15.
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fought ‘the battle of ideas’ at the policy level, servicing the Conservatives in government and
opposition. 52
The ASI’s role as ‘policy engineers’ stems from the idea of micropolitics, coined by Madsen Pirie. By
micropolitics Pirie means ‘a new style of policy formulation geared to the working of the political
market’. 53 This meant offering incentives to those who may oppose new policies in order to win their
support. 54 In terms of privatisation, such incentives could include shares for workers in newly
privatised enterprises. Cockett argues that the ASI’s particular expertise laid in the field of
privatisation, and by the mid-1980s was the ‘single most important source of ideas and policy
proposals’ concerning privatisation in Britain. 55 However, there is no severe assessment of this
statement in his book. This is also the case with Kavanagh who claims that the ASI promoted policies
of privatisation, deregulation and contracting-out of services, but neglects to examine how. 56
Evidently, the CPS and ASI both played a significant role in shaping the neo-liberal agenda of
Thatcherism, but policies such as privatisation are not given in-depth consideration.
To conclude, there is a clear research gap on how important think-tanks were in shaping the changing
attitudes of the Conservative Party towards privatisation. This is shown in Francis’ article where he
concludes by saying that the way the ‘property-owning democracy’ and by extension idea of
privatisation was conceived ‘was a reflection of external ideological influences’, without exploring
what these influences were. 57 This is a common theme throughout the literature; that the role of the
IEA, CPS and ASI is assumed, referenced by not thoroughly investigated. 58 Jackson makes an
admission that there is considerable archival evidence yet to be fully exploited by historians,
something this project intends to correct. 59 Thus, whilst there is a substantial amount of secondary
literature on privatisation to draw on, there is a gap to fill in terms of assessing just how crucial think-
52
Denham, Think-Tanks, p. 58.
M. Pirie, Micropolitics: The Creation of Successful Policy (Aldershot, 1988), p. 128.
54
Ibid.
55
Cockett, Thinking the Unthinkable, p. 305.
56
Kavanagh, Thatcherism, p. 87.
57
Francis, ‘Crusade to Enfranchise’, p. 297.
58
Denham and Garnett, British think-tanks, p. 3.
59
Jackson, ‘Think-tank archipelago’, p. 45.
53
8
tanks were in causing privatisation to become such a key policy of the Thatcher governments between
1979 and 1990.
Word Count (with footnotes): 3072
Word Count (without footnotes): 2522
Bibliography
Bevir, M., and R. A. W. Rhodes, ‘Narratives of Thatcherism ‘, Western European Politics, 21:1
(1998), pp. 97-119.
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Democracy’, Twentieth Century British History, 23:2 (2012), pp. 275-297.
Francis, M., ‘“Not Too Many Capitalists, But Too Few”: The Conservative Party and the PropertyOwning Democracy, 1945-64’, (Unpublished paper, 2014), pp. 1-12.
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9
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Howell, D., ‘The property-owning democracy: Prospects and policies’, Policy Studies, 4:3 (1984), pp.
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Party really change after 1945?’, Transactions of the Royal Historical Society, Fifth Series, vol. 37
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10