This age of inflation reveals the sickness ailing Britain’s economy: rentier capitalism
Inflation in the UK has hit its highest level in 40 years, particularly thanks to the dramatic rise in energy and food prices. This fact has provoked panic among some commentators and policymakers that Britain is about to relive the inflationary turbulence of the 1970s, and has prompted Rishi Sunak to announce a last-minute £15bn “cost of living package” partly funded by a one-off tax on energy companies.Andrew Bailey, the governor of the Bank of England, has already been the subject of outrage for suggesting that workers should show “restraint” in their pay demands, to prevent an upward spiral in wages and prices as seen in the 1970s. Right now, with inflation at 9% and employers expecting to increase pay this year by just 3%, Bailey should be able to relax on that front.
Inflation aside, the differences between Britain’s economy of 2022 and that of 40 years ago are stark. In 1982, unemployment hit a postwar record, at more than 3 million, as manufacturing employment plummeted. Today, Boris Johnson boasts of record low unemployment. Trade union coverage was still over 50% in 1982; today, it’s less than half that, and almost half of that again in the private sector. The inability of most workers to negotiate collectively for wage increases is one of the principal reasons why Bailey sounded so out of touch, and why comparisons with the 1970s miss the mark.
We are not witnessing a rerun of the 1970s and early 80s. But there are other reasons to consider the relationship between the crisis now facing Johnson’s government and that which confronted Margaret Thatcher in her first term in office. Put simply, the crisis today is a legacy of how that previous crisis was handled.
It is worth remembering that inflation represented the
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