Morning:
8°c
We are all prisoners of our own experience. People who did not work through the early 1990s could not believe there could be a recession and falling house prices. People who did not work through the 1980s do not believe we could face another outbreak of inflation. People who did not work through the 1970s cannot accept the possibility of a revival of trade union power.
It is this last point which is particularly relevant today. The threat of a national postal strike has been greeted with incredulity in most of the media — if only because the Royal Mail's PR machine is one of the most efficient parts of the organisation. And it may be that the tone of the coverage is correct and that the union is committing suicide — as did the miners under Arthur Scargill a generation ago. But equally the postal workers' calculation could be similar — if they do nothing, they are doomed to death by a thousand cuts as they struggle to cope with technologies that make obsolete the essence of what they do. So why should they not have one last battle to see if they can turn the tide? It will give them some self-respect if nothing else.
It is hard to see how the Royal Mail strikers can win because we can get by without the service. Indeed, we survived a two-month postal strike in the 1970s, so we would barely notice now. But it would be a mistake to believe the example of likely failure here will mean the death of militancy elsewhere.
There are at least three reasons why. The first, prosaically, is that much of the anti-union legislation passed in Margaret Thatcher's time as PM has been subsequently unwound, either directly by this Government in the past 12 years or indirectly with the enactment of European Union standards of employment law. The unions have also learned how to live within the rules, and do much of what they have traditionally done but in new, legally compliant ways. It is a sobering thought, for example, that the RMT rail union headed by Bob Crowe has had 100 strike ballots this year alone — and it has fewer than 80,000 members.
The second is a consequence of something Alan Greenspan, the former chairman of the US Federal Reserve, said when he commented that the benefits of globalisation were so great that society ought willingly to accept the downside — by which he had in mind the current recession.
Economically, that may make sense but the problem politically is that those who have reaped the benefits never seem to be those who have to bear the pain. Think no further than bankers and their bonuses at one end, and the record levels of youth unemployment at the other. Shrewd union leaders will know how to exploit this sense of injustice.
Third, there is the interesting thesis put forward by Robert Wade of the London School of Economics that income inequality played a major part in fuelling the financial crisis. As he puts it, as the top 10% received an ever-greater proportion of national income distribution, they diverted a waterfall of financial resources into asset markets, causing asset price bubbles.
They were suckers for all sorts of highly speculative investments that fuelled the excess. On the other hand, households in the middle 60% of income bands experienced stagnant incomes and — especially in the Anglo Saxon countries — borrowed on the back of appreciating house values, which for a time concealed the wider problem of under-consumption and exaggerated the build-up of excess capacity throughout the global economy.
Eventually, as we now all know, the imbalance between rising debt and a stagnant ability to repay simply became too great. Most people got the benefits of globalisation, not from higher incomes but from the ability to borrow more.
Wade also points out — uncomfortably — that a very similar pattern existed in the 1920s America in the run-up to the Great Depression. He says that 90% of American taxpayers had lower disposable incomes in 1929 than they had had in 1922, while the top 1% of taxpayers increased their disposable incomes by 63%.
Lower incomes for the mass of the people meant consumption growth was subdued so, with restricted opportunities for productive investment, the excess income went into stock-market and property speculation — until the 1929 crash.
So there is a respectable economic argument for resisting extremes of income inequality.
Thus far in the stuttering debate about reining in government spending, there has been an assumption that an incoming government will be able to lay waste to the public sector and slash employment levels without any public backlash. Perhaps this is correct. But a sense of history suggests otherwise.
Politicians would do well not to underestimate the build-up of pressures in society that public-sector unions in particular may be able to tap into. That could well be the way the tide is running.
That in turn has huge implications for the way Britain is seen overseas. We need the confidence of foreign investors because we need them to buy a significant slice of the government debt as it is issued. Those foreign investors are likely to look askance at a country bedevilled by strikes where the government has great difficult doing what it thinks needs to be done.
