The coming to power of the big business government of Ted Heath in June 1970 was a major challenge to the Labour movement. The result was a transformation in the industrial and political climate in Britain. Heath, who was determined to reverse the decline of British capitalism, set out to tame the trade unions and carry through a programme of deep cuts in living standards. It constituted, in reality, the abandonment of the post-war “consensus” and a declaration of war on the working class by the Heath government. It was to become the “whip of counter-revolution”, to use the words of Marx, which served to unleash the biggest class movement for more than fifty years.
British capitalism had long suffered from a relative economic decline especially since the Second World War. Trailing behind the real victors, the United States and the USSR, Britain had been reduced to a second rate power, and was now threatened with further relegation. Between 1945 and 1970, her industrial productivity grew annually on average by 1.5 per cent, compared with three per cent in the USA and Germany and almost four per cent in Japan. In the same period, Britain’s share of world manufacturing exports slumped from 25 per cent to ten per cent. While fixed assets in manufacturing industry in Japan and Germany were £30,000 and £23,000 per worker respectively, in Britain it was only £7,500. The rate of profit for British industry was also significantly lower by comparison. Between 1964 and 1970 the rate of profit of British capitalism had fallen dramatically from 12 per cent to 6.8 per cent. This decline (“the British disease”) was due to the short-sightedness of the British ruling class, which in comparison to its rivals, stubbornly refused to reinvest the profit extracted from the working class in re-equipping industry. By now the British bourgeoisie had become a largely parasitic class, which was to have serious long-term implications for the economy and society.
In the hundred-year period to 1979, the gross domestic product of the UK trebled. By comparison, the United States, Germany, and Japan it had grown by a factor of seven, ten and fifty respectively. The protected markets of the British Empire, and then the world economic upswing following the Second World War, served to mask the decline of British capitalism. Nevertheless, while Britain’s competitors developed their productive capacity, the relative decline of Britain continued unabated. The ruling class, which blamed the “lazy British worker” and the “restrictive practices” of the unions for all its ills, attempted to resolve this problem by reducing “costs” at the expense of the working class.
The Heath government started out full of confidence. However, given the strength of the workers’ organisations, this proved much more difficult than was first envisaged. The early attacks of the Tories brought the class struggle to record heights. The working class was like some sleeping giant, which once disturbed, reacted with fury. Such was the tempo of the ensuing movement, that within four years the industrial struggle succeeded for the first time in history in bringing down the elected government.
Heath was now determined to restore British profitability rates, and with it Britain’s success. As profits come from unpaid labour, wages had to decline. Robert Carr, the employment minister, set the pace by curbing wage rises for public sector workers, and other employers were encouraged to follow suit.