It is true that inflation averaged 12.7% during the decade and the level of the bank rate at the end of the year was 10.8% on average. In November 1979, the bank rate rose by 3% to an all-time high of 17%. Remember this on Thursday if, as I suspect, the Bank of England announces a “shock” increase from 0.5% to 1.5%.
I bet this summary of the economic balance is much better than the readers who lived through this period remember. There is a good reason for this. For starters, it was a decade of roller coaster rides. The first four years were very strong: the so-called “barber boom”, named after the then Chancellor of the Exchequer. The GDP growth rate averaged 4.3%.
By the end of the decade, there was also fairly good growth in the economy and real incomes. In 1978 and 1979, real disposable household income increased by 7.1% and 5.9%, respectively.
It was the middle period that was absolutely horrible and that many people associate with the whole decade. In late 1973, the Conservative government under Edward Heath declared a three-day working week. Just to make it clear to readers who are too young to remember, this was not a precursor to the current move toward a four-day workweek in an attempt to correct the “work-life balance,” but more soon an attempt to reduce the demand for electricity. .
As if this were not enough, having been on strike in 1972, in early 1974 the miners again voted in favor of the strike. In February 1974, Heath called early general elections, apparently to answer the question “who rules the country, the government or the miners?” When the result returned with a suspended parliament, it seemed that the electorate had not given a clear answer to this very basic question. Although the Conservatives were still the most important party in Parliament, they could not form a government. As a result, a minority Labor government took office.
In the subsequent elections of October of that year, the Labor Party emerged with a small majority, so it was a Labor government that presided over the deteriorating economic performance in the middle of the decade. In 1974 and 1975, real GDP contracted. And in 1976, the United Kingdom had to go “cover in hand” to the International Monetary Fund to get a loan.
But there was something else in the seventies, something that the aggregate statistics do not include at all, but which, having lived myself, I remember too well. It was the feeling that the established order was collapsing with little that the Government could do to save it.
In February 1975, the rate of increase in average income reached 32.5%. But that did not mean much progress in living standards. It was part of the inflationary process that threatened to spiral out of control. Inflation peaked at 27% in August 1975. It was the period when unions were extremely powerful and the strike was very frequent and damaging.
Although things seemed a little better in the last two years of the decade, the winter of 1978/9 (the so-called “winter of discontent”) saw a new onslaught of union militancy that left garbage uncollected in the streets. and the unburied dead.