From Social Contract to ‘Social Contrick’: The Depoliticisation of Economic Policy-Making under Harold Wilson, 1974–75

Abstract

The 1974-79 Labour Governments were elected on the basis of an agreement with the TUC promising a redistribution of income and wealth known as the Social Contract. However, the Government immediately began to marginalise these commitments in favour of preferences for incomes policy and public expenditure cuts, which has led the Social Contract to be described as the "Social Contrick". These changes were legitimised through a process of depoliticisation, and using an Open Marxist framework and evidence from the National Archives, the paper will show that the Treasury"s exchange rate strategy and the need to secure external finance placed issues of confidence at the centre of political debate, allowing the Government to argue there was no alternative to the introduction of incomes policy and the reduction of public expenditure. IntroductionIt is a common conception that a depreciating currency reflects a lack of market confidence in the sustainability of a nation"s economic policy, and disciplines Governments by forcing them to adopt policies to restore faith.However, a depreciating currency can also offer political opportunities for Governments when it is desired for reasons of industrial competitiveness and attributed to market forces, by placing issues of confidence and credibility at the centre of political debate. The need to stabilise exchange rates, and for countries in deficit as Britain was in the 1970s, the need to secure external finance, can therefore help to justify deflationary counter-inflationary and fiscal policies, because market logic acts as a buttress between the Government and the consequences of unpopular policy changes.The idea that the 1974-79 Labour Government was engaged in the politics of depoliticisation has often been asserted with reference to the 1976 IMF crisis (see Clarke, 1988, 314-5; Holloway, 1995, 128; Bonefeld and Burnham 1998, 41), however the intention of this paper is to demonstrate that this was not an isolated example of depoliticisation that occurred during a moment of acute crisis. Rather, it is possible to demonstrate that the events in the autumn and winter of 1976 were the logical extension of the Labour Government"s statecraft that had been pursued since as early as December 1974. By using an Open Marxist framework of analysis and evidence from the National Archives, this paper will demonstrate how the Government used issues of credibility and confidence in order to shape domestic political preferences by encouraging perceptions of crisis, firstly in the foreign exchange markets, and secondly in external financing.Firstly, a return to incomes policy was justified by citing pressure on the sterling rate, which was attributed to a lack of confidence in the Government"s counter 3 inflationary credibility, despite the fact that it was favoured by the Treasury to help improve industrial competitiveness, and was allowed to occur, if not actually engineered, by a passive intervention strategy in the foreign exchanges when sterling came under pressure. Secondly,...

Depoliticisation and the politics of imperialism

“…However, this is also a point made by more 'state-centric' approaches, such as by Burnham (2001;2014), Kettell (2008;2009) and Rogers (2009a;2009b).…”

“…As both Kettell (2004; and Rogers (2009a;2009b) show, international institutions were able to depoliticize economic policy far before the 1990s. However, while these authors account for the depoliticizing effect these institutions provided for domestic economic policy, this paper contends that these institutions can also depoliticize international economic policy.…”

“…To see a strategy of imperialism as having the potential to be depoliticised is straightforward enough -the role that the international realm as an apparent source of external discipline plays in the legitimation of state policy has been well studied (Hay & Watson 1999;Rogers 2009aRogers , 2009b. However, as with any state policy, the contradictions of capital have not been solved, they have only been temporarily managed.…”

“…Burnham (2001), too, points out the importance of understanding the international basis behind the operational independence of the Bank of England. Rogers (2009aRogers ( , 2009b gives an account of IMF conditionality under the Callaghan government. While the Callaghan government was presented as going 'cap in hand' to the IMF to seek a bridging loan -a loan that the IMF was unsure was necessary.…”

“…Indeed, the common understanding of depoliticisation derives from seeing the state as the overtly political form of an inherently contradictory society (Burnham 2001(Burnham , 2006Kettell 2004Kettell , 2006Kettell , 2008Rogers 2009aRogers , 2009bRogers , 2012. In essence, the state, as Simon Clarke (1983, 118) notes, is a regulatory agency required to sustain capitalist society in the face of its crisis-prone nature.…”