Economic Depression – one more for the road eh?

Coronavirus could lead to an Economic Depression on a scale not seen since the 1930s – according to the International Monetary Fund. We’re already seeing people going without food and being kicked out of work. And when the virus subsides, it’s not going to be a return to business as usual. The damage that’s been done is way too severe.

Millennials experienced the 2008 crisis as a brutal coming of age. A long, deep recession that trashed people’s life chances. For Boomers, I’m losing count how many economic recessions we’ve been through now. Sterling crisis of the 1960s. Oil crisis of the 1970s. Manufacturing collapse under Margaret Thatcher. Housing market collapse in the early 1990s. And here we go again!

Only this time it will be very different. It’ll be way more catastrophic in terms of the impact on jobs and markets. And of course it’s happened not because of economic cycles or government policy but – a biological virus. You’d surely have to go back to the Black Death of the fourteenth century to see a disease hit our economy at such a scale.

Economic depression – all about oil in the 1970s

As Boomers, we’ve seen economic recessions with very different characteristics. The 1970s saw short bursts of recession that despite the reputation of the decade for crisis and gloom, actually saw the economy bounce back into positive growth pretty quickly. The psychological impact though was huge because we’d basically been booming since the end of the Second World War and suddenly, we experienced a taste of what our grandparents had lived through in the 1930s.

The cause of recession in 1973 was the decision by oil producing countries to quadruple the price of ‘black gold’. Basically, they weaponised oil and were punishing the UK, US and other nations for supporting Israel in the Yom Kippur War. I remember the news bulletins were always relaying the latest bad news from the meetings of Arab oil producers. And Sheikh Yamani – the Saudi oil minister – became a household name. Here he is blithely informing us that oil is now a weapon…

Sheikh Yamani was a household name

Monetarism turns economic recession into depression

1979 saw Margaret Thatcher become Prime Minister in the UK and she implemented what was called a “monetarist” policy in the face of an economic downturn. That meant Austerity-Max with public spending cut and state support to manufacturing industry reduced. What Thatcher wanted to do was break the trades unions, reduce inflation and privatise the state-run parts of the economy. So, a political agenda as much as an economic policy.

The result between 1979 and 1981 was benign if you lived in the south east. But in Scotland, the north and the Midlands of England – industries collapsed like dominoes. I went on a canal trip at the end of secondary school on the Cheshire Ring canal and we were gobsmacked as middle class southern kids to see mile after mile of closed factories. It was a scene of devastation that led to a summer of riots in cities across the UK in 1981.

Thatcher remained in power until 1990 – when she oversaw another, often forgotten, recession. Like 1979 to 1981, the recovery took way longer than the downturns of the 1970s. We’d had the yuppie boom of the late 80s when markets soared. But then 1987 saw a stock market crash on Black Monday with the FTSE falling nearly a quarter in two days. Two years later, the aftershock hit the ‘real economy’ with unemployment rising sharply all over the country.

What I recall the most about the early 90s recession was the collapse in house prices. There were a lot of what were termed ‘voluntary repossessions’ where people chucked their own keys through the letterbox and walked away from their own home. And there was a boom in auctions of empty properties.

I was a financial journalist at the time and the other thing I reported on was the massive amount of financial corruption that was exposed as the economy slowed down. From Lloyd’s of London to independent financial advisers on the high street – the reality of the 1980s Yuppie era revealed itself in one scandal after another.

Back to the 1979 to 1981 recession. Here is the Toxteth riot of 1981 – what happens when you let youth unemployment skyrocket…

Margaret Thatcher – memories of the Poll Tax demo

(This blog post includes some great photos of the 1990 Poll Tax demo taken by an old friend of mine – mostly at the end)

I was 16 in 1979 when Thatcher was elected Prime Minister. I then experienced an eleven-year bad dream from which I woke up in 1990 as she departed. Her reign – and I think it deserves to be called that – seemed like a play in three acts.

Photo taken by a friend during the 1990 Poll Tax riot

There was the years of crisis in her first term from 1979 to 1983. In the steep economic recession from 79 to 81, even The Economist (not an enemy of Thatcher by any means) thought there could be a Labour government by 1983. Within her own party, disgruntled “wets” (the old aristocratic one-nation wing of the Tories) conspired feverishly to oust her.

Then along came the Falklands war with Argentina and an end to the recession – plus the Labour Party was in a mess with an unconvincing leader. Even though the Tories were losing local councils and didn’t enjoy majority support among the public, they won enough votes to sail to victory in 1983.

And so comes the middle act of the Thatcher play. Confident enough to provoke the miners into a year-long strike, which she won largely through divisions on the trade union side. Thatcher, it must be said, was lucky in her enemies.

The 1986 Westland Affair was a case in point. Westland Helicopters was the last UK manufacturer of helicopters. The Defence minister Michael Heseltine wanted to ensure its future by integrating the company into a European consortium. Thatcher, never very pro-European, was quite happy for it to be snapped up by an American rival, Sikorsky.

The ensuing bust-up between her and Heseltine nearly brought the government down. Again, luck intervened. Even though Heseltine resigned his post and stormed out of Number 10 (the prime minister’s residence), the Labour leader – Neil Kinnock – failed to deliver the killer blow in the House of Commons. And so on she went.

I remember her third election victory in 1987. Some pundits were predicting a slimmer majority. But I’d been canvassing for the Labour Party and knew she was set for a thumping majority. So – with a heavy heart – I placed a £3 bet at the bookies on her getting a 97 to 102 majority at odds of 22/1.

And sure enough, she got a 102 set majority and I picked up £66. I suppose that’s almost shorting your own side but I was thoroughly disillusioned by that stage. Any comfort was welcome!

The last act of this tragedy I saw as her descent into madness. Her language and appearance became so imperious that it was mocked on the very popular Spitting Image satire show. And then she decided to implement the Poll Tax – replacing a property based local tax with one on every citizen. Like all her tax changes – it redistributed wealth upwards – and was as popular as a lead balloon.

Spitting Image – satire of Margaret Thatcher

Many resisted paying the tax. I freelanced an article to The Guardian at the time about how people were being chased for the tax and the threat of back payments being taken from pension savings.

In March 1990, I went with a journalist friend on a poll tax demonstration in Trafalgar Square. There was a march feeding into the square from Whitehall but no sign of trouble. That was until the riot police and small groups of anarchists decided to do what they’d really set their hearts on doing all along – having a massive bust up.

While Labour Party and trade union speakers addressed the crowd, the first missiles soared overhead. And in a short period of time, we found ourselves in a scene of total chaos.

Police tactics involved kettling us into the square while the rioters set light to a nearby building being renovated and threw pieces of kerbstone. Then riot police on horseback charged past the South African embassy trampling somebody underfoot. We huddled on the steps of St Martin’s church wondering what the hell to do next. What became clear was that the many thousands of us were now regarded as de facto criminals.

Somehow, eventually, we ran into a restaurant where the customers were huddled against the back wall. An American women shrieked: “Sterling is ruined after this”. Not really a huge concern at the time, I must admit. And then a stroppy waiter insisted we buy a meal!!

And so – in one of the more surreal moments of my life – I ended up eating spaghetti bolognese at a first floor window of the restaurant watching rioters overturn an Aston Martin on St Martin’s Lane. And all the way up the road, looters smashed shop windows including Macari’s instruments.

I later heard somebody was arrested on Regent Street with a brand new saxophone!