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By Root 3055 0

Whereas most European economies in the 1980s grew more slowly than they had the previous decade, the British economy grew faster. From 1987 there were classic signs of ‘overheating’ and initial confusion about what monetary indicators were showing. Nigel Lawson’s shadowing the deutschmark meant that we did not take action early enough to tighten monetary policy. That is not to say that the surge of prosperity in these years was just or even mainly the result of an artificial consumer boom. It was more soundly based than that. The current account deficit which became a real problem must not obscure — indeed to some degree it reflected — the fact that industry was investing in the future during these years: in the 1980s British business investment grew faster than in any other major industrial country, with the exception of Japan. Profitability rose, and so did productivity. The improvement in British manufacturing industry’s productivity in the 1980s was greater than in any other major industrial economy. New firms grew and expanded. New jobs followed — 3,320,000 of them created between March 1983 and March 1990.

It is, therefore, as important to understand what went right in these years as what went wrong. Provided that the benefits are not reversed by a combination of imprudent management of the public finances and Euro-regulation, the fundamental improvements in the British economy in the 1980s will endure. Where the problem arose was on the ‘demand side’ as money and credit expanded too rapidly and sent the prices of assets soaring, particularly non-internationally traded goods like houses. This spiral was clearly unsustainable and had to break or be broken. By contrast the ‘supply side’ reforms were highly successful. These were the changes which made for greater efficiency and flexibility and so enabled British business to meet the demands of foreign and domestic markets. Without them, the economy would not have been able to grow so fast and deliver such improvements in profits, living standards and employment: in short, the country would have been poorer.

Trade union reform was crucial. The most important changes were those made between 1982 and 1984, which have already been described in some detail. But the process continued right up to the time I left office. The 1988 Employment Act, based on our manifesto pledges, strengthened rights of individual trade unionists against industrial action organized by their unions without a ballot and against the unions’ attempts to ‘discipline’ them if they refused to go out on strike. It also instituted a special commissioner to help individual union members exercise their rights and opened up trade union accounts for inspection. The 1990 Employment Act concluded the long process of whittling away at the closed shop, which had held so many in its vicious thrall in the 1970s. It now became unlawful to deny someone a job because they were — or were not — a member of a trade union. These reductions in trade union power, together with the reinforcements of individual trade unionist’s rights and responsibilities, were crucial to a properly functioning labour market, in which restrictive practices were overcome and unit labour costs kept down below the levels they would otherwise have reached. The abolition of that monument to modern Luddism — the National Dock Labour Scheme* — was another blow to restrictive practices.

Such reforms had a continuing and beneficial effect. It was not just that they allowed management once more to manage and so ensured that investment was once again regarded as the first call on profits rather than the last; they also helped change the attitudes of employees to the businesses for which they worked, and in which they increasingly held shares. So in my last year in office there were fewer industrial stoppages than in any year since 1935: under two million working days were lost in this way, compared with approaching thirteen million a year on average during the 1970s. Still too many, by the way.

But there were other changes aimed at improving the quality