On incomes policies in the 1970s

A friend of mine pointed me to this article on incomes policies in Britain in the 1970s.

Incomes policies are thought to have not been effective because of the way in which the last one ended - when in 1978/9 there was a wave of strikes in protest at the Government's 5% pay norm. However, there had been some successes for them before then. Notably, the high inflation of 1974-5 had been tackled by incomes policies and the inflation rate was down. Also, the situation of strong trade unions, a willingness of some trade unions to follow a 'solidaritistic' wage policy (the £6 per week pay rises of Stage I) and a government committed to reducing inequality had meant that inequality in the mid-1970s was lower than before or since. It has been calculated by some commentators elsewhere that the distribution of income in Britain was at its most equal in 1976 in the wake of increased taxation on the wealthy and a flat-rate wage increase in many sectors.

A variety of reasons have been put forward by commentators as to why incomes policies in Britain were less successful than in other countries [such as Sweden]. This could be due to the fact that they were always seen as temporary expedients here in Britain and so there was always pressure to bring them to an end and move to "free collective bargaining". Whereas, in Sweden, the Social-Democrats [who were the dominant party in the Swedish government from 1932 to 1976] and the LO [the main trade union confederation] accepted that incomes policies and a 'solidaritistic' wages policy (i.e. not allowing wage increases for workers in one employer or one sector to run too far ahead of the average) was necessary to try and marry together the goals of full employment and low inflation.

Additionally, the trade union movement in many other countries was more centralised (i.e. it had stronger trade union confederations) than in Britain. In Britain, although individual unions were powerful back then, the TUC itself was weak. It did not have as much influence over its constituent members as the LO did in Sweden or the DGB in Germany. Even in countries with ideologically-divided different trade union confederations, the central confederation for each tendency (communist, social-democratic or Catholic) was strong in respect of its powers over its individual member unions.

Purdy also argues in his article that the employers were less organised in Britain than in some other countries. He points to a distinction between trade associations and employers' organisations. The differentiation between the latter and the former meant that employers' federations were weak. The CBI did not feel empowered to negotiate or make major commitments on behalf of its members. This differed from employers' organisations in some other countries. As such, a tripartite approach was trickier in the UK than in some smaller Western European countries. The Government was both (a) not negotiating with a powerful trade union confederation and (b) not negotiating with a strong employers' federation. A deal reached between the Government, the TUC and the CBI could be unpicked if ICI or the T&G refused to go along with it.

Another interesting angle Purdy points out is that there was a potential alternative, left-wing, way of selling the idea of an incomes policy. The unions would want to be able to show something in exchange for their restraint. Purdy points out that some thinkers, especially those in the Communist Party and in some smaller left-wing groups, were keen on industrial democracy. The idea of this was that, in exchange for wage restraint, workers would get greater influence over their employer. This could involve worker-directors, some form of elected management, some form of shop-floor decision-making etc. This would also have the advantage of opening workers' eyes to the trade off between higher wages in the present and potential capital investment which could raise productivity and wages in years to come.

This was the "road not travelled". Instead the Government and the trade unions seemed to go along with the idea that management of firms should be left to their existing bosses with little or no worker input. This means the unions focussed on wages and so were inherently going to have great difficulties with incomes policies that pressed for wage restraint.

The "solution" to this dilemma since Thatcherism - and to my mind a very unjust solution - has been to weaken trade unions and increase unemployment. This means workers have less bargaining power and so are in a very weak position to exert upward pressure on their wages. Instead, the fruits of productivity growth go into the pockets of bosses and shareholders - leading to increased inequality.