From Social Contract to ‘Social Contrick’: The Depoliticisation of Economic Policy-Making under Harold Wilson, 1974–751
| Author | Chris Rogers |
| DOI | 10.1111/j.1467-856X.2009.00382.x |
| Published date | 01 November 2009 |
| Date | 01 November 2009 |
| Subject Matter | Article |
From Social Contract to ‘Social
Contrick’: The Depoliticisation of
Economic Policy-Making under
Harold Wilson, 1974–751
bjpi_382634..651
Chris Rogers
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 article 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 that there was no alternative to
the introduction of incomes policy and the reduction of public expenditure.
Keywords: depoliticisation; Social Contract; economic policy; Labour government
Introduction
It 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 depre-
ciating 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 International
Monetary Fund (IMF) crisis (see Clarke 1988, 314–315; Holloway 1995, 128;
Bonefeld and Burnham 1998, 41); however the intention of this article 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
The British Journal of
Politics and International Relations
doi: 10.1111/j.1467-856X.2009.00382.x BJPIR: 2009 VOL 11, 634–651
© 2009 The Author.Journal compilation © 2009 Political Studies Association
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 article will demonstrate how the government used issues of credibil-
ity 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-
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, public expenditure cuts were justified by
the possibility that Britain would need to secure substantial external financing in
early 1976. This culminated in borrowing from the IMF’s oil facility, which helped
to stifle support for the Labour movement’s Alternative Economic Strategy (AES),
and lock British policy into multilateral solutions to balance of payments correction.
This helped legitimise the argument that immediate public expenditure cuts were
essential if more severe and externally imposed reductions were to be avoided in
the future.
The State and the Politics of Depoliticisation
It has been common to view globalisation and capital mobility as processes that
have given power to markets over states (see inter alia Helleiner 1992; Strange
1994; Pauly 1997; Cohen 1998). However, Peter Burnham (2001a, 135) has noted
that an alternative ‘would be to see the reregulation of financial markets as pro-
viding the strongest possible public justification governments can muster for main-
taining downward pressure on wages to combat inflation’. As such, the supposed
imperatives of markets can be identified as tools that help governments to ‘restruc-
ture (that is, lower) expectations and improve its credit rating’ (Burnham 2001a,
147). Therefore, Burnham (1994, 221–222) has suggested that analyses focusing on
the constraints imposed by the deregulation of financial markets represent ‘a vulgar
and fraudulent discipline [that fails] to grasp the complex organic set of social
relations which is the global political economy’.
Understanding this complex set of social relations is therefore of key importance in
understanding the nature of the state. In order to achieve this, John Holloway
suggests that it is necessary to ‘understand the state not as a thing in itself, but as
a social form, a form of social relations’, which appears ‘in the form of something
external to social relations’ (Holloway 1995, 122; see also, inter alia, Bonefeld, 1992;
Burnham 1995, 2001b and 2006). Conceived in this way, it should be understood
that the state ‘is not autonomous, or simply related to “the economy”, rather it is an
integral aspect of the set of social relations whose overall form is determined by the
manner in which the extraction of surplus from the immediate producer is secured’
(Burnham 1995, 93, emphasis in original). Or rather, states ‘are not to be thought
of as “thing like” institutions losing power to the market’ (Burnham 2001b, 108 and
2006, 76).
FROM SOCIAL CONTRACT TO ‘SOCIAL CONTRICK’ 635
© 2009 The Author.Journal compilation © 2009 Political Studies Association
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