Thursday, 30 June 1983

Thatcher and Friends: Chapter 1 - Thatcher's Fake Landslide

By John Ross

In terms of seats in Parliament Thatcher's election victory of 1983 was enormous. But the Conservatives' 144-seat majority had little to do with real degrees of popular support; it merely reflected the grotesquely undemocratic character of the British electoral system. The Tories won 61.1 per cent of the seats on 42.4 per cent of the vote. The Tory percentage of the vote actually fell by 1.5 per cent from 1979 while their number of seats increased by almost 8 per cent.

Table 1



Table 1 gives the percentage of votes and seats won by the major parties. It also shows what changes that would be brought about by allocating seats in direct proportion to the percentage of votes received. The effect of the 'first past the post' electoral system IS not,contrary to the rhetoric of David Owen and David Steel, that Labour is over-represented in Parliament because it is un-democratically holding on to a lot of seats in the North of England. Labour's proportion of seats in 1983 was slightly, but not massively, above its proportion of the vote. The party which was absurdly over-represented in Parliament was Margaret Thatcher's Tories. The chief effect of proportional representation in 1983 would not have been to reduce Labour representation but to have eliminated a large part of the “hang 'em, flog 'em, lock 'em up” brigade of Tory backbenchers and replace them with up-and-coming members of the SOP-Liberal Alliance.

The decline of the Tory vote

Real political and social trends, and underlying strength, cannot be judged from one election alone however. A 1.5 per cent fall in the vote for the Tory Party on the face of it looks quite a good result given that no government since 1959 has been re-elected after a full term. Its significance only becomes clear when it is seen in the context of the long-term decline of Conservative Party support.

Figure 1 illustrates the percentage of the vote gained by the Conservative Party in every election since its highest-ever level of 1931. An even longer-term curve of Tory support, to show that we have not 'cooked the books' by adopting an arbitrary starting-point, can be found in Chapter 2.

Figure 1
 

What Figure1 shows, as one would expect, is a whole series of short-term fluctuations of Tory support from election to election, and from victories to defeats. But all these short-term shifts are simply superimposed on a quite clear continuing decline of Tory support. With the exception of 1945-51, when the Conservative vote was temporarily depressed by the colossal post-war Labour landslide, every Conservative victory since 1931 has seen the Tory vote at a lower level than the one before. Each consecutive Tory defeat saw the Conservative vote fall to a lower figure than the one previously (see Table 2).

Table 2


 
In the 1983 election Thatcher has not succeeded in reversing his long-term trend of Tory decline. On the contrary, her votes in 1979 and 1983 form part of that fall of support for the Conservative Party.

Furthermore this Conservative decline, as we will see later, is not some sort of curious statistical freak but is deeply rooted in long-term social forces. The 1979 and 1983 elections demonstrated the weakness of the Labour Party but also a failure by the Tories to regain popularity - a failure which has profound consequences for the shape and future of British politics.

Three-party politics

Finally, Table 3 shows the decline of the Tory vote in the overall development of the party system. It clearly shows the way in which support for all three major parties in the 1983 election forms a coherent part of their long-term development.

Taking the Alliance first it can be seen from Table 3 that the Liberal vote has been rising since 1955. Taking just the successive peaks the trend is from 3 per cent in 1955, to 6 per cent in 1959, 11 per cent in 1964, 19 per cent in February 1974 and 25 per cent for the SDP-Liberal Alliance in 1983. The Alliance vote is not a six-day wonder but a product of that 30-year trend of rising Liberal support.

Equally, the Labour Party vote also shows a perfectly clear development. The highest percentage Labour vote ever recorded in a general election was 48.8 per cent in 1951 - although the 48.0 per cent of 1966 was only marginally lower.

Table 3



If we look at the findings of Gallup polls, which have been taken since 1939, Labour's highest-ever levels of support were 52.5 per cent in January 1946 and an all-time peak of 53.5 per cent in May 1966. It was after the announcement of the introduction of incomes policy in June 1966 that Labour Party support started the remorseless downward trend from which it has never recovered. The Labour vote of June 1983 is evidently a continuation of that decline.
Taking these trends together then, it can be seen that the votes of none of the major political parties in the 1983 election were determined simply by short-term elements of the situation. The support of all the parties represents parts of coherent long-term trends in British politics. Ripping simply one feature out of the situation - normally, for propaganda purposes, the decline of the Labour Party vote - obscures what is taking place. In reality an enormous political process is under way affecting the position of all political parties in which the development of each individual party interlocks with that of the others.

Thatcher and Friends: Chapter 2 - The Modern Party System

By John Ross

The reality that in the 1983 election we are considering only one link of a far longer and more fundamental political process becomes still clearer if we now take a longer time-scale than the one we have so far considered. Most modern British political analysis commences at the Second World War. However, post-war trends form only a small, if coherent, part of the 130-year development which in its totality forms the modern British party system. If we want to see clearly the whole development of this system, and the place of each party within it, then we must not start not with the post-war period but with the origins of this entire process.

The reality of this long-term party development becomes clearer if it is recalled that the two modern British capitalist parties - the Conservatives and the Liberals - were not formed separately. Both were the product of one single great political crisis - the 1846 split in the old Tory Party between Robert Peel and forces organised by Benjamin Disraeli (see Chapter 7 below). The Conservatives and Liberals are simply, so to speak, the two sides of the coin of the original crisis- the Conservatives constituting directly the continuity of the majority of the Tory Party and the Liberals being formed through the fusion of the 'Peelites' with the old Whig Party. Both parties came to be led by the two components of the original Tory split - Disraeli giving political coherence and leadership to the Conservatives and Peel's old lieutenant, Gladstone, becoming the great formative leader of the Liberal Party. The Labour Party, as we will see, was a later development emerging directly as a consequence of the great crisis of the Liberal Party which became acute in the 1880s and reached its head in 1886 with the split between Gladstone and Joseph Chamberlain over Irish Home Rule.

The Tory Party

If we take first the Conservatives then Figure 2 shows the proportion of the votes won by the Tory Party in every election since 1859 - the year generally taken as marking the fusion of the 'Liberal-
Conservative' supporters of Peel with the Whigs to form the Liberal Party.

Figure 2

The fundamental curve of Conservative support is clear. Despite changes in the franchise, and inevitable short-term fluctuations, the Tory percentage of the vote rose remorselessly through all short-term shifts to reach a peak in 1931. Each peak of its support progressively moved higher than the one before in a cumulative chain - an equivalent graph for seats would show the Tory position rising in a similar way from immediately after the creation of the modern Conservative Party in 1846.
From 1931, the trend of Conservative support relentlessly falls. Each peak is lower than the preceding one, and the successive declines see the Tory vote falling to lower levels. The 50-year fall of the Tory vote we saw in Chapter 1 is simply the descending part of this 130-year curve of Tory development. All short-term fluctuations due to political crises, specific events, changes in the right to vote, etc., are merely superimposed on that 80-year curve of rising support followed by 50 years of decline. It is scarcely possible to imagine a more clear-cut development.

The Liberal Party

The Liberal Party's development represents, so to speak, the mirror-image of that of the Conservatives. Figure 3 shows the percentage of the vote gained by the Liberal Party in every general election since 1859 - the 1983 figures, of course, being those for the SDP-Liberal Alliance.

Figure 3
 
Once more it can be seen that despite all changes in the right to vote, and all short-term shifts, support for the Liberal Party follows a perfectly clear trend of development. For 92 years - from its creation in 1859 up to 1951 - support for the Liberal Party declined. Old British Liberalism was, so to speak, dying before it was born. The Liberal Party received its highest-ever share of the vote in the year of its creation - 1859. After that the story was downhill for almost a century.

It is worth noting that within this decline 1886 represented a clear turning-point. From 1859 to 1885 the Liberal Party defeated the Conservatives in the vote in six general elections out of six - in fact, the Tories were defeated in the vote by the Liberals or their predecessors the Whigs in twelve out of the thirteen general elections between 1832 an1885. From 1886 onwards, in contrast, the Tories beat the Liberals m the vote in twenty-five general elections out of twenty-six - the sole exception being 1906. In short, the split of the Liberal Party over Irish Home Rule in 1886 altered the entire historical balance between the Liberal and Tory Parties and represents one of the great earthquakes of British political history.

Finally, from these figures it can also be seen that there was no 'Strange Death of Liberal England' during or just before the First World War - as George Dangerfield suggested in his famous book of that title. The Liberal Party had been in decline for 57 years before the split of 1916 between Asquith and Lloyd George. The First World War was merely the kick that knocked down the entire rotting structure of the old Liberal Party. The famous period of Liberal government of 1906-15 was the dying spasm of an already mortally wounded beast.

After 1951 a new cycle of Liberal development began. After 92 years of decline the Liberal Party vote turned upwards and has continued to rise for 32 years. The Liberal-SOP vote of 1983 is just a continuation of that trend.

The Labour Party
 
The beneficiary of the great crisis of the Liberals after 1886 was of course the Labour Party. However, it is not true, as is sometimes claimed, that the rise of the Labour Party was the cause of the crisis of the Liberals. The Liberal Party was already in profound decline before the Labour Party ever came into existence. The backbone of the Liberal Party was already smashed in 1886 - 14 years before the Labour Party was formed.

What is evident, however, is that the same processes that were destroying Liberalism also created the Labour Party. In essence, as we shall see, the Labour Party replaced the Liberals in their chief social and geographical areas of strength.

Finally the politics of the Labour Party also grew up in the shadow of the Liberals. Those who laugh at Lenin's famous description of Labour as a 'Liberal-Labour Party' should in reality take it a little more literally at least as far as Labour's high-level practical policies are concerned. In 1900 the first act of the leadership of the new Labour Party was to enter into a secret electoral agreement with the Liberal Party. The last major act of what may transpire to have been the last majority Labour government of the old style - the 1974-79 Wilson/Callaghan administration - was to enter into a parliamentary pact with the Liberal Party. The great gods of post-war Labour policy - William Beveridge and John Maynard Keynes - were both to become Liberals. The split from Labour, both of personnel and votes, to form the SDP went on to form a bloc with the Liberals.

In its political and social base, the Labour Party had in a sense always contained two rather different components. One was the element of a mass independent working-class and at least vaguely socialist party. The other was the residue of the old Liberal Party when the latter was no longer a viable political instrument. Subject that combination to a major crisis and it would inevitably tend to dissolve into its constituent parts - precisely as happened in 1981 with the SDP split.

Figure 4 gives the percentage of the vote for the Labour Party in every general election since its foundation in 1900.

Figure 4

 
With inevitable short-term fluctuations Labour Party support rose progressively from the foundation of the party in 1900 until 1951. There was then no fundamental decline between the two peak Labour votes of 48.8 per cent in 1951 and 48.0 per cent in 1966, but after 1966 the move of the Labour vote is remorselessly downwards.

As with the Tories and Liberals, any serious study of the Labour Party must account not merely for short-term shifts, but also for that long curve of development.

Summary
 
Finally, to summarise these developments, it is clear that the chief trends of the 1983 election were in no real sense determined by short-term factors. All the events to which the press gives such importance - the personality of the leaders, particular manifestos, great 'crises' - had very little to do with its chief features. These explain perhaps fluctuations of a few per cent in either direction. But they cannot even remotely explain the enormous historical curves of support, operating over a 137-year period, which we have looked at and of which the1983 election is a coherent part.

The Conservative Party, as we have seen, has a perfectly clear path of development. The modern Conservative Party was formed as the majority of the split of the old Tory Party in 1846. The Conservative Party's support rose, through inevitable short-term fluctuations, for 80 years up to 1931. It achieved a position as the pre-eminent capitalist party through the split of the Liberal Party in 1886. Its support has progressively declined since 1931 and Margaret Thatcher, oil revenues, Falklands factors, hysterical press campaigns, etc., have proved quite unable to halt that underlying decline - nor would we of course expect such superficial elements of the situation to reverse a process which has been going on for over 130 years. This Tory development in turn forms part of an immense party political system which has been in existence as long as the Conservative Party itself.

What then is the nature of this Conservative Party, its 137-year development, and the party political system of which it is such an integral part? This forms the subject of the rest of the book.

Thatcher and Friends: Chapter 3 – The Tory Elite

By John Ross

Any analysis of the Tory Party itself might as well start at the top. A suitable point of departure is the original membership of Thatcher's Cabinet.

The team that launched the Thatcherite project was in fact fairly typical of Conservative Cabinets. Of its members, 71 per cent were company directors, 14 per cent were large landowners, and 10 per cent were lawyers, with some overlap between the categories of landowner and company director. Eighty six per cent of the Cabinet had been to public school. Only one out of 22 was a woman (increased to two after the Cabinet reshuffle of September 1981, but reduced to one again in 1983).

Moving down a rung to look at Tory MPs in the original Thatcherite Parliament we find that 170 (50.1 per cent) were directors of companies - in fact between them these 170 were on the boards of 475 private companies. (The equivalent figures of Labour MPs were 0.6 per cent on the boards of three private companies, and a further 0.6 per cent on the ‘boards’ of cooperative societies.)

If we take the principal occupations, as opposed to simply the membership of company boards, an identical pattern shows up. Of Tory MPs 40.6 per cent had direct business backgrounds as executives, managers, bankers, stockbrokers, or farmers.

The ‘professional’; layers which made up virtually all the rest of Tory MPs also had a very definite character. By far the largest number of these were lawyers and accountants - making up 24.1 per cent of all Tory MPs. Of the rest, 5.8 per cent came from the armed forces and 2.4 per cent from the apparatus of the Tory Party or employers' organisations. Taken as a whole, 73.0 per cent of Tory MPs were products of public schools - 14.7 per cent from Eton alone.

In other words, the Tory Party in Parliament and government is totally dominated by company boards professions closely ties to business such as accountancy and law, and some sections of the state apparatus such as the armed forces. These together with the apparatus of the Tory Party and employers' organisation themselves, made up 7.3 per cent of Tory MPs. All other groups pale into insignificance compared with these layers.

The party outside Parliament

The Tory Party leadership locally, as one would expect, is less narrowly recruited. But it still shows an identical basic shape. A survey for 1969 showed 33 per cent of constituency chairpersons of Conservative Associations to be owners of large or medium businesses, company directors, or executives. A further 16 per cent were small businessmen/women and 9 per cent were farmers or landowners. (i.e. 58 per cent of Conservative constituency chairpersons came directly from business or management occupations). A further 14 per cent were lawyers or accountants.

The situation is similar among the wider membership of the Conservative Party. A 1964 survey indicated that 40 per cent of Conservative Party members and 42 per cent of Conservative activists (and 85 per cent of constituency chairpersons) were made up of employers, managers, and ‘higher professional’ layers.

Educationally the only major difference between Conservatives in Parliament and senior layers outside was a distinction between constituency chairpersons in Conservative held seats and those in Labour held ones. In safe Conservative seats 52 per cent of constituency chairpersons came from public schools and in Tory marginals, 44 per cent. In marginal Labour seats, however, only 25 per cent of Conservative constituency chairpersons were educated at public schools and in safe Labour seats only 20 per cent were.

In other words, at the local level, the same backbone of business and business orientated professions, educated in public schools, dominated the Tory heartland. The Tory Party was slightly more ragged round the edges in Labour areas.

Labour and Conservatives

It is also worth comparing these figures to those for the Labour Party because there has been some confused discussion in recent years about a ‘;convergence’; between the social origins and occupations of Labour and Tory MPs. Quite apart from the much more fundamental issue of the social nature and financing of the two parties this argument is simply not factually true and can only be sustained by sloppy use of journalistic formulas such as ‘;middle class’; and ‘;professional’;. Table 4 shows the main occupations from which Labour and Tory MPs came in 1979 and also compares their educational backgrounds and company directorships.

Table 4


It can be seen from this Table that it is quite simply misleading, and obscures the fundamental features, to talk of Labour and Tory MPs becoming increasingly ‘middle class’.

This is not, of course, intended to justify the existing social composition of MPs. There IS a stupendous lack of social representativeness in the MPs of both parties. Manual workers are essentially non-existent among Tory MPs and only around a sixth of Labour ones - most of those in the category of ‘;manual and clerical workers’; had in fact ceased to work at these jobs many years before. The percentage of women Labour MPs and candidates in 1979 cannot be considered any more creditable than that of the Conservative Party (5 per cent to 2 per cent in favour of Labour among women MPs, and 8 per cent to 5 per cent among candidates). There were only two black Tory candidates in 1979 and only one black Labour candidate. Only one more woman was elected to Parliament in 198 than in 1979.

But taking the social layers which are represented, these are evidently not the same for Labour MPs and Tory MPs. The Labour MPs represent essentially layers based in the organisations of the labour movement and parts of the public sector such as education, local government, and the civil service. These make up 70 per cent of Labour MPs. The equivalent occupations to these made up only 14 per cent of Tory MP. Tory professionals are not drawn from occupations such as the state education system but from the traditional occupations of private enterprise such as law and accountancy.

Whatever Tory and Labour MPs represent, therefore, the social layers they come from are evidently not the same. We will consider later whether the top personnel of the Tory Party actually correspond to the overall character of the party.

International comparisons

Finally it is worth comparing the Tory Party with the capitalist parties of other major countries.
Taking first the United States, the US legislature is much more dominated by corporation and other lawyers than the British one. In 1982, for example, 57 per cent of the US Senate was made up of lawyers - compared to 21 per cent of Tory MPs and 9 per cent of Labour MPs. There is also in the United States the famous ‘fringe’ of astronauts, actors, ‘machine politicians’, etc.

The most serious business of government in the United States, and also the most direct input of the capitalist corporations in terms of personnel, is the role of professionals financed by major companies on bodies which are wholly unelected. Typical examples are Reagan's Secretary of Defence Caspar Weinberger and Secretary of State George Shultz, who were both top officials of the Bechtel Corporation which is the largest overseas construction contractor in the world. Other typical figures of the same type were, or are: Dean Rusk (president of the Rockefeller Foundation and Secretary of State); Dean Acheson (corporation lawyer and Secretary of State); Robert McNamara (successively president of Ford's, Kennedy's Secretary for Defence, and then head of the World Bank) and Henry Kissinger (writer of Nuclear Weapons and Foreign Policy, worker for the Council on Foreign Relations, and then Nixon's National Security Adviser and Secretary of State). The formal separation of legislature and executive in the American system means that such figures need not run for office, but are appointed by the President.

The business connections of the British Tory Cabinets, as we have seen, are as impeccable as their US counterparts - indeed, they are probably much more directly involved in the ownership of capital than many of those listed above for the United States. But the Tories are also not merely members of the Cabinet but also members of the legislature - a privilege denied to their American counterparts. The direct connection between the economic organisation of the capitalist class and the exercise of power is, if anything, even greater in the Tory Party than in the political parties of the United States.

The comparison with the major capitalist parties of Western Europe is also striking. To take just one example, the Christian Democratic Union/Christian Social Union, which is the dominant party of West German capitalism , attempts to give a much greater image of democracy and social representativeness than does the Tory Party. In 1969 56 per cent of CDU/CSU members of parliament were teachers, civil servants, trade union officials, party full-timers, and local politicians - compared with 73 per cent of Tory MPs who were company directors, managers, lawyers, accountants, members of the armed forces, or members of employers' organisations. This difference was sharply highlighted when the West German and Italian Christian Democrats refused to work in a common group with the Tories in the European Parliament. The reason they gave was that they were ‘people's’ parties not ‘Conservative’ parties and presented themselves as much more representative than the Tory Party.

The personnel of the Conservative Party, in short, are thoroughly, and indeed one might say extravagantly, capitalist in character. The connection of the Tory Party and the ruling class is one of the closest and tightest of any capitalist party in the world.

Thatcher and Friends: Chapter 4 –Aristocrats and Others

By John Ross

Turning from the immediate personnel of the Tory Party to its more long-term development, there is another feature which authentically marks off the Conservatives from the capitalist parties of almost any other major country. This is the degree to which ultra-archaic social layers have survived within the Tory Party in particular and the British ruling class in general. Furthermore, while these features sometimes appear merely absurd, in reality they reflect extremely profound aspects of the nature and structure of British capitalism and its chief political party.

The aristocracy and gentry

Taking the most archaic layers of British society, the aristocracy and landed gentry, the prolonged influence, and earlier the total dominance, of these forces in British politics is quite extraordinary.

The Parliament of 1841-47, during which the modern Conservative Party was created, first met 9 years after the Parliamentary Reform Act of 1832 and 70 years after the date generally taken as the beginning of the Industrial Revolution. In this House of Commons, however, 81 per cent of MPs still came from the families of the aristocracy and landed gentry. Taking a slightly later period the radical barrister Bernard Cracroft showed, in a famous article published on the eve of the second Reform Act, that 326 out of 658MPs (i.e. 50 per cent) in 1865 were directly members of aristocracy or titled families. A further 170 represented directly landed or territorial interests. In other words, a full three-quarters of the House of Commons was, at this time, still made up of representatives of landowners.

At the higher levels of government the situation was still more extreme. Palmerston's Cabinet of 1865 was made up of two dukes, one elder son of a duke, six lords, two baronets, one son of a peer, one son of a baronet, and only two persons who were not related directly to titled families. Gladstone's Cabinet of 1880 still contained a majority of aristocrats - those involved being a duke, a marquess, and five earls. Gladstone himself was the son of a baronet.

In 1909 members of aristocratic families still made up 16 percent of the House of Commons and non-aristocratic landowners a further 15 per cent (i.e. 31 per cent in all). Furthermore, unlike the situation in other countries, this figure did not drop after the First World War. In Germany, on the other hand, the number of those descended from aristocratic families elected to the Reichstag fell from 14 per cent in 1912 to 4 per cent in 1930. The 16 percent of British MPs who came from aristocratic families in 1909 had only dropped to 15 per cent by 1928. In 1920 the Duke of Devonshire alone had sixteen relatives in the House of Commons.

Finally, even if we take the aristocracy in the most restricted sense - that is sons or daughters of hereditary peers excluding all nephews, nieces, cousins, relatives by marriage, etc - then these still constituted 8.5 per cent of Tory MPs in 1924 (this had fallen to 3.2 per cent by 1974). Taking people who had or would inherit hereditary titles, they declined from 24 per cent of the House of Commons in 1832, to 21 per cent in 1868, 16 per cent in 1885, 16per cent in 1900, and 13 per cent in 1918.

Cabinet and government

At the highest levels of government the prevalence of aristocratic and landowning families declined even more slowly. Prior to the First World War, no British Cabinet contained less than 35 members of aristocratic families. Thereafter, the numbers began to drop rapidly for all parties other than the Conservatives. Only three out of twenty-one members (14 per cent) of Lloyd George's Cabinet of 1916 were from aristocratic families. The figures were then 16per cent in the MacDonald Labour government of 1923, 11 per cent in the 1929 Labour government, 0 per cent of the 1945 Attlee government, and an average of 5 per cent in Labour governments after that.

In the Tory Party, by contrast, the role of members directly associated with aristocratic families continued far longer and no equivalent fall occurred during or after the First World War. Members of aristocratic families constituted 47 per cent of the Balfour Tory Cabinet in 1902, 43 per cent of the Baldwin Cabinet of1935, and 31 per cent of the Churchill Cabinet of 1951. The fall was then to 28 per cent in the Eden Cabinet of 1955, 22 per cent in the Macmillan Cabinet of 1957, 21 per cent in the Home Cabinet of1963, and 22 per cent in the Heath Cabinet of 1970.

If a wider circle than the Cabinet is taken, and other sections of the ruling class are also considered, then the continuation of ultra-archaic features in the British ruling class may be seen simply by considering two central aristocratic families - those of the Dukes of Marlborough and the Dukes of Devonshire. As late as1960 these two families together included in their membership, by direct descent and by marriage, nine senior Conservative ministers(the prime minister, the foreign secretary the secretary for war, the minister for agriculture, the minister for commonwealth relations, the minister for labour, the minister for works, the minister for power, and the attorney general); two junior ministers(the under-secretary at the Foreign Office, the under-secretary for commonwealth relations); five members of the boards or owners of four newspapers (the Times, the Daily Mail, the Daily Express, and the Observer); the governor and deputy-governor of the Bank of England; six directors of three merchant banks (Hambros, Lazards, Morgan Grenfell); three directors of the Guinness brewery firm; a director of the Courtauld's textile firm; the ambassador to the United States; and the governor-general of New Zealand. The prime minister (Macmillan) was related through his marriage in the Devonshire family to the president of the United States (Kennedy)and the Marlboroughs contained the supreme icon of the Tory Party, Sir Winston Churchill. Finally, it is worth noting that both families at an earlier period were united through the person of the]Ü Duke of Abercorn and therefore, more distantly, all the above were related to each other.

The last aristocrat to be British prime minister was Sir Alec Douglas Home in 1964. His predecessor was Harold Macmillan - whose Devonshire connections I've just outlined. His predecessor was Anthony Eden - a member of a landed family. Eden's predecessor, in turn, was the grandson of the seventh Duke of Marlborough and for18 years heir to the title - Sir Winston Churchill. No post-war Conservative prime minister failed to come from an aristocratic or landowning family until Edward Heath in 1970.

More structurally, Britain is today of course, with the House of Lords, the only major country in the world in which the hereditary peerage have a right to vote in the legislature. As late as 1893the House of Lords was powerful enough to veto a measure as fundamental as Home Rule for Ireland - although a similar attempt to veto the budget of 1909 was defeated through a major constitutional crisis and two general elections. In 1950-51 the House of Lords could still sabotage the nationalisation of the steel industry.

Landowners

We have already noted that 81 per cent of MPs in 1847 came from landed families. They still produced 49 per cent in 1880 -when the Liberals, not the conservatives, formed the government.

Turning to the Tory Party more specifically, a clear pattern emerges. The majority of Tory MPs remained landowners until the 1870s. Thereafter, a slow decline began with the proportion of landed families among Tory MPs falling to 46 per cent in 1885 and 39 per cent by 1900 - although even this figure is extremely high. While of course farmers cannot be precisely compared to nineteenth-century landowners, nevertheless it is interesting to note that even in 1979 farmers accounted for 12 per cent of Tory MPs. Thatcher’s 1979 Cabinet still contained two members who were large landowners (Whitelaw and Carrington), and one inheritor of a seventeenth-century stately home (Pym). For some comparison we may note that 0.3 per cent of Labour MPs in 1979 were farmers.

The forces which replaced the Tory landowners from the 1880s onwards were, naturally, those coming from industry and commerce -a process which speeded up after the 1886 split of the Liberal Party. Among new Tory MPs, as opposed to sitting members, the number of landowners declined from 37 per cent in 1886 to 29 percent in 1900 while the number from industry and commerce increased from 28 per cent to 43 per cent in the same period. Overall, however, members of landowning families STILL exceeded the number of Tory MPs from industry and commerce even in the Parliament of 1900 (by 39 per cent to 32 per cent).

Public schools

It is this pattern of development in the Conservative Party which also makes it easy to understand the significance within the party, and the British ruling class generally, of that supremely English institution - the public school.

While the direct role of landowners and aristocrats has declined in the Tory Party in the twentieth century - even if not as rapidly as is generally supposed - the weight of the public schools has not diminished significantly. As we will return to this later we will deal here only with the most essential points.

It has often been said, entirely correctly, that the public schools, in their present form, were the essential institutions created by the ruling class in the nineteenth century to achieve the cultural homogenisation of the capitalist class through a common education of its children. Thomas Arnold was appointed headmaster of Rugby school in 1828 and set about converting institutions which previously had been chiefly famous for dissolute behaviour into serious educational institutions. This task was then consolidated and codified through the official government Clarendon Commission of 1861-64.

The basis on which this homogenisation was to be created, however, was unequivocally clear. The public schools were to embody a cultural supremacy of the values of the landed aristocracy and gentry over the rising industrial capitalist layers which had emerged in the late eighteenth and early nineteenth centuries. Atits most crude level this was the famous declaration by Gladstone of the value of the ‘classical education’; of Latin and Greek over science and technology:

‘The relation of pure science, natural science, modern languages, modern history and the rest to the old classical training, ought to be founded on a principle
‘I deny their right to a parallel or equal position; their true position is ancillary, and as ancillary it ought to be limited and restrained without scruples.’

This precept was certainly put into practice. At Shrewsbury, one of the nine founding public schools investigated and ‘reformed ‘through the Clarendon Commission, not one lesson in science was given before 1877. At Rugby, the pioneer public school, science equipment was excluded from the school premises and placed in the town hall - where it was ‘locked up in two cases so that the towns people could use the space for other purposes at night’. At Cambridge in 1872 only twelve persons were studying for the natural science examinations - and the majority of these were training to be doctors.

This educational system, and choice of subjects, might of course appear merely grotesque until it is set against its correct framework - its consequences for future economic, social and political development. To understand what the facts given above signify, it is necessary to note that by 1872 eleven technical and twenty other universities existed in Germany. In the United States, well over seventy universities existed by 1870 and the systematic organisation of postgraduate scientific education, copied from Germany, had already been introduced. At that time there were only four universities in the whole of England. There were also a further four universities in Scotland, where the education system was qualitatively superior.

This influence and effect worked itself all the way down the educational system with consequences lasting to the present day. In the late nineteenth century, when Germany was establishing universal primary education and an unparalleled system of technical and engineering education, the future Tory prime minister Lord Salisbury characterised the attempt to establish systematic primary education in Britain as ‘pumping learning into louts’. By 1900 the average German worker had spent a further 5 hours a week for 2 to 4 years in part-time education. The average English worker, in contrast, received 2 years less in school, with only two-thirds of the hours, and with no systematic part-time education afterwards.

If you take that type of difference in education and training, multiply it by 20 million workers, and extend the process over decades, then the directly economic effects, let alone the educational and cultural ones, will be - and were - staggering.

Looking at higher levels of education, the situation is much the same. By 1957 Britain had the lowest proportion of university places per head of the population of any country in Europe except for Ireland, Norway and Turkey. The number of university places per head was 65 per cent higher in West Germany than in Britain, 114 per cent higher in France, 454 per cent higher in the Soviet Union, and 818 per cent higher in Argentina. The famous ignorance and philistinism of the British ruling class is not a mere quirk but has a profound institutional background. Sir Keith Joseph is today building on a Tory tradition.

No matter what happened to the rest of the education system, however, the public schools brought about a profound homogenization of the various elements which made up the British capitalist class, and the leadership of its political parties. If we take the period from 1867 to 1916, then 32 per cent of all Cabinet members, including Liberals, were educated at a single school - Eton. Taking all public schools together, the figure was 59 per cent.

If we take simply Tory MPs and Cabinet ministers, then the supreme peak of dominance of Tory MPs by members educated in public schools was reached in 1935 and 1945. In these years 81 and 85 percent respectively of all Tory MPs were educated at public schools. Between 1906 and 1945 together an average of 79 per cent of Tory MPs were educated at public school when the party was in opposition and 75 per cent when it was in government. From 1945 to 1979 the percentage was 73 per cent when the Tory Party was in office and 78per cent when in opposition. (This difference is accounted for by the fact that, as with constituency chairpersons, public school educated candidates in the post-war period tended to be even more disproportionately congregated in safe Tory seats.)

Taking the higher levels of the Tory Party, 92 per cent of all Conservative Cabinet ministers between 1925 and 1955 were educated at public school. Since then, the figures have been 94 per cent in the Macmillan Cabinet of 1957; 88 per cent in the Home Cabinet of 1964; 83 per cent in the Heath Cabinet of 1970; and 81 per cent in the Thatcher Cabinet had been educated at two schools - Eton and Winchester.

While these figures are of course absurd when judged from the point of view of the general population, they are not so when compared to the leading personnel of the capitalist class itself. In 1982 Eton and Winchester, in addition to a third of Thatcher’s Cabinet, had also educated the chairpersons of all five clearing banks, the heads of the home and foreign civil services, and the head and deputy heads of the BBC. Eton by itself accounted for fifty Tory MPs.

Taking various periods since the Second World War, two-thirds of all under-secretaries in the civil service, nine-tenths of all senior army officers, two-thirds of senior air-force officers, four-fifths of fudges, two-thirds of bishops, three-quarters of directors of clearing banks, and 50 per cent of directors of leading industrial companies were educated at public school. The Tory MPs and Cabinets might be on a different planet from the public at large but they are superlatively well integrated into the capitalist class - not merely in terms of class position, but also in terms of education and upbringing.

Thatcher and Friends: Chapter 5 - The Finances of Toryism

By John Ross
 
So far we have concentrated on the personnel of the Tory Party. We have outlined the direct connections of its members and leaders to the capitalist class and noted the connections which become closer and closer the more one ascends the ladder of the party. However, from a fundamental point of view this question of personnel is merely an index of the nature of the Tory Party and not of its substance. Other west European capitalist parties are able to get by on a much looser connection with the direct personnel of the capitalist class than the Tory Party. If we want to understand the Conservative Party the most basic questions are who gains from its existence and policies and who supplies the practical means, the finances, to make its entire structure possible? As one might suspect, those who pay and those who gain turn out to be the same.

A landlords' party

The finances of the original Conservative Party, and before that the "old" Tory Party, show exactly the same pattern as its membership in Parliament - confirming from another angle the character of the party. While no systematic accounts exist for Tory funds for the nineteenth century, nevertheless the situation is clear both from what partial records do exist and from elections themselves. Central Tory Party funds, as opposed to a simple reliance on local patronage, came into being some time before 1830and had a regular existence after this date. Thus, in 1831 we find the Duke of Buccleuch contributing £220,000 to the Tory Party (for convenience, and to allow comparisons for periods with different prices, all figures in this section have been converted into 1980 prices). Buccleuch was one of the sixteen largest landowners in Britain. Tory aristocrats Bute, Ellenborough and Powis contributed a further £88,000 at the same time. In 1857 twelve Tory peers alone donated £196,000.

For the general election of 1880 Tory peers subscribed a known sum of £524,000. However, it must be remembered that this is only a fraction of the total donations and of the far higher local expenditure paid for by the Tory landowners. In short, it is quite clear that in this period up to the 1880s the Tory Party was not merely staffed but also financed essentially by landowners (we will consider its policies later).

After 1880

More recently, as we have already noted, the Tory landowners began to be complemented by substantial forces from other sections of the capitalist class. An identical shift may be found in the finances. The essential method of Tory funding used in the late nineteenth and early twentieth centuries was massive corruption in the form of the buying and selling of hereditary titles to newly rising sections of the ruling class. This of course was also a supplementary means of integration of these layers into the old Tory-dominated landowning strata.

This mechanism was simple and may be illustrated by a classic example. For the election campaign of 1900 the American businessman turned British citizen William Astor donated £20,000 to Conservative funds (a sum equivalent to £575,000 in 1980 prices).The next time the Tories were in office after this administration, that is in 1916, Astor received a peerage. He then "spontaneously" donated £200,000 (over £2 million in 1980 prices) to the Conservative Party. By 1914 the Conservative Party had accumulated a reserve of £800,000 (£20 million in 1980 prices) essentially through promises of future creation of peerages.

The Liberal Party used similar methods to secure its finances. Between 1900 and 1906 eight people alone - Wills, Whitley, Lever, Ashton, Langman, Horniman, Joicey, and Robinson - donated £130,000 to the Liberal Party (£3.6 million in 1980 prices). They received in return five peerages and four baronetcies - Lever receiving both. Lloyd George, during his coalition government, built up a personal fund from the sale of titles which, with the accumulated interest and profit, allowed him to spend a minimum of £1.3 million in 1980 prices) on political activities in the inter-war period.

The entire structure of party finance and bribery was furthermore tightly bound into the state and also utilised in relation to Labour Party politicians. The chief technical organiser of the system - a failed actor and suspected murderer named Maundy Gregory - was provided in the 1930s with a secret pension to live in Paris by the ex-Conservative Party chairman John Davidson. The condition was that Gregory kept his mouth shut. To ensure that this was done the diplomatic service was almost certainly used to survey Gregory's exile. The person who donated the funds for Gregory's pension, with a contribution worth over £400,000 in 1980 prices, was duly rewarded with a baronetcy by the1930 national government of Ramsey MacDonald and Baldwin.

Large-scale donation of money along similar lines was not confined to the Tory and Liberal Parties either - although it was concentrated there. Ramsay MacDonald, after taking over as prime minister in 1924, received a settlement for life of the interest on £40,000 (£560,000 in 1980 prices) from the manufacturer Sir Alexander Grant. Grant subsequently received a baronetcy during MacDonald's premiership. MacDonald, acting on information given by Baldwin, also appears to have believed that the Labour leaders, Clynes and Henderson, were involved in the Maundy Gregory scandals.

Companies and the state

In addition to organising the cover up of its earlier sources of funds, the inter-war period was used by the Tory Party to rationalise its finances and place them on a recognisably modern footing.
The person who supervised this process, John (later Lord) Davidson, is worth a mention all to himself. Before becoming Conservative Party chairman in 1927, Davidson had been private secretary to Tory Party leaders Bonar Law and Baldwin's government of 1924. In this capacity Davidson had been responsible, jointly with the military and the civil service, for drawing up the secret plans to defeat the 1926 General Strike. Earlier Davidson had also been involved in the sensational release of the still mysterious "Zinoviev letter" used to smear the Labour Party in the run up to the 1924 general election - and as late as 1956 Davidson intervened to prevent publication of an account of the role of Conservative Central Office in this affair.

The person whom Davidson recruited to be head of Conservative Party publicity, and later to establish the Conservative Research Department, was a serving army officer and member of MI5, Major Joseph Ball. Whether or not Ball actually resigned from the intelligence service when he took up the new job is, of course, a matter on which one can come to no definite conclusion. But John Ramsden, who researched the period and from whom the above details are taken, considered it probably that Ball continued to work for MI5 "during the whole time he was at Central Office". Whatever the background of Ball and Davidson, however, Tory election expenditure on central propaganda in this inter-war period was, in real terms, among the highest in history. Conservative central publicity alone in 1935 was around £5 million in 1980 prices - in addition to all the local expenditure. The next highest figure for central publicity was that preceding the 1964 election.

The most essential structural innovation which Davidson introduced was to replace the funding of the Tory Party from rich individuals with direct financing from companies. The type of individual contributions indicated previously declined to the point where, by the 1970s, only 15-20 per cent of central Tory Party funds was coming from individual donations. Of the rest, approximately 60 per cent came directly from companies and around 20 per cent, with the proportion declining, from Conservative constituency parties.

Modern Tory financing

Company contributions today make u by far the largest sector of central Tory funds: many of them "laundered" through various intermediate bodies. The Labour Research Department, to whose research in this field anyone who studies the subject is enormously indebted, found that around two-thirds of traced political contributions by companies go directly to the Conservative Party and the rest are channelled indirectly through organisations such as British United Industrialists, the Economic League, Regional Industrial Councils, or given to bodies such as Sir Keith Joseph's Centre for Policy Studies. However, the sums of money involved are so large that they cannot be successfully hidden and the picture is the same whether direct or indirect contributions are taken. We will look at both.

Big capital

The first feature which shows up in Conservative Party funding is that the central apparatus of the Tory Party is an organization quite specifically financed by the very largest concentrations of British capital. Constituency contributions make up only a small and decreasing proportion of Tory Party central funds - 17 per cent in 1979-80 compared to 29 per cent in 1969-70. Furthermore, this figure for constituency contributions is exaggerated as it includes formal credits given to constituencies. These formal credits amount, on the Tory Party's admission, to approximately one-sixth of the total. In short, the real contributions of constituencies to Tory Party central funds was around 14-15 per cent in 1979-80. The rest, that is approximately 80-85 per cent, was divided between individual contributions (of which the Conservative Party refuses to give any specific details) and a minimum of 60 per cent of company contributions.

If the origins of company funds are then considered, a clear pattern shows up. Taking the largest sections of industrial capital alone, in 1967-77, 59 of the 200 largest industrial companies donated funds to the Conservative Party, 39 of the second 200 did, 23 of the third 200 did, and 27 of the fourth 200 gave donations. In short, Conservative Party donations came differentially from the largest industrial companies, with 98 out of the largest 400 donating and only 50 out of the next 400 doing so.

If a wider range of companies is taken, and the financial sector is included, then as Francine Miller and Richard Minns found in a survey in 1979, 60 per cent of large firms contributed to the Tory Party, whereas only 30 per cent of smaller firms did. The contributions of the smaller firms amounted to only 6 per cent of the total donations. The contributions of the smallest companies of all - with a market capitalisation of less than £5 million - accounted for only 1 per cent of total contributions.

Banks, oil and food

Turning to the economic sectors from which the Tory Party receives its funds an extremely clear pattern also shows up. The Tory Party does not receive its funds in a way that is even remotely in a one-to-one relation with the economic structure of British capitalism. On the contrary, the financing of the Conservative Party is massively weighted towards certain sectors of the economy, which give enormously more than their proportionate size in the economy. Other major economic sectors give comparatively very small sums or nothing at all. Furthermore this bias in Tory financing continues to increase, as can be seen in Table 5.

Table 5

 
Three sectors of the British economy (finance and property companies; food, drink and tobacco firms; construction companies) have steadily been accounting for a larger and larger proportion of Conservative Party company donations. Between them these three sectors make up regularly 45-55 per cent of all company contributions to the Tory Party. Other sector, notably engineering and general manufacturing industry, have been progressively reducing their percentage or contributions to the Tory Party.

Furthermore the figures given in Table 5 are not simply equivalent to the relative weights of these different sectors of the economy. Excluding education, health, public administration and public utilities, finance and property companies accounted for only 10 per cent of GDP in 1981, but gave 31 per cent of company donations to the Conservative Party. Food, drink and tobacco manufacturers only accounted for 4 per cent of GDP, but gave 15 percent of company contributions to the Tory Party. As we will see in the next chapter, those economic sectors which do contribute most heavily to the Conservative Party today are precisely those which had come to dominated the British capitalist class by the end of the nineteenth century. Conservative Party funds do not necessarily reflect accurately the overall structure of the British economy but do very definitely reflect the historically most powerful groups within it - a fact in line with the point already made that Conservative financing comes differentially from the largest concentrations of capital.

Who gains?

The relation between economic interest, concentration of capital, and the Tory Party becomes even clearer if we now integrate these figures with the development of the British economy under Thatcherism. It is not true, as is sometimes presented, that the period since 1979 has seen some sort of generalised collapse of production in the British economy.

On the contrary, while certain sectors of the economy declined sharply others were growing very rapidly indeed. Furthermore, while in some economic sectors the fall in production was considerable, the fall in profitability was very small even at the peak of the recession. Essentially, the experience of British capital under Thatcher breaks down into three categories.

First, certain economic sectors underwent rapid growth almost throughout the recession. These were in particular five - oil, agriculture, communications, finance and electrical engineering. Although the economy as a whole contracted by 4 per cent from 1979 to 1981, oil and natural gas output increased by 20 per cent, agricultural output by 9 per cent, and income from financial services by 6 per cent. Electrical engineering did contract at the height of the recession in 1981 but this was temporary, after growth in 1979 and 1980. In 1982 electrical engineering output expanded by over 5 per cent and electrical engineering production was 6 per cent above its level in 1978.

Second, a series of sectors of the economy underwent no major decrease in output at all despite the recession. These included food, drink and tobacco manufacturing, mining and retailing.

Third, the sectors which underwent massive decline under Thatcher were general manufacturing and construction. Manufacturing production overall declined by over 15 per cent between 1979 and1982. By the end of 1982 manufacturing output was down to the level of 1967 - 15 years earlier. The fall in construction was even greater: it decreased by almost 20 per cent between 1979 and 1982.

But while both manufacturing and construction output declined, the profit levels in construction and manufacturing were very different. In manufacturing not only output but profits too collapsed. In construction, however, profits held up relatively well and were significantly above the average for the economy as a whole. If we take the best profits calculations available – the inflation-costed accounts prepared by the Bank of England – the return on capital in contracting and construction companies in 1981was 10.7 per cent compared to an average of 7.5 per cent for all companies outside the oil industry.

In Table 6 major commercial and industrial sectors of the economy are arranged in order of their profitability in 1981. It is very interesting and instructive to compare this with the figures on output given above and with the information on the sources of Conservative Party finances in Table 5.

Table 6
 
It should be noted that the category "engineering contractors" in Table 6 is not what is referred to in general language as the "engineering industry" (i.e. vehicles, metal goods etc.). It includes chiefly firms such as the Davy Corporation - which is the second largest overseas construction contractor in the world – and Babcock International, another supplier of industrial plant. These are among the most internationalised of all firms in the British economy. Babcock International exports over 30 per cent of its British production and carries on almost 50 per cent of its production abroad. The Davy Corporation exports nearly two-thirds of its British production, carrying on more than 50 per cent of its production abroad.

What is clear is that if the financing of the Conservative Party does not reflect accurately the shape of the British economy as a whole, it does reflect with quite astonishing accuracy the levels of profit and changes in production which took place under the first Thatcher government. Of the growth sectors of the economy under Thatcher, we noted that oil companies do not contribute directly to the Conservative Party - although they do to pro-private industry groups such as the Economic League. Profits in banks and financial institutions cannot be calculated in the same way as those above, but they are enormous. With these exceptions, however, it is obvious that while the Conservative Party's finances do not come necessarily from the largest sectors of industry in terms of output, they do come from the most profitable - and from those which have been most rapidly expanding. Those who paid were those who gained.

Developments within manufacturing
 
This trend becomes even clearer if the situation within manufacturing industry is looked at. In Table 5 it was demonstrated that the proportion of contributions from the three core sectors for Tory finance was continuing to rise. This evidently means that the funds from other sectors, including manufacturing, were decreasing, as we showed earlier. Within the manufacturing sector there is only one significant exception to this – electrical engineering. Here, there was not a reduction but an increase in contributions to the Tory Party, at least up to the height of the recession in 1981 - which, as we noted, was the only time when electrical engineering output was seriously affected by the slump. In 1980, when Thatcher's party was paying off the 1979 election campaign expenses, the two electrical engineering giants - GEC and Plessey - were respectively the first and fourth largest company donators to the Conservative Party and were, after Allied Breweries, the second and third largest political contributors to all right-wing organisations in that year (i.e. including British United Industrialists, the Economic League, etc,). The three traditional core sectors of Toryism plus electrical engineering accounted for more than 60 pre cent of all traced company contributions to the Tory Party in this year.

At the time of her election, Thatcher also had no more openly proclaimed admirer in industry than the head of GEC, Lord Weinstock. His ardour, judged by cash payments rather than praise, seems to have temporarily abated at the height of the recession in1981 when GEC temporarily withdrew from giving a donation to the Conservative Party.

This new attitude of the electrical engineering industry towards the Tory Party can be contrasted, for example, to the traditional position of GEC's chief rival as Britain's largest industrial firm - Imperial Chemical Industries (ICI). ICI is a firm traditionally keeping its distance from the Conservative Party. Its chairperson in the 1960s, Paul Chambers, was a frequent critic of Tory governments and one of the chief campaigners for entry into the Common Market at a time when the Conservative Party was not at all prepared to accept all the consequences of this. Under Thatcher, the distancing of the heads of ICI from the Conservative Party has gone still further with its present chairperson, John Harvey-Jones, being an open supporter of the SDP and bitterly opposed to Thatcher's war over the Falklands. Two other smaller chemical firms, Fisons and Laporte Industries, also withdrew funding from the Conservative Party - Laporte industries publicly declaring that it was doing so because of the policies of the Thatcher government.

The connection between these changing relations to the Conservative Party and the shifts in the economy under the Thatcher government examined earlier are rather obvious. Electrical engineering firms such as GEC or Plessey are in an industry which, apart from 1981, continued to expand almost throughout the recession. They are also locked into a great complex of heavy dependency on state expenditure on armaments, power generation, telecommunications, etc., which were among those sectors of state expenditure which were not cut back by the Thatcher government. GEC in particular also adopted a very specific strategy for dealing with the slump - it accumulated £1,000 million of liquid funds by the beginning of 1983 and invested them at high interest rates in the money market.

As Anthony Sampson put it, in his Changing Anatomy Of Britain, Britain's "largest manufacturing corporation was looking more like a bank" - which is not a bad analogy for a Tory manufacturing company.

In contrast, a firm such as ICI in the chemicals sector is not tied in a similar way into the same complex of military and state spending. For this reason, and others, while electronics output continued to expand for most of the recession, chemicals was a sector significantly hit by the slump. Whereas GEC's profits maintained themselves relatively well, ICI in 1980 suffered the first loss in its history, recovered somewhat in 1981, and then suffered another big fall in profits in 1982. In 1981 GEC, in electrical engineering, was making a profit almost 75 per cent higher than ICI in chemicals despite a turnover 40 per cent smaller and a capital employed less than half as large. The shifts in financial contributions, then, reflect the shifts in the economy itself.

These figures also show that it is not serious to suggest, as is sometimes done, that the relation of companies to the Conservative Party, or a phenomenon such as Thatcherism, is simply based on "ideology" or "purely political" considerations. Naturally, there is a specifically political, and even ideological, element in the relations of the ruling class to the Tory Party. All sections of the ruling class, or at least the major ones, would almost always prefer a Conservative government to a Labour one. They will defend the Tory Party as a fundamental strategic instrument even when they have sharp tactical differences with it. Nevertheless, as we have shown, there is also a very clear economic dimension. Certain sections of the capitalist class have gained enormously from the Conservative Party in general and Thatcherism in particular and continue to finance the Tory Party to a high degree. Other economic sectors have ceased to gain as much as before and are withdrawing their level of funding. Only someone who is very naive, or deliberately wants to obscure reality, can believe that these trends are "accidents".

However, all this poses another question. Why did this extraordinary collection of landowners, banks, construction firms, and food, drink and tobacco manufacturers come to dominate the Conservative Party and the British ruling class? To see this we need to go back to look at the British capitalist class itself.

Thatcher and Friends: Chapter 6 - The British Capitalist Class

By John Ross

While the material in the previous two chapters shows that the Conservative Party is superlatively well integrated into the British ruling class, it also raises an obvious question. What sort of ruling class is it whose political personnel remained until the 1880s dominated by landowners? What kind of capitalist class would leave political leadership to Greek and Latin students and allow its mass education system to be on so primitive a level as inevitably to hold back its economic future? How could the "First Industrial National" come to have a ruling class party dominated by bankers and brewers?

This point is important because it relates to a common misunderstanding both of the Conservative Party and of Thatcherism - one which sees the cause of Britain's economic and political crisis in such questions as the weight of the public schools, the supremacy of the cultural values of landowners, etc, and believes that there is something "irrational", from the point of view of British capitalism, in Thatcher's enormous destruction of British manufacturing industry. Such views can be found expressed at a popular level in the various editions of Anthony Sampson's Anatomy of Britain or, at a more sophisticated level, in what is now one of the classics on the "British crisis" – Martin Wiener's English Culture and the Decline of the Industrial Spirit.

At a political level such concepts form a basis of some of the political appeal of the SDP and the Liberals. On such an analysis there is of course no need to question capitalism as such in Britain. All that need be done is to remove certain of its most backward features – probably in alliance with "modernising" sections of the capitalist class against "backward" layers who support Thatcher.

While we cannot deal with all the ramifications of these issues here (but see the Guide to Reading) it is simple to make a few fundamental points. We shall do so by tracing the history of the British capitalist class itself.

Dominance within the British ruling class

To find that the Tory Party had its origins among landowners is not surprising. At least a century before manufacturing industry arose on a large scale in Britain the greatest concentrations of wealth and power in the country were in the capitalist landowning class. What is not so well known, however, is that the greatest concentrations of wealth in Britain were still in the hands of the capitalist landlords probably as long as a century after the Industrial Revolution had taken place. There is not the slightest doubt about this fact, either in relation to individual or to institutional forms of capital.
Although concentrations of personal capital are notoriously difficult to measure accurately, a relatively reliable guide, for the period prior to the introduction of death duties, can be gained from wealth left at death. Records of this have been extensively studied – by Marx in the 1860s and subsequently in much greater detail. All these studies show essentially the same, and extremely clear, historical distributions of wealth in Britain.

If we take as a measure of wealth those leaving £500,000 or more on death then the numbers of owners of such capital outside land did not overtake capitalist landlords in Britain until the 1860s.
If the criterion of leaving over £1,000,000 is taken then the shift did not take place until the 1880s (i.e. almost exactly the same time that the shift between the dominance of landed and non-landed capital was taking place in the Tory Party). Even if we assume that industrialists represented a younger generation which died later – and there are good reasons for assuming that this was not an important element in the situation - this still means that for almost a century after the Industrial Revolution it was landownership which continued to represent the greatest individual concentration of economic wealth in Britain.

This specific pattern of capitalist economic development becomes even clearer if wealth is looked at not just on an individual level, but also in terms of the concentrations of capital in the different institutions and sectors of the economy. As far as industry is concerned, Raphael Samuel, in his scintillating essay "The Workshop of the World", has shown on what extremely small units of production the Industrial Revolution and the manufacturing economy of the Victorian epoch was based. As Samuel puts it,
In juxtaposing hand and steam-powered technologies one is speaking of a combined as well as an uneven development. In mid-Victorian times, as earlier in the nineteenth century, they represented concurrent phases of capitalist development, feeding on one another's effects.... The industrial revolution rested on a broad handicraft basis, which was at once a condition of its development and a restraint on its further growth.
Any idea that Britain leapt during the Industrial Revolution from the primarily agricultural based economy of the early part of the eighteenth century into a modern industrial epoch has no basis in fact. British industrialisation followed a far more long-drawn-out course than the process seen later in Germany, Russia, or today's "Newly Industrialising Countries". The scale of British industry in its period of industrialisation was also incomparably smaller than that of its later rivals.

The same pattern can be seen if the concentration of industrial capital, as well as the scale of individual units of production, is considered. Even by the 1880s the largest 100 industrial firms in Britain accounted for less than 10 per cent of total production - and this had only risen to around 15 per cent by 1909. Really rapid concentration of industrial capital in Britain began only after the First World War, when the share of industrial production accounted for by the largest 100 firms rose to 26 per cent by 1930, fell slightly to 23 per cent by 1948, and then rapidly moved ahead to 33 per cent in 1958, 38 per cent in 1963, and 45 per cent in 1970. However even then, as we will see, the most powerful development and concentration of capital in Britain still existed in sectors primarily outside heavy industry. In countries such as Germany, the United States, and Japan, the economy became dominated by industrial sectors such as steel, electronics, chemicals, and vehicle production. In Britain the economy was dominated by banking and land, and the manufacture of food, drink, and tobacco. Only in one truly modern sector, oil, did British capitalism develop an extremely strong position - and that was particularly linked to the military needs of its navy.

Concentration of land

In contrast to the situation of industry the concentration of landed capital in Britain had acquired quite staggering proportions by the last half of the nineteenth century. The most comprehensive survey of this period, the official Return of Owners of Land for 1873, showed that four-fifths of the land in Britain was owned by a mere 7,000 people. In certain areas of the country the situation was even more extreme. For example, in East Anglia 350 people owned 55 per cent of the agricultural land, and in Scotland the 25 largest estates alone accounted for a quarter of all land.

Seven people - the Dukes of Buccleuch, Devonshire, Northumberland, Portland and Sutherland, the Marquess of Bute and the Earl Fitzwilliam - had estates of over 100,000 acres and annual incomes of over £100,000 each (and income approximately equivalent to £2 million in rent in 1980 purchasing power). Two others – the Dukes of Norfolk and Westminster - had smaller estates but enormous incomes due to the geographical positions of their land (the Duke of Westminster, who owns much of London's Belgravia, is still today the richest individual person in Britain). A further six people - the Duke of Richmond, the Earls of Breadalbane, Fife and Seafield, Alexander Matheson and Sir James Matheson - had slightly smaller incomes but estates even larger than 100,000 acres. These fifteen persons alone can be said to have constituted the core of the British landed capitalist class.

Finally, the actual process of the building of towns, but before and after the Industrial Revolution, itself increased the wealth of landed capital. By the end of the eighteenth century, probably one-fifth of the expansion of London in the previous 200 years had been onto land owned by dukes and much of it was on leases under which the building reverted to the landowner. By 1866 out of 261 provincial towns, 69 were largely built on land owned by great landlords and 34 by gentry.

Ireland

To rent directly derived from land in Britain another element must be added to understand the wealth of the British capitalist landowning stratum - and one with the profoundest historical consequences for the Tory Party and British politics. This is the question of Ireland. As subsequent developments have greatly distorted the true historical relations between British capitalism and Ireland, it is necessary to outline them briefly.

The first point that should be noted is that even the relative sizes of the populations of Britain and Ireland which exist today are in no sense a natural development. At the beginning of the nineteenth century the population of Ireland comprised some 33 per cent of the population of the British state.

By 1966 it had fallen to less than 8 per cent of the population of the states of Britain and the South of Ireland combined. In 1966 the population of England alone was ten times that of Ireland whereas in 1821 the English population had been only one and a half times the population of Ireland.
This tremendous transformation in the relative weights of populations did not come about through "natural" increase of the English population over the Irish. It was achieved through genocidal policies of the British state which resulted in the annihilation of large sections of the Irish people and the de-population of large areas of the country - the South of Ireland is today the only country in Western Europe which actually has a lower population than the same area had at the beginning of the nineteenth century. At the time of the first Irish census of 1821 the population of what is today the Southern Irish state stood at 5,086,000. By 1961 it had fallen by almost half to 2,818,000. As a comparison, the population of England from 1801 to 1961 rose from 8,538,000 to 43,350,000 and even the population of the North of Ireland expanded marginally.

The collapse in the population of the south of Ireland is explained not by any "voluntary" factors but by the effects of famine - above all the great famine of 1846 - mass emigration forced by poverty, and the effects of a standard of living based on mass misery. Anyone who had any illusions as to the supposedly "peaceloving" characteristics of British politics, and of its ruling class, need not even look to the barbarous policies carried out by Britain in Asia, Africa, or the Middle East. They need simply note the regime of mass annihilation and repression in Ireland - a policy which in its cumulative effects, if not its methods, stands comparison with anything achieved by Hitler. Its policy towards Ireland alone brands the British ruling class, and the Tory Party in particular, as one of the greatest groups of mass murderers in history.

The profits which this regime of extortion and massacre produced were, however, equally astronomic. By the middle of the eighteenth century £750,000 was being extracted annually in rents from Ireland to absentee landlords in England (roughly £45 million a year in 1980 prices). To give some idea of comparison it may simply be noted that at that time a "knight" might live quite adequately on £800 a year. By the beginning of the nineteenth century, roughly 1.5 per cent of British GNP alone was accounted for by rent from Ireland - most of it available for capital accumulation in Britain.

In the nineteenth century this struggle over British rule became one of the most decisive issues not only of Irish but of British politics. And by this time the need to maintain control of the crucial shipbuilding plants of Belfast had been added to the question of English landlordism. The outcome of this struggle, the clash over Irish Home Rule and Independence brought Britain closer to civil war than any other event in the twentieth century. Thefanatical Tory attachment to the Union with Ireland, its support for armed Unionist resistance to Home Rule and for the Curragh army mutiny of 1914, the fact that after 1886 the Conservatives publicly named themselves the "Unionist Party" - later amended to "Conservative an Unionist Party" - cannot be understood simply as a question of romantic attachment to Empire or the "integrity of the British state". It was rooted historically in the profound economic interests in Ireland of British capitalism in general and of the landed capitalist class in particular.

Industry, banking and commerce

The form of derivation of its wealth by the British landlord class gave to landed capital in Britain an enormous economic flexibility. Being derived from rent rather than tied down in direct agricultural production, capital accumulated in land could potentially be utilised in other sectors of the economy. Similarly, as no skill in agricultural production was required for landownership in Britain, it was easy for wealth made in other sectors of the economy to buy its way into land. This latter path then constituted a route to both political and social respectability and created a ready fusion of landed and various other forms of capital.

Wealth made in land was invested in trade and banking, and wealth made in trade and banking was invested in land. British landed capital, at least in its greatest concentrations, never constituted a cut-off estate as did the more feudal aristocracy of Germany, France and other European states.
Thus, for example, the two Mathesons already referred to were from families involved in Far Eastern commerce, while London bankers and merchants (such as Lloyd, Baring, Drummond and Rothschild) all bought their way into land. So also did brewers such as Barclay, Hanbury and Whitbread as well as West Indian merchants and plantation owners. Later in the nineteenth century, industrialists such as Tennant, Armstrong, Coats and Wills repeated the same process.

Developments throughout the nineteenth century also progressively opened up wider opportunities for British landed capital to participate in more general economic activities. The development of large-scale railway building from the 1840s onwards, for example, provided enormous opportunities for investment. Initially, the railway construction directly involved buying of land on estates and later created massive opportunities for portfolio investment - a type of utilisation of funds particularly suited to the rentier incomes of British landed capital. The wholesale creation of joint-stock companies in the last half of the nineteenth century opened up opportunities for investment to any section of landed capital with money available.

Despite this increasing opening for non-agricultural forms of activity for landed capital, however, for reasons discussed later, this fusion of landed capital with other sections of the ruling class was not achieved in anything like an even fashion. On the contrary, the unevenness of this fusion became one of the principal features of the British ruling class. Whereas in the eighteenth century the intermixture of landed, merchant, and banking capital had been achieved, no equivalent fusion took place in the nineteenth century between industrial capital and wealth made in land, banking, or overseas trade. The notorious division between banking and industry in Britain in reality has its origins in the very earliest periods of British capitalism.

Landed and non-landed wealth

The separation of industrial capital from other sections of the British ruling class can be easily illustrated by the most politically active section of the capitalist class - the membership of the House of Commons. The Parliament of 1841-47 that created the Conservative Party has been subjected to an extremely detailed examination by W.O. Aydelotte. We have already noted earlier that in this Parliament 81 per cent of MPs came from landed families. A further 9 per cent had made wealth in business. Between these two capitalist interests there was some important degree of overlap - 17 per cent of members of the landowning families in the House of Commons had major connections with business outside land and 40 per cent had at least some minor business connections.

But when the actual layers of overlap are considered a rather different reality is revealed. Of the fifty MPs from landed families who were regularly connected with non-agricultural capitalism, only six were manufacturers and three others were involved in railways, whereas there were eighteen bankers, nineteen merchants, a planter, a distiller and a stockbroker. In short, significant numbers among the most politically active landed capitalist in the mid-nineteenth century were involved with merchants and banking but virtually none with manufacturing industry. Landed capitalists with manufacturing interests represented under 2 per cent of the landed families represented in the House of Commons.

Throughout the rest of the nineteenth century this pattern is also clear. Manufacturing industry had in any case ceased to expand proportionately as a sector of the British economy by the middle of the nineteenth century, and this might in any case have tended to restrict the fusion of manufacturing capital with other layers of the economy. Even more importantly, however, the British economy had already begun to undergo an internal transformation to reach a structure which was very distant from one based on the core sections of heavy industry. Although the weight of non-landed capital increased throughout most of the nineteenth century, this was not due to any increase of wealth in what in other countries would have been regarded as the heart of the industrial economy.

To show this shift in the composition of the ruling class, we may once more take both criteria of individual wealth and the institutional measures of capital. Of those leaving over £1,000,000 at death, fortunes deriving from landed capital declined from around 89 per cent of the total in 1809-58 to around 36 per cent in 1880-99 - although, as can be seen, even this latter figure is still high. Textiles, the key nineteenth-century sector of British industrial capitalism, accounted, in contrast, for around 5 per cent of the total. Furthermore the proportion of fortunes made in textiles tended to decline in the latter part of the nineteenth century.

A similar trend can be seen in the metal industry. This accounted for around 10 per cent of non-landed millionaire wealth in the first part of the nineteenth century - that is under 5 per cent of the total - and it then declined. This pattern of individual wealth is easily explained by the changing economic structure of the period which we will discuss later.

The real sustained development of non-landed wealth from the mid-nineteenth century onwards came from layers outside the core of heavy industry. The financial and banking sector consistently accounted for between 10 and 20 per cent of those leaving more than £1,000,000 at death - meaning that land and finance between them easily accounted for the majority of the greatest concentration of individual and family wealth in Britain. From the middle of the nineteenth century onwards the food, drink and tobacco industries also accounted for around one tenth of millionaires (i.e. twice as much as the metal industry) and from 1858 onwards the distributive trades accounted for another 5 per cent.
A similar pattern of economic power shows up within the manufacturing sector if we consider not just individual wealth-holders but also companies. A list of the ten largest manufacturing companies for 1914, for example, shows four textile firms, three food, drink and tobacco companies, one construction supplier, and only one firm each from engineering and chemicals. The types of companies that were by this time dominating modern German and American capitalism (Siemens and AEG in electronics, IG Farben in chemicals, Krupp, Thyssen and Carnegie in metals, Rockefeller in oil) simply were not the dominant sections of British industry, let alone British capital. The core of heavy manufacturing industry - metal engineering, electronics, chemicals, steel - was already, by the late nineteenth century, a subordinate section of British capitalism. The peculiarities of the Tory Party we noted earlier, the weakness, and even collapse of manufacturing industry under Thatcher, are therefore not some "out of the blue" freak, but a logical link in an historical process.

Indeed, the point can be put very simply. The fundamental question which must be answered for the British economy is not why it is "deindustrialising", but why it ceased to develop its manufacturing industry so early in the first place. After rapidly expanding overall from roughly 1770 to 1830, the expansion of manufacturing industry as a proportion of the British economy then ended for a century - until after the defeat of the General Strike of 1926 and the onset of the depression of the 1930s. The entire flow of labour from agriculture, and the essential proportionate growth in the economy in the last two-thirds of the nineteenth century, went into what would now be regarded as the "service" sectors of the economy - finance, retailing, transport and communications. Only much later (around 1930), and under very different circumstances, did the growth of manufacturing industry as a proportion of the economy start again – although the effects of this have been undone, during the 1970s in general and by Thatcherism in particular. It is this grinding halt to the growth of manufacturing industry as a proportion of the British economy from roughly 1830 that underlies the relatively low level of individual and company wealth in sectors such as the metal industry, textiles, etc. and helps to explain the continued weight of landed capital and the growth of sectors such as banking, retailing and food, drink and tobacco manufacture which we have looked at.

This development of the economy, however, also explains the archaic features of the Tory Party, the nature of its leadership, the weight of the public schools and so on. As the British economy was not dominated by heavy manufacturing - as were the German and US economies, for example - the need to educate an advanced industrial workforce was a low priority for the British ruling class. So also was the creation of the type of political leadership necessary to run a modern industrial state. It was not the prevalence of public schools and the cultural supremacy of landowners that created the backwardness of the industrial structure, but the backwardness of the industrial structure which created the nature of the public schools and the cultural supremacy of landowners.

The anachronistic features of the Tory Party are not aberrant but reflect the character of the British ruling class itself. The dominance of the Tory Party corresponds to, and reflects, in the victory within the ruling class of layers outside the core of manufacturing industry. But to see why they were victorious we must consider why the modern political party system arose in the first place.

Thatcher and Friends: Chapter 7 - The Origins of the Conservative Party

By John Ross
 
The great crisis: 1828-46

The background to the creation of both the modern party system and the modern British economy is the Industrial Revolution itself. After an initial surge of development in the latter part of the eighteenth century, temporarily halted in the first decade of the nineteenth, British capitalism embarked upon the most powerful surge of industrialisation in its history. By 1831 the proportion of British national income accounted for by manufacturing, mining and construction had risen to approximately 34 per cent. In the same period the proportion of national income accounted for by agriculture fell to roughly 23 per cent, making Britain the first major country in history in which industry constituted a larger part of the economy than agriculture. This creation of a fundamentally industrialised economic structure inevitably confronted the British capitalist class with problems of political domination that had never been confronted by any previous ruling class in history. The modern party and political system is precisely the attempt to confront this problem.

The difficulties of constructing a suitable system of capitalist political domination under the new conditions were further complicated by the fact that the process of industrialisation unleashed not one but two potentially violent forces threatening the British economic and political system.

The first such force was the industrial proletariat concentrated within the British state. Between 1811 and 1831 the proportion of the paid workforce employed in manufacturing, mining, and construction in Britain rose to over 40 per cent. This, furthermore, was a working class created under the horrors of an Industrial Revolution too well known to need describing in detail here.

The second element in the situation, however, was Ireland, already discussed in part of the previous chapter. To absentee rents extorted from Ireland were added the systematic use of Irish agricultural products – grain, butter, pork and bacon – to feed the growing towns of Britain. The Catholic population of Ireland itself was increasingly forced back on a lower and lower diet - one increasingly organised around potatoes - which culminated in the famine of 1846.

The effect of this entire system of oppression, both in Britain as a whole, and Ireland in particular, was inevitably to produce sharply increasing tendencies towards a social and political explosion. Logically these reached their first qualitative peak in the most extreme case of oppression of all, Ireland, in the 1820s. In 1823 Daniel O'Connell formed the Catholic Association to campaign against the British law banning the holding of political office by Catholics – that is, a ban on the vast majority of the Irish population. In 1828 O'Connell won the County Clare parliamentary seat - confronting the then Tory government under Wellington with a choice of admitting him to the House of Commons or facing what the government feared would be an insurrection against British rule in Ireland.

The result of this Irish crisis was to fracture the governing Tory Party. The Tory leadership, around Wellington and Peel, passed the Catholic Emancipation Act in 1829, but only after violent opposition from their base. Then, amid increasing unrest on a whole series of issues, the Tory government collapsed in 1830. It was the end of an epoch in British politics. For 47 years prior to 1830 the Tory Party, or its predecessors, had been continuously in office. After 1832 the Tory Party was defeated in the popular vote in twelve out of the thirteen next general elections up to 1885. O'Connell had precipitated a revolution in British politics.

Through the breach opened up by Ireland now flowed a whole new series of political issues. After 2 years of increasing struggles the great Parliamentary Reform Act of 1832 was passed by the new Whig administration. This largely re-cemented relations within the ruling class, but did not restore order – on the contrary, it allowed new forces to come out into the open. In 1838 the first Chartist petition for universal male suffrage in Britain was presented - the first emergence in the world of a clearly working-class mass movement. In 1839 an armed working-class insurrection took place in Newport, South Wales. In 1842, amid one of the worst industrial depressions of the nineteenth century, the second Chartist petition was presented. In the same year the first embryonic political general strike in history took place. Profound new forces were emerging into politics with tremendous disintegrative potentials for the future.

Identical trends to those in Britain were also appearing in Ireland. After 1843 O'Connell was eclipsed in influence by the Young Ireland movement - commencing a process which culminated in 1848 in the first attempted Irish armed insurrection against British rule in the nineteenth century.

Finally, the background to this entire process was rising discontent throughout Europe which culminated in the 'year of revolutions' of 1848.

1846: The creation of the modern capitalist parties

Confronted with the rising discontent of the 1840s, British capitalism had only two fundamental choices. The first was simply to engage in a head-on confrontation with the rising ferment not only in Ireland but also in Britain - a policy that ran the risk at some point of culminating in exactly the type of revolutionary developments that occurred in Europe (where such a policy was carried out) in 1848, 1870 and 1918. The second option was to use the enormous reserves and newly acquired strength of British capitalism to attempt to co-opt the movements forming against it. Given that at that time Britain accounted for more than 30 per cent of world industrial production, or half as much again as any competitor, it is no surprise that British capitalism chose the latter course. By so doing it was also able to surmount the economic crisis which had been accumulating in the 1840s.

The decisive steps summing up the new orientation of the British ruling class, and laying the basis for British economic policy for the next century, were all taken in a mere 5-year period between 1841 and 1846 - the years inaugurating also the structure of the modern political system. Essentially, free trade in industrial goods had been introduced by the Tory Prime Minister Robert Peel immediately on taking office in 1841. State finance was rationalised through the reintroduction of income tax for the first time outside war. It was the completion of these measures by the repeal of the Corn Laws in 1846 which was then the step which split the old Tory Party and created both modern Conservative and Liberal parties.

The Corn Laws were effectively a tariff on the import of cereals - allowing import of corn duty-free only when the British price was extremely high. They therefore gave a competitive advantage to British agriculture at the expense of its rivals while simultaneously maintaining an artificially high price for all food based on grain. This arrangement benefited land­owners, particularly the smaller and less efficient, but cut the living standard of the working class, and created a pressure for higher wages, by keeping up food prices. High food prices in turn helped feed working-class discontent and threatened industrial profits through the demand for higher wages.

Via a crucial economic mechanism, therefore, the Corn Laws in reality provided for the ruling class two alternative sets of social alliances. Maintenance of the corn tariff meant an alliance of all sections of the ruling class with small landowners at the expense of the working class - a perfectly suitable reactionary combination if the aim was to confront and smash the working class. A similar political system was later used by French capitalism and by Bismarck - and its consequences in France and Germany were exactly the same as had confronted the British capitalist class in the 1830s (i.e. rapidly rising working-class discontent, culminating in the 1848 revolution in France, and the rapid rise of the German labour movement, culminating in the revolution of 1918).

The alternative social alliance for British capital was to scrap the Corn Laws and hold down or reduce the price of food. This would create a basis for a bloc between large landowners and the industrial bourgeoisie and also for attempts to co-opt the working class. For industrialists such a cheap food policy would help keep down money wages - permitting high profit levels while avoiding working-class discontent. Large landowners would not be adversely affected as they could survive the foreign competition. Small landowners, however, would inevitably be crushed.

In reality, therefore, behind the apparent argument on a tariff, stood two completely different systems of social alliances and two totally different political perspectives. The first - that is large landowners, with small landowners and industrialists to crush the working class - might be named, after its most famous exponent, 'Bismarckianism'. The second - large land­owners, with industrialists and the working class at the expense of small landowners - may be termed after what it became, Liberalism and the Liberal Party. Peel chose the latter course of sacrificing the small landowners and his lieutenant, Gladstone, went on to lead the Liberal Party. The majority of the Tory Party, however, formed around forces organised by Benjamin Disraeli, rallied to defend its small-landowner base and against Peel's course. The outcome, as we have already seen, was the creation of both modern capitalist parties in Britain and the surpassing of all the old party alignments. A new 130-year party political system was put in place.

The new economic orientation

At the same time as creating the basis for British political stability, however, Peel also set in train processes that were to destroy the competitiveness of British-based manufacturing industry. Indeed, this was in a sense an inevitable outcome of the original decision because it had been adopted precisely to avoid confronting the working class – in other words, to accept a lower than possible rate of exploitation and instead grant economic concessions to the working class. The period following the 1840s therefore saw the re-establishment of political stability, but also British industry beginning to fall behind its rising American and German rivals both in terms of competitiveness and in terms of technological capacity. What is more this process was hastened by new economic mechanisms put in place to supplement and maintain the original Peelite orientation.

Of these new economic mechanisms by far the most important was British overseas investment. With a decreasingly competitive manufacturing base, but with colossal economic reserves, British investment abroad from the 1870s onwards began to reach levels equivalent to investment in Britain itself - and finally overtook it. By the First World War, profits on British investment abroad amounted to around 8 per cent of British GNP and remained at approximately 4 per cent even between the First and Second World Wars. Apart from its direct effects on the economy, overseas investment also reduced the pressure for British manufacturing industry to be internationally competitive.

To show the mechanism of this we need only take the international constraints on the British economy. British capitalism; for as long as systematic figures exist, has always had a surplus on the 'service' side of the balance of payments – shipping, travel, etc. However, this surplus was historically relatively small and at the beginning of the nineteenth century was sufficient to finance only around 10 per cent of British imports of goods ('visible' imports). This 'services' surplus then rose slightly during the course of the nineteenth century, but never reached a figure of more than around 14 per cent - which left 86-90 per cent of British visible imports to be financed by other means.

Taking other possible sources then, at the beginning of the nineteenth century, income from British overseas investment amounted to only about 10 per cent of the visible import bill (i.e. services and investment income together, prior to the 1840s, were sufficient to finance only 20 per cent of British visible imports). British visible exports, and the manufacturing industry which produced most of them, therefore simply had to have a high degree of international competitiveness in selling its goods. A failure of competitiveness in manufacturing could not be compensated for by the service sector or by foreign investment income and, therefore, prior to the second half of the nineteenth century, would have provoked a severe balance of payments crisis, a sharp contraction of imports, and a tremendous drive to re-establish the competitiveness of the manufacturing sector. British manufacturing industry in the early nineteenth century not merely was but had to be competitive.

What occurred over time was that the return from the flow of British investment abroad became an alternative means of financing visible imports to the necessity of having an efficient and competitive manufacturing sector. As the century wore on, the proportion of visible imports which had to be financed by visible exports (i.e. primarily manufactured goods) decreased steadily from 80 per cent in the 1820s and 1830s to just under 60 per cent on the eve of the First World War.

This represented a qualitative transformation in the nature of the British economy and its conditions for equilibrium with world economy during the second half of the nineteenth century. The answer to the famous question as to why British industry became less and less competitive compared to its rivals is simply that it had less and less necessity to be competitive. The international balance of the British economy could be increasingly maintained by means other than a competitive manufacturing sector – it is indeed hard to think of a purer case of Lenin's model of a foreign-investment-dominated imperialism than the British economy during the latter part of the nineteenth century. With the British economy removed from international constraints imposed by the balance of payments, British manufacturing industry could and did slide further and further behind its competitors.

The shattering effect of the two world wars, the acute new crisis which set in after 1945, can be understood in the same light. With the income from foreign investment removed by the effects of war, the proportion of visible imports which now had to be financed by visible exports rose sharply to 86 per cent in the decade after the Second World War and only decreased marginally (to 84 per cent) at the end of the 1960s. British manufacturing industry simply had to become competitive again - with the entire crisis of the 1950s, 1960s, and 1970s being in large part dictated by the need to achieve this. Finally, the situation was changed once again by North Sea oil - but this constitutes a new chapter in British economic development which we cannot deal with here.

Cheap food

The economic consequences for the working class of this new economic orientation were also clear. If one had to sum up in a single phrase the one most important economic base of capitalist political supremacy in Britain in the entire century and a quarter after 1846, it would undoubtedly be cheap food - cheap food based on the abolition of the tariff on food imports and then cheap food, and other goods, capable of being imported, without a competitive manufacturing sector, through the income from British foreign investments. All else, all the other economic structures, all the ideology, etc., was created on this unshakeable fact that the British working class was given, in the rhetoric of the period, the ‘big loaf’ of free trade in food as opposed to the ‘small loaf’ of protectionism in agriculture. When the necessity for equivalent rates of exploitation compared to other countries, to create a competitive manufacturing sector, was also removed by the foreign investments then the economic basis for extremely powerful political integrative mechanisms was created. Cheap food, combined with foreign investment, gave to British capitalism a stability for its political dominance not matched by any other ruling class in the world, except for the United States which created its basis of low-price food not by imports but by the incredible level of productivity of its internal capitalist agriculture.

Finally, if these statements seem excessive or an example of 'economic reductionism', then the following fact should be noted. From 1846 until 1970 not one single British government with the known intention to place a tariff on imports of food was ever elected (1970 is the turning-point because of Heath's pledge to join the EEC Common Agricultural Policy). In the intervening 124 years an attempt to introduce a tax on food imports was tried twice in elections. In 1906 the Tories appeared pledged to introduce protectionism. The result was, in terms of MPs, the greatest electoral defeat in the entire history of the Conservative Party, with its share of seats in the House of Commons reduced from 60 per cent in 1900 to 23 per cent in 1906. The second time an attempt was made to introduce a tariff on food, in 1923, it led to the defeat of the Conservatives under Baldwin and the creation of the first ever Labour government. Those disinclined to believe in economic and social forces as the driving force of politics need merely ponder that 124-year electoral record.

Finally, of course, once these economic mechanisms, and economic orientation, were put in place then they easily explain the internal balance of forces within, and nature of, the British ruling class we looked at earlier. The great internationally expanding sectors of the British economy from the mid-nineteenth century onwards were not manufacturing, but those based on foreign investment – both direct investment and more especially portfolio investment of the type particularly suited to banking, those with rentier incomes, etc. The rising working-class living standards which this economic system made possible within Britain created a vast new market for the necessities of working-class life – and provided the basis for the food, drink and tobacco manufacturers, retail chains, etc., whose dominance in the economy we have already noted.

While German capitalism was building up its electronics, chemicals, and steel industries based on a tremendous oppression of the working class, British imperialism was building up its foreign investments, and the specific industry and service sectors to supply its internal working-class market. All the fundamental characteristics of the British ruling class in the late nineteenth century at which we have looked flow logically from these features.

Finally, these very same developments evidently also created the basic potential for a very specific type of social alliance. To have developed an economy primarily based on manufacturing capital in Britain would have required a high rate of exploitation to be competitive. It would have demanded a low exchange rate of the currency to make exports competitive - an exchange rate that would have put up the price of food and other imports and cut the value of funds available for foreign investment. The sectors based in banking, food manufacturing, construction and other sectors supplying the internal market - as well as those primarily engaged in foreign investment - required no such measures. On the contrary, they required a high exchange rate of the currency to finance foreign investment - and that high exchange rate meant cheap imports, which could then be processed by the food, drink and similar manufacturers. Far from needing a high rate of exploitation such sectors needed a large internal market based on a relatively high working-class purchasing power - a policy to which those sectors based on foreign investment had no particular objection as their profits did not come from the exploitation of the British working class anyway. An economic basis therefore existed for such sections of capital to appeal to and build a mass base in the working class. That alliance was called the Conservative Party. It was all the more necessary because, for all his efforts, Peel had not succeeded in halting the crisis of the British political system. He had merely succeeded in enormously prolonging its timescale and qualitatively altering its form. No sooner was the new party system put in place than it began to disintegrate - that process of 'disintegration from the edges' constituting the fundamental dynamic of British politics for the next 120 years. That disintegration was also the reason for the rise of supremacy of the Conservative Party within the British ruling class.