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March 10, 2009

Comments

Dave O

Managers’ “right to manage” is not matched by a competence to do so.

Good point. I look forward to nicking that soundbite at some appropriate point.

john b

I suspect Glyn was actually wrong on the social costs, because of the environmental disbenefits of burning coal compared with gas. But a B/CA at the time would almost certainly have come down in his favour.

john b

aaagh, bloody html stripping blog. Link to Alex's piece on miners & CO2:
http://yorksranter.wordpress.com/2009/03/08/alternative-yorkshire/

dearieme

How can you define "exhaustion" of a coal mine except in economic terms?

Meh

The rewriting of history by the winners (Kamm and the Thatcherites here) is always a bit depressing to watch. The NUM had in fact already previously agreed to various cutbacks and (with echoes of the Bush approach on Iran) the claim that they were "insane zealots who could not be negotiated with" is it seems, their basic tactic to justify the massive failures to address the economic problems they caused.

Of course, the real issue is sadly beyond the miners (who may well have been doomed by CO2) but that the entire laissez faire system does not produce the promised employment levels.

ad

Should every loss making business be subsidised?

If not, what is special about coal mining?

Bob B

The negotiated price of coal for electricity generation in Britain was calculated from the world price of oil and the usable energy content of the particular grade of coal.

Between 1985 and 1986, the world price of oil approximately halved, which implied that even more pits became uneconomic to operate.

For those dispassionately interested in the context, the scale of subsidies to support the nationalised coal industry can be inferred from the data for the external borrowing requirements of the nationalised industries reported in David Butler: Twentieth-century British Political Facts 1900-2000 (Palgrave 2000) p.444. The fact is that the Thatcher and Major governments were pouring billions of taxpayers' money into subsidising the nationalised coal industry.

Ultimately, the violent strike was to bully the government and the public at large into putting even more taxpayers' money into the coal industry - and there was certainly active speculation at the time about whether the 1984/5 mining strike would succeed in bring down the government which had been elected in June 1983.

For info about external influences on the NUM:

"Also named is Vic Allen, a retired professor of economics at Leeds university, who was a founder member of the Campaign for Nuclear Disarmament and went on the first Aldermaston march. A firm Stalinist, it is alleged he passed on information about CND to his East German handlers.

"After the revelation this weekend that he had been 'an agent of influence', he said he had no regrets. . .

"Prof Allen was an ally of Arthur Scargill during the 1984-85 miners' strike. In 1987 he published a book, The Russians Are Coming. His pro-Soviet views were well known. . ."
http://www.guardian.co.uk/uk_news/story/0,3604,271697,00.html

Bob B

Peter Walker as energy minister was responsible for the nationalised coal industry at the time of the strike in 1984/5. These are his reflections:
http://news.bbc.co.uk/1/hi/uk_politics/3503545.stm

But see too this piece in The Economist of May 27, 1978 (p.21-23) on the Ridley Report to the Conservative Party on policy for the party in government on the future of the nationalised industries:
http://www.co-opnet.coop/viewtopic.php?t=367&highlight=ridley+report

Note especially this section towards the end relating to the energy industries:

"Every precaution should be taken against a challenge in electricity or gas. Anyway, redundancies in those industries are unlikely to be required. The group believes that the most likely battleground will be the coal industry. They would like a Thatcher government to: (a) build up maximum coa1 stocks, particularly at the power stations; (b) make contingency plans for the import of coal; (c) encourage the recruitment of non-union lorry drivers by haulage companies to help move coal where necessary; (d) introduce dual coal/oil firing in all power stations as quickly as possible."

The Ridley Report was eventually to become hugely influencial within the party in government after May 1979 although Mrs Thatcher was initially very cautious about privatisation of the nationalised industries - as Simon Jenkins reports in his book: Thatcher & Sons (Penguin Books, 2006).

The Economist report was in the public domain and it forecast accurately the strategy deployed for defeating a mining strike. For all that, the NUM fell into the bear trap. The timing of the strike in March 1984 by the NUM was incredibly stupid - it was the start of spring when demand for electricity begins to abate and, at the time, coal stocks above ground at power stations and the pits were high, so much so that there were problems in finding places to stockpile coal production.

Btw where did all the money given to support the striking miners go to? Try this: Gavin Lightman QC: The Lightman Report on the NUM (Penguin Books, 1990)

Lightman was commissioned by the NUM executive to find out what really happened to the monies collected and donated in support of the miners' strike. Leading recommendations of that report in 1990 included: " . . a proper account is urgently required of the monies and property of the Union . . " as the destination of substantial sums, including a reported donation from Soviet miners, couldn't be accounted for.

For a fairly objective account of the strike, try Martin Adeney and John Lloyd - two eminent journalists - on: The Miners' Strike (1986)

The NUM has a track record. Try the account of its obstruction to increasing recruitment of pit workers in 1946 which contributed in the shortage of coal during the long hard winter of 1946/7 in Alec Cairncross on: Years of Recovery - British Economic Policy 1945-51 (Methuen 1985) chp.13 on the coal crisis.

Luis Enrique

it's a difficult dynamic problem, and Glyn's arguments (and really I should read him or shut my trap) sound more like a static analysis to me. even if you buy his argument (and it sounds sensible enough to me) you still don't want to impede the reallocation of resources too much (even socialists don't want the economy to ossify) nor to accumulate industries that are being propped up on the basis that letting them fall would appear to do more harm than good. How do you stop every industry that gets in trouble from claiming that it needs life support* (as ad asks), and how do you solve the problem of achieving a gentler less harmful demise, when keeping the patient alive too long can also do more harm than good?

* I know some people say the coal industry didn't even really need life support and could have survived by itself - I don't know anything about that.

dirigible

"Should every loss making business be subsidised?"

No. But if we are being hard-headed economists about this then it would have been cheaper for the government to keep the pits open rather than pay for twenty years of unemployment and social devastation.

Rather like the post says. If you read it.

Luis Enrique

dirigible

okay so not every loss making business can validly claim the costs of it going bust are larger than the cost of keeping it alive, as is being argued re coal mining, but every loss making business can potentially make that argument. Even a small loss making employer, where the social costs of it going under would be small, can claim it ought get a small amount of assistance (so long as the cost of assistance is less than the social cost of closure). So long as there is some social cost when an employer goes bust then there is some sum of money, less than that cost, that it can argue it ought to receive to keep it alive - if you do it for coal you would have to do it for others (this is the dynamic problem I'm on about, above). So ad's question isn't so silly.

There is one obvious non-linearity that would skew cost benefits analysis - the larger the employer is relative to (local?) labour market flows (that is, the longer it would take redundant workers to find work) the greater the social cost - that would mean only large employers get to claim they deserve assistance. But if you promise to help too-large-to-fail firms, don't you just end up with too many too large firms?

Bob B

"it would have been cheaper for the government to keep the pits open rather than pay for twenty years of unemployment and social devastation"

Regardless both of the cost of keeping the pits open and regardless of the world oil price? The fact is that the Thatcher and Major governments invested billions of taxpayers' money into supporting the nationalised coal industry - check out the reference above to David Butler's book on Political Facts.

Some towns previously deeply dependent on closed steel plants, like Corby in Northamptonshire, turned round in less than twenty years into thriving places with new investment because of the dedicated commitment to recover on the part of the local community:
http://www.moreincorby.com/northamptonshire/

The miners at the Tower Colliery in South Wales determined to save their pit from closure by buying it from the Coal Board and successfully working it as a producers cooperative for 13 years:

"Miners at Wales' last deep mine have marked its closure with a celebratory march, similar to the parade staged when they bought the pit 13 years ago. Tower Colliery in Hirwaun, Rhondda Cynon Taf, was taken on by 239 staff, each pooling £8,000 redundancy to buy it after it closed in 1994."
http://news.bbc.co.uk/nol/ukfs_news/hi/newsid_7200000/newsid_7200400/7200432.stm

Bob B

The council of Rotherham - where the 1984/5 mining strike started at the Corton Wood Colliery - launched a nationwide appeal to local authorities to fund an anti-poverty campaign.

This was the outcome:

"The former deputy leader of Rotherham Council has been sentenced to three years in prison for plotting to steal £172,000 from a charity.

"Garvin Reed, a Labour councillor, admitted spending thousands of pounds of a charity's cash on prostitutes, lavish hotels, meals, and outings. . . The court heard Reed was part of a conspiracy to defraud the National Local Government Forum Against Poverty"
http://news.bbc.co.uk/1/hi/england/2511047.stm

some2199

Let's not pretend that Thatcher fought the miners for economic reasons. It was political, and it should be judged politically. Didn't she bail out the Cornish tin mines a few years after the miners' strike?

Bob B

At least at start of the strike in 1984, a lively topic of popular conversation in Yorkshire was about whether the mining strike would succeed in bringing down the government elected in the previous June.

Neither the Labour Party nor other trade unions declared their support for the strike. And in Yorkshire, the miners were never given an opportunity to ballot on the strike called in their name.

SThomas

But the issue with the miners strike was that Scargill deliberately mixed the economic and the political. Some pits were economic (Tower) and some weren't, but by mixing them all together, he effectively created a "war" between the miners unions and the government, which ultimately the government (and the nation) could not afford to lose, and since the "miners" side lost, all of the miners lost, and not just those where the pits were indeed uneconomic. The alternative was of course an effective coup d'etat by Arthur Scargill, not a prospect easily stomached.

dirigible

Luis Enrique "every loss making business can potentially make that argument"

They can. But most will be, rightly, laughed at for trying to do so.

The pits were different for reasons that everybody knew at the time, and this has been proved by twenty-five years of hard evidence.

"But if you promise to help too-large-to-fail firms, don't you just end up with too many too large firms? "

We do. But if we decide that no large (and in this instance state owned, which is a useful line to draw if people want one) company must ever be supported no matter whether the alternatives cost *more*, this is an equally ridiculous dogma.

SThomas "But the issue with the miners strike was that Scargill deliberately mixed the economic and the political."

The simple politics of destroying the power base of primary industry in the UK doesn't cover Thatcher with any more glory.

Bob B

Of course, the enduring puzzle is why the electorate kept voting for the return of a Thatcher government if she was so awful as PM - as in 1983 and 1987?

I suppose part of the explanation is the ridiculous Labour Party manifesto of June 1983 - which Gerald Kaufman aptly described as "the longest suicide note in history". Blair was first elected to Parliament on that manifesto.

Had Labour won that election, we would have had Michael Foot as PM, sweeping nationalisation of the commanding heights of the economy and unilateral nuclear disarmament. And we would have withdrawn from the European "Common Market".

ROFL !

Carps

I can't see how any one of any political stripe can make decisions about what businesses are economically viable, or what the alternative cost of letting an industry fail might be. We can always assume interim poverty as the use of labour changes, but in the long term the economy grows to the benefit of the aggregate. Otherwise we would still all be subsistence farming or working in t'mill. We've moved from the fields to the cities to the office and at every stage there has been massive dislocation and discomfiture to many. That doesn't mean we should/could stymie change.

GDP has risen overall since 1984, and not all ex-miners or ex-mining communities have withered away to nothing and died, so the analysis is doomed from the start.

There's definitely a tension here between your avowed and longstanding complaint that "the boss class" have too much power without the necessary wisdom to make effective decisions, and the example as given here: "we" could have known in 1984 that keeping the pits open was the right thing to do.

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