Lessons From the U.K.’s Winter of Discontent
If you thought it was getting expensive to buy beef or fill up your gas tank, wait until you see your heating bill this winter. The U.S. government said last week that it expects heating bills to increase by up to 54 percent compared to last year (depending on which heating fuel is used). So far, the administration has taken few actions to mitigate this, appearing to prefer a wait-and-see approach. It may want to think twice about this, as America could very well be approaching its very own “Winter of Discontent.” The administration would be wise to take lessons from what happened in the U.K. in 1978-79. While it wasn’t an energy crisis, the failed attempt to deal with inflation caused supply chain disruptions that left citizens without fuel and energy—and feeling angry.
What was the Winter of Discontent?
In 1978, the United Kingdom was governed by Prime Minister James Callaghan and his Labour Party. Callaghan would arguably be the last left-wing prime minister of the U.K, and the Winter of Discontent was why. Since then, the only Labour candidate to actually win an election was Tony Blair, the ultimate centrist third-way politics poster boy. (Gordon Brown took over as prime minister after Blair resigned in 2007.)
The 1970s were characterized by runaway inflation. Callaghan’s government made several attempts to cool things down, but knew that success would come only if it could slow down wage growth. In August 1978, the government set a 5 percent limit on all wage increases and promised to sanction any public or private government contractor that violated this policy—a legally questionable move as no legislation to that effect was ever passed; the limit could perhaps most accurately be described as a U.K. equivalent of an executive order. The government had for a long time slowed down wage growth in the heavily unionized public sector, hoping that the private sector would “follow by example,” though this rarely happened. The idea was that the policy would crush inflation since neither public nor private sector workers would be able to get a raise of more than 5 percent.