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James Callaghan was born in Portsmouth in 1912. After being educated at Portsmouth Northern School, he joined the staff of the Inland Revenue. In 1931 he joined the Labour Party and began work as a trade union official.
Callaghan was selected as the parliamentary candidate for South Cardiff and was elected to the House of Commons in the 1945 General Election and held minor posts in the government of Clement Attlee.
When Hugh Gaitskell died in 1963, Callaghan was one of the main contenders for the party leadership. Callaghan, who represented the right-wing of the party, was defeated by Harold Wilson.
When the Labour Party was elected in the 1964 General Election, Callaghan became the Chancellor of the Exchequer. In this post he created a great deal of controversy by introducing corporation tax and selective employment tax. After a long struggle, Callaghan was forced to devalue the pound in November 1967.
Callaghan resigned from office but was recalled as Home Secretary in 1968. He held the post until the defeat of the Labour government in the 1970 General Election.
Edward Heath and his Conservative government came into conflict with the trade unions over his attempts to impose a prices and incomes policy. His attempts to legislate against unofficial strikes led to industrial disputes. In 1973 a miners' work-to-rule led to regular power cuts and the imposition of a three day week. Heath called a general election in 1974 on the issue of "who rules". He failed to get a majority and Harold Wilson and the Labour Party were returned to power.
Wilson appointed Callaghan as his foreign secretary. In this post he had responsibility for renegotiating Britain's terms of membership of the European Economic Community (ECC). in 1975 Callaghan was demoted to the position of minister of overseas development.
Now aged 63, political commentators thought Callaghan's political career was coming to an end. However, when Harold Wilson resigned in 1976, Callaghan surprisingly defeated Roy Jenkins and Michael Foot for the leadership of the Labour Party.
The following year Callaghan, and his Chancellor of the Exchequer, Denis Healey, controversially began imposing tight monetary controls. This included deep cuts in public spending on education and health. Critics claimed that this laid the foundations of what became known as monetarism. In 1978 these public spending cuts led to a wave of strikes (winter of discontent) and the Labour Party was easily defeated in the 1979 General Election.
Margaret Thatcher became the new prime minister and Callaghan was leader of the opposition until he resigned in 1980. Callaghan was made a life peer in 1987. His autobiography, Time and Chance, was published in 1987.
Nowadays exchange rates can swing to and fro continually by amount greater than that, without attracting much attention outside the City columns of the newspapers. It may be difficult to understand how great a political humiliation this devaluation appeared at the time - above all to Wilson and his Chancellor, Jim Callaghan, who felt he must resign over it. Callaghan's personal distress was increased by careless answer he gave to a backbencher's question two days before the formal devaluation, which cost Britain several hundred million pounds.
Wilson himself regarded the sanctity of sterling as so absolute that he allowed Cabinet to discuss the issue only once, on July 19th, 1966; and he refused to circulate the minutes of that meeting, even to the Cabinet ministers who attended it. Thereafter he vetoed all attempts to discuss-the exchange rate in Cabinet, or even in any of the Cabinet committees on economic affairs. After the 1966 election Wilson had set up a small committee of key ministers to consider the major issues of economic policy - SEP; but every time we tried to raise the subject of devaluation, it was evaded. Michael Stewart, Dick Crossman and I soon joined a lobby for devaluation led by Roy Jenkins, Tony Crosland and George Brown, who had forced the abortive Cabinet meeting on devaluation in 1966. But Wilson continued to veto any formal discussion of the matter until the last moment, when he had already agreed with Callaghan that devaluation was inevitable. It was not until four days before the date fixed for the change in parity, that he set up a small group of ministers to supervise the details; he made me a member, I suspect, only because he wanted to commit me to yet another cut in defence spending as part of the accompanying economic measures.
Jim Callaghan I felt I could handle. He was a substantial figure in the Party, with strong trade union support, and always a potential rival. But I knew more about the Treasury and the economy than he did and the Prime Minister is also First Lord of the Treasury and holds the whip hand.
The Chancellors (23): James Callaghan
You can read about Callaghan’s time as home secretary here, as foreign secretary here, and as prime minister and after here.
Leonard James Callaghan (left, courtesy of the National Portrait Gallery) was one of the more remarkable British politicians of the 20 th century. His secondary modern school left almost no mark. His formative influences came from other sources: some of those were also those of the first generation of Labour. One was self-improvement. Like many Labour men, there was something of the autodidact about him: growing up in Portsmouth, he was an avid user of the local Carnegie Library. Another was nonconformism, in the form of the Baptist church. It was through the church that he got his real education. He became a Sunday school teacher, and gained sufficient qualifications to take up a career in the Inland Revenue. It was through church that he met his wife, Audrey. They remained a devoted couple until her death in 2005: he went shortly after. Another traditional Labour influence was trade unionism. Callaghan, characteristically, came to the trade union for its correspondence courses.
There were other influences. The memory of his father, a chief petty officer in the Royal Navy, left him with an abiding affection for the sea: come the Second World War, he fought long and hard to get out of his reserved occupation in the Inland Revenue and join the Royal Navy. His patriotism remained strong thereafter. When his father had died, in 1921, the family had been reduced to dire poverty, something alleviated by the first MacDonald government’s introduction of the naval pension that rescued his family from poverty: it was the sort of practical, down to earth socialism that never left Callaghan.
These influences were brought together by his career, marriage, trade union activism, and by war. His ability saw him promoted to the Inland Revenue’s London office. He met Audrey at Maidstone Baptist church. Callaghan’s socialism was never of the rabble-rousing variety, and Audrey’s respectable middle class background proved a comfortable fit (her father was a company director). Likewise, his trade unionism was pragmatic: nonetheless, his energy and organizational abilities became obvious, and he was taken under the wing of Douglas Houghton, the leader of the Association of the Officers of Taxes. In 1936, he was elected as the full-time assistant general secretary.
Callaghan’s war service was delayed by the difficulty of extricating himself from his reserved occupation status, and then contracting TB. It was that hiatus that saw him decide to enter politics (something which his service in the Royal Navy undoubtedly helped him with). He was adopted as the candidate for Cardiff South, (South-East as it would become in 1950) and elected in 1945: it was then he took the name James.
At this point Callaghan looked more like a left-winger than anything else. At the 1944 party conference, Callaghan had supported a motion publicly restating the party’s support for nationalisation, against the wishes of the leadership. As new MP, in 1945, he voted against the American loan. In 1946, he put his name to a letter critical of Bevin’s hostility to the Soviets. None of this did him any harm, however. He came under the wing of Hugh Dalton, and was widely seen as a rising star.
In may have in, in part, to quieten his critical voice that Callaghan was made a junior minister in 1947. Labour, of course, lost office in 1951. Thus, Callaghan’s rise would take place in the context of 13 years in opposition, and the bitter factionalism that went with it (and would remain for the rest of his career, not least when prime minister). Labour’s shadow cabinet was elected, and Callaghan was only one of two of the 1945 intake to win a post (the other was Harold Wilson), gaining experience shadowing a range of ministries. He also became a public figure, not least thanks to his journalism and broadcasting. By 1960, he succeeded Wilson (who became shadow foreign secretary) as shadow chancellor. He was now one of Labour’s top brass. After Gaitskell’s sudden death, Callaghan ran for the leadership, though without any chance of winning: he was laying down a marker for the future. He secured 41 votes, and the backing of the rising star Tony Crosland. It had worked: he had firmly established himself as the third of Labour’s big three.
As such, it was no surprise that Wilson made him chancellor in 1964. It was not a happy inheritance, as his predecessor Maudling acknowledged. However, Wilson didn’t help. Wilson saw himself as the government’s true economic maestro, and was determined to lead economic policy from the front. Furthermore, he was determined to change the direction of economic policy towards a more corporatist and technocratic direction: to do that, he believed he needed to clip the Treasury’s wings. Just as Attlee had looked to planning and had made Herbert Morrison economic overlord, and Cripps minister for economic affairs, Wilson created a department of economic affairs. He put his rival, George Brown, in charge of it and a new National Plan. Being Wilson, one cannot help but feel that two put his two most powerful rivals in just such a position had its appeal: by dividing, Wilson would rule.
A turf war was inevitable. On the face of it, it looked like one Brown could win. Brown’s force of personality and Wilson’s shared belief in planning meant that, early on, Brown won the arguments. However, the Treasury are not used to being bested in such matters. That the DEA failed was, in hindsight, always the likely outcome, given the balance of power: a newly minted department was up against the one used to wielding the purse strings and, with that, power.
Circumstance, and politics, also helped the Treasury. For all their good intentions, prime ministers’ attentions are easily diverted abroad. Like most, Wilson’s leadership on economic policy proved fitful, and often broad-brushed. Furthermore, Wilson could never be accused of not engaging in the political game. To be fair, the Wilson of the ‘sixties had many virtues: he had to. His cabinet was full of large egos, factional rivalries and ideological divisions. No ego was larger than Brown’s. Brown had expected to win the leadership in 1963, and still believed he should have done. Wilson knew that. As Brown grew frustrated, he became more disputatious and difficult to work with (something not helped by his legendary penchant for the booze). If Wilson had never trusted Brown, his mistrust grew as the arguments between Brown and Callaghan ground on.
The economic circumstances helped the Treasury in that turf war. Labour had inherited an incipient balance of payments crisis. That, and the attempt to defend sterling, would dominate Callaghan’s time at the Treasury. Nor would the pressure from Brown to inflate the economy to meet his growth targets help. The failure to tackle the fundamental problem meant that the balance of payments dominated economic policy, and that was very much to the Treasury’s advantage, especially when Wilson was looking to go to the country in 1966 and turn his tiny majority of four into something healthier (which he duly did). Not long after, Brown was moved to the Foreign Office. The DEA wasn’t dead yet, but it was on life support.
It was as much that constant air of crisis that did for Brown’s DEA as much as anything else. It almost did for Callaghan too. The Treasury mandarins like to frighten new chancellors: the arrival of a new boy is their best chance of knocking some fiscal sense into a government. They didn’t need to soup things up to frighten Callaghan. The projected balance of payments deficit inherited from Maudling was £800m. Thus, there was an immediate problem facing the triumvirate of Wilson, Brown and Callaghan. The government faced an acute dilemma. Some felt that the best option was devaluation, but they were the still relatively junior figures such as Crosland or Jenkins. The big three were against it.
Party of their reasoning was political. The ghosts of 1931, 1947 and 1949 haunted them. Labour could not afford to be labelled as the party of devaluation yet again. Others feared that if the markets were given Labour blood at this early stage, they would only come back looking for more: if they devalued now, they might be forced to again. The markets had been scenting blood for the past thirteen years, Wilson felt they had to deny it to them now.
The problem was that if sterling was to be saved, some of the fundamental problems of the British economy had to be dealt with. The problem with that was that one of them, the poor productivity record of British industry, was not under the government’s control. Furthermore, anything it might do to encourage investment would inevitably take time. There was little time. The alternative was wage restraint. The government talked to the TUC, but even the TUC was undermined by the refusal of Britain’s largest union, the TGWU, to countenance an incomes policy of any sort.
The irony is that, either way, both fiscal and monetary policy would have to be sharply deflationary. With another election wanted, that was hardly likely to happen anytime soon. The policy became, de facto, one of living from hand to mouth, of muddling through and hoping somehow the issue could be avoided. Some measure of deflation was, though, unavoidable. This was, however, a Labour government. Overall spending was cut by £240m, though health charges were cut or abolished, whilst national insurance benefits, national assistance and pensions went up. National Insurance contributions were increased to pay for it, and more. Income tax went up, as did excise duties. Callaghan proposed a corporation tax, and capital gains tax. He had already issued an import surcharge. He also raised the bank rate from 5% to 7%. It half-worked, but only at the expense of two more years of what Edmund Dell calls ‘stumbling on’. He tried other measures, such as prices and incomes policy and hire purchase restrictions. Again, they half-worked, but not for long.
In hindsight, devaluation was inevitable. If it wasn’t one thing that would finally do for sterling, the other would. In the end, it was the balance of payments, pure and simple. Once, in the summer of 1966, Callaghan had been persuaded to devalue by George Brown (read about that here). The next day, Wilson persuaded Callaghan to retract his support and deflate the economy sharply. By November 1967, however, the deficit was back, and then some: running at £107m per month, the highest on record. A Commons question forced Callaghan to admit that the government had borrowed £1bn to prop up sterling. Callaghan admitted nothing about any possible devaluation, but the next day the government spent another £1.5bn trying to prop up sterling. The dam was breaking: sterling was devalued to $2.40.
For Callaghan, it was a personal defeat. He had been bitterly unhappy for a while, and wanted to resign. Wilson saved him. He did not want to be seen to lose him, so Callaghan swapped jobs with Roy Jenkins and went to the Home Office.
If there is one lesson 20 th century gives us, it is that where sterling is concerned there will come a point at which you can’t buck the markets. Labour faced sterling crises in 1931, 1947, 1949, 1967 and 1976. It lost every time. In as much as Callaghan, Wilson and Brown were wrong not to devalue sooner, they were hardly alone in that (as the Conservatives would find in 1992). It is true to say that Callaghan did succumb to the machismo that the pound tends to bring out in British politicians. Even then, devaluation was hardly the easy option. To make it work (and it did work) policy would need to be sharply deflationary, as it was under Jenkins. Politically, the 1967 crisis undoubtedly weakened Wilson and his government so did the 1966 predecessor, and a 1968 variant. The attempt to avoid devaluation caused economic damage. Whether the government could have devalued and deflated in 1964 and won in 1966 is debatable however, devaluation in 1967 certainly hurt it, and hurt its prospects of winning in 1970.
For all that, Callaghan’s time at the Treasury was hardly happy, or successful. In some ways, he was lucky to survive it. However, survive it he did, and then some. He would go on to be the only man to have held all four great offices of state, and one of the ten chancellors to go on to be prime minister since 1900, and one of twelve to go on to lead their party. He was nine chancellors to be foreign secretary as well, one of ten to hold the Home Office too. In many ways, Lucky Jim (as he became known) was anything but: his career at the top was in an era of seemingly never-ending political crises, many of which he was right at the centre of. That he rose to the top, and did so much that was good may well have owed something to the experience he gained in those difficult years in number eleven. As much tough as lucky, perhaps.
James Callaghan, Baron Callaghan
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James Callaghan, Baron Callaghan, original name in full Leonard James Callaghan, (born March 27, 1912, Portsmouth, Hampshire, England—died March 26, 2005, Ringmer, East Sussex), British Labour Party politician, who was prime minister from 1976 to 1979.
Callaghan entered the civil service at age 17 as a tax officer. By 1936 he had become a full-time trade-union official. After serving as a lieutenant in naval intelligence during World War II, he entered Parliament in 1945, representing the Welsh constituency of Cardiff South. Between 1947 and 1951 Callaghan held junior posts at the Ministry of Transport and at the Admiralty. When Harold Wilson’s Labour government was formed in 1964, Callaghan was named chancellor of the Exchequer. In this capacity he helped secure in 1966–67 international agreement to a system called Special Drawing Rights, which in effect created a new kind of international money. He resigned from the Exchequer in 1967, when he was forced to devalue the pound sterling. He then served as home secretary until 1970. In Wilson’s second government in 1974, Callaghan was named foreign secretary and in 1976, upon Wilson’s resignation, Callaghan succeeded him as prime minister, largely because the Parliamentary Labour Party considered him the least divisive candidate.
Throughout his ministry (1976–79), Callaghan, a moderate within the Labour Party, tried to stem the increasingly vociferous demands of Britain’s trade unions. He also had to secure the passage of unpopular cuts in government spending early in his ministry. His reassuring public manner came to be criticized as complacency when a series of labour strikes in 1978–79 paralyzed hospital care, refuse collection, and other essential services. In March 1979 his government was brought down by a vote of no confidence passed in the House of Commons, the first such occurrence since 1924. At the subsequent general election, Callaghan’s party was defeated. On October 15, 1980, he resigned as leader of the Labour Party, to be succeeded by Michael Foot. He was created a life peer in 1987 and published an autobiography, Time and Chance, the same year.
James Callaghan was born in Portsmouth, England on 27 March 1912, and he worked as a clerk in the Inland Revenue before joining the Royal Navy during World War II. He was elected as the Labor Party MP for Cardiff South in 1945, and he became Parliamentary Secretary in the Ministry of Transport in 1947. In opposition, he gained experience on a variety of issues, first shadowing foreign affairs, and then becoming Labor's Treasury spokesperson. He lost the 1963 leadership election to Harold Wilson, but he served under Wilson as Chancellor as the Exchequer from 1964 to 1967. He was faced with strong pressure on the pound, so he oversaw the creation of a prices and incomes board, cuts in public spending, and the 1967 devaluation of the pound. From 1967 to 1970, he served as Foreign Secretary, and he was forced to deal with the emerging IRA violence in Northern Ireland and calls for immigration restrictions. After Labor's return to power in 1974, he became Foreign Secretary, and he succeeded Wilson as Prime Minister in 1976. He was handicapped by the lack of an overall majority, economic recession caused by the 1973 oil-price shock, and his unwillingness to overcome trade union hostility to his economic austerity measures. The disastrous outcomes of the referendums on Scottish and Welsh devolution triggered a successful vote of no confidence in Parliament in March 1979, which was followed by a general election. It was the large-scale trade union strikes of 1978-1979, popularly remembered as the "Winter of Discontent", that destroyed the party's popular image and foiled its political prospects for over a decade. His party was routed at the 1979 general elections, and he resigned as party leader a year later.
Keynes Has Left the Building: Remembering the 1976 Speech That Changed Modern Britain
The summer of 1976 was famously hot. Temperatures across the UK began to rise in late May and did not break until September. In the south and south-east, average rainfall was the lowest since 1910. In Yorkshire and parts of East Anglia, the reservoirs were emptied and, to preserve available supplies, standpipes were introduced. A Minister for the Drought, Denis Howell, was appointed and invited by the Prime Minister to perform a public rain dance.
With summer drawing to a close and the drought gone, the new political year began, with the party conference season, which, for Labour, was being held in a rain-swept Blackpool. In his September 28 keynote address, James Callaghan, Labour’s leader and Prime Minister, lectured delegates at the conference and a wider audience beyond on the UK’s economic crisis and the need to reduce public spending, borrowing and inflation. Sounding to his critics on the left of the party like a mixture between the new Leader of the Opposition, Margaret Thatcher, and the hated Ramsay MacDonald, the Labour leader who, in 1929, betrayed his party by forming a National Coalition Government with the Liberals and the Conservatives, Callaghan signalled that the world was changing and that the Labour government he led would need to change with it.
Callaghan’s speech, a paean to the virtues of austerity economics several decades before the 2008 financial crisis, was a watershed moment in British politics. This was the point at which Labour, the party of the left, started to publicly say things we might associate with the Conservatives and the right, but which the Conservatives had, until fairly recently, avoided saying out loud for the most part.
At some point during the late 1980s, party political conferences became entirely stage-managed affairs in which evidence of any disagreements was suppressed. (During Labour’s 2005 conference, in Brighton, an 82-year-old anti-war activist, Walter Wolfgang, was ejected from the conference for heckling the Foreign Secretary, Jack Straw, and then, when he tried to re-enter the building, detained by police citing anti-terrorism legislation.) But in the 1970s, conferences (at least the Labour Party ones) tended to be much more rumbustious affairs during which delegates arrived armed with the view that their leaders were politically guilty until proven innocent and in which the leadership, in turn, made clear its lack of confidence in its audience. The year 1976 was, in this respect, a classic of its kind.
James Callaghan was appointed Prime Minister on the April 5, 1976 following the retirement of Harold Wilson and a leadership election in which, over the course of three ballots, Callaghan defeated five other Cabinet Ministers including the Chancellor of the Exchequer, Denis Healey. Callaghan was 64 years old and a political survivor who had been an MP in Cardiff since 1945 and had served as Chancellor, Home Secretary and Foreign Secretary. He was on the centre-right of the Labour Party with a reputation for being tough on law and order. Both personally and politically, he was also close to many trade union leaders at a time when this was seen as an electoral asset. As someone whose father had been a Chief Petty Officer in the Royal Navy and had left school aged 17 and never been to university, Callaghan, it was thought, was someone who could talk to and forge a connection with Labour’s working-class voters. Above all, Callaghan was regarded as a safe pair of hands who could be trusted to hold the party together through thick and thin.
But Callaghan arrived at 10 Downing Street holding a poor set of cards. On April 7, the MP and former minister John Stonehouse, who was awaiting trial on charges of fraud having faked his own death in November 1974 before fleeing to Australia with his mistress, resigned the Labour whip. As a result, the government was left without a majority and needed to do deals with the smaller parties to pass legislation and escape no-confidence motions. Above all, Callaghan had to confront the fallout from a global economic crisis which had begun in 1973 when the Organization of Arab Petroleum Exporting Countries launched an oil embargo that quadrupled oil prices and stoked inflation.
The key economic and political flashpoint was the value of the pound on foreign exchange markets. Although the Bretton Woods system of globally managed exchange rates had broken down, the government was still intervening to try and prop up the value of the pound relative to other currencies. This was partly an economic problem: A falling pound meant higher import prices and rising inflation. But it was also a political problem: a falling pound was a powerful symbol of the UK’s relative decline.
By the late summer of 1976 Callaghan’s political stock had risen, however. He was felt, by most people, to have negotiated an honourable end to the third “Cod War” with Iceland: a dispute over fishing rights which, whilst comical-sounding in the abstract, had resulted in a serious injury to at least one British fisherman and the deployment of two dozen Royal Navy vessels. Callaghan also had successfully overseen negotiations on how to cut a previously agreed £4-billion sun from the government’s budget and had done so without splitting the Cabinet apart. Furthermore, inflation was falling. To add to the credit side of his ledger, he had brokered a pay deal with the largest unions, the “social contract,” and had negotiated a £10-billion loan from the Group of Ten rich countries and the International Monetary Fund. By September 1976, Callaghan had positioned himself between those further to his left in the Cabinet and those, like Margaret Thatcher, far to his right, and had managed to present himself as the safe custodian of the national economic interest.
Callaghan easily could have chosen to devote his first conference speech as leader to a few bland policy announcements and routine attacks on the economic incompetence and social callousness of his Conservative opponents. He chose not to do so. Having recently been warned by Bank of England officials of yet another looming balance-of-payments and currency crisis, and conscious of the fact that the loan he had negotiated from the Group of Ten would have to be repaid in December and new credit secured, he decided to instead lecture delegates on what he saw as harsh new economic realities.
Callaghan opened his speech with some words of praise for his predecessor, Harold Wilson, who had, by that time, largely disappeared from public life, and with a heartfelt tribute to his wife. Without much else in the way of a preamble, he then warned that the country continued to face its “most dangerous crisis since the war.”
He cautioned that, “for too long, perhaps ever since the war, we postponed facing up to fundamental choices and fundamental changes in our society and in our economy.” The UK, he went on, “has been ready to settle for borrowing money abroad to maintain our standards of life, instead of grappling with the fundamental problems of British industry,” which, as he saw it, were low productivity and spiralling wage costs.
The next part of the speech survives on YouTube. Wearing a sombre suit, a light pink shirt and a hideous tie, Callaghan exhibits a world-weary, facts-of-life, been-there-and-done-it realism. He warns against a “short-lived consumer boom of the kind which used to buy success at the polls…but which never bought success in the world’s markets or at the work place.” This was, not too subtly, a dig at the former Conservative Chancellor, Anthony Barber, who, in anticipation of the next general election, had, in 1972, cut income taxes and announced tax concessions to industry at the cost of higher inflation and a growing budget deficit. The “Barber boom,” as it had soon become known, was still working its way through the economic system half a decade later and had become a catch-all rhetorical prop of Labour’s attacks on the Conservative’s economic credibility.
Callaghan was setting his sights higher, however. Shortly after becoming Prime Minister, he had warned that higher inflation was the key cause of growing unemployment, and that inflation was a problem which had been ignored by successive governments, Labour and Conservative, for far too long. Returning to that theme, he now argued that: “the cozy world we were told would go on for ever, where full employment would be guaranteed by a stroke of the Chancellor’s pen, cutting taxes, deficit spending, that cozy world is gone.” Rising unemployment was, he accepted, a huge economic and social problem. But it was a problem which was caused not by government spending too little but, “quite simply and unequivocally,” by “paying ourselves more than the value of what we produce” and so pricing people out of jobs.
In the next part of the speech, the bit which, Callaghan said, “made the fur fly,” he spoke more generally about the role of government:
We used to think that you could spend your way out of a recession, and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step. Higher inflation followed by higher unemployment. We have just escaped from the highest rate of inflation this country has known we have not yet escaped from the consequences: high unemployment…that is the history of the last 20 years.
Callaghan concluded the speech with a promise that “we shall meet the crisis—and tomorrow the day will be ours.” But this was not a speech intended to rouse the faithful. It was a speech meant to warn of tough times and tough choices ahead. He sat down to applause but no standing ovation.
The name which is not mentioned in Callaghan’s speech but without which it is impossible to understand the significance of what he said is that of the economist John Maynard Keynes. In 1936, Keynes, already the country’s most famous economist, published his General Theory of Employment, Interest and Money, and did so at a moment when the UK economy was only just beginning to emerge from a seven-year-long depression. The General Theory was a sustained assault upon what Keynes regarded as the idiocies of the “classical” school of economists and of the governments which had mistakenly followed their advice. Classical economists—a term coined by Karl Marx to describe the liberal economics of David Ricardo and James Mill, but which Keynes traced back much further to Adam Smith—believed the best thing governments could do to bring a speedy end to recessions and to promote growth was to do nothing. If governments, under pressure from the public, decided to try and spend their way out of a recession, they would simply end up saving businesses that ought not to be saved running up budget deficits and fuelling inflation.
Keynes’s key insight was that, in certain situations, a free market economy could find itself locked into a downward spiral from which there was no natural escape. The answer, Keynes argued, was government intervention. To stimulate demand and create the right conditions for investment and job creation, the government ought to raise spending or cut taxes. In the short run, any additional public spending would, as the Treasury argued, mean a budget deficit and government borrowing. This was, nevertheless, Keynes argued, a price worth paying. When growth resumed, tax revenues would go up and the deficit could be paid back.
For the Labour Party, Keynesianism was a godsend. Before the General Theory was published, the Labour Party had had to argue either that capitalist economies were inherently unstable and that mass nationalization and centralized economic planning were the only option, or that there was no real alternative to economic austerity. The problem with the first strategy was that it allowed Labour’s opponents to argue that it was only half a step away from Communism. The problem with the second strategy was that it did not give voters any reason to think that voting Labour would make any difference. Keynesianism offered Labour a third way.
Academics continue to argue about the precise impact of Keynesianism on the day-to-day management of the British economy in the post-war years. But whether deservedly or not, Keynesianism was awarded much of the credit in the UK and beyond for a quarter of a century of high growth, high employment and rising wages.
But the Keynesian intellectual consensus began to break down in the early 1970s. One important critic returning to the fray at this time was the Austrian-born economist Friedrich Hayek, who had argued with Keynes in the early 1930s. In 1944, Hayek had however published The Road to Serfdom. This was not a dry work of economic theory but a political polemic. Hayek argued the Western democracies were in danger of abandoning market individualism in favour of state collectivism and political tyranny.
Hayek was awarded the Nobel Prize for economics in 1974. Enjoying his new-found economic respectability, he now denounced the “fatal idea that unemployment is predominantly due to an insufficiency of aggregate demand.” In Hayek’s eyes, the problem Britain faced was inflation, over-powerful trade unions, and endlessly interfering governments. Hayek was joined in his attacks on Keynesianism by the Chicago-based “monetarist” economist Milton Friedman. Friedman was, like Hayek, a classical economic liberal who believed free markets, left to their own devices, invariably worked.
The additional twist to Friedman’s analysis was his claim that inflation was caused primarily by changes in, and an over-expansion of, the money supply, and that attempts to use government spending and deficits to reduce unemployment in the short term simply had the predicable effect of increasing inflation and the underlying or “natural” rate of unemployment in the long term: an argument which, as we have seen, featured front and centre in Callaghan’s speech.
The significance of Callaghan’s 1976 speech should now be clearer. Yes, the speech was a rebuke to delegates who, Callaghan thought, understood almost nothing about the challenges the government was facing. Yes, the speech was also about assuring potential investors that the government could be trusted to do the right thing. But the speech was much more than this. It was a forthright repudiation of an economic philosophy which had, since the 1940s, been treated as something approaching gospel by successive Labour and Conservative governments.
While Callaghan’s Blackpool speech did not receive a standing ovation, it did receive other endorsements. The Times and The Financial Times were impressed. The outgoing U.S. President, Gerald Ford, told Callaghan he had delivered ”one helluva speech.” Milton Friedman told the host of the BBC’s Money Programme, one Peter Jay, that Callaghan had said the right things in the right way. Jay, for his part, pronounced in a newspaper column that Callaghan’s speech constituted “what must surely be the most breathtakingly frank public announcement since Saint Paul’s first epistle to the Corinthians.”
This is an adapted excerpt from Twelve Days that Made Modern Britain by Andrew Hindmoor. Copyright 2019 by Andrew Hindmoor, and published by Oxford University Press. All rights reserved.
Whatever Happened to the Likely Lads?: James Callaghan and Jimmy Carter Re-visited
Britain. 1976. Harold Wilson ends his reign as Prime Minister. In his place comes one the most experienced politicians in modern British political history. Meanwhile, in America, a former Georgian Governor shocks the world by winning the Democratic nomination for President of the United States.
James Callaghan and Jimmy Carter led the United Kingdom and the United States at one of the most tumultuous periods in either nation’s history. While both men had humble beginnings – and pursued a naval career – their respective rises to power could not have been any more different.
‘The Keeper of the Cloth Cap’
Jim Callaghan was elected to Parliament in 1945 for Cardiff South and served as a Parliamentary Secretary for the Ministry of Transport during the Attlee years. In opposition, he remained popular with the Parliamentary Labour Party, eventually being named Shadow Chancellor by Hugh Gaitskell. Upon Gaitskell’s death, Callaghan was defeated for the Leadership of the Party by Harold Wilson.
He would remain Shadow Chancellor, but he would not remain in the shadows for long. Between 1964 and 1976, Callaghan held the distinction of being the only person in history to hold the three Great Offices of State: Chancellor of the Exchequer, Home Secretary and Foreign Secretary before finally becoming Prime Minister.
In stark contrast to James Callaghan, the senior statesman and political veteran, Jimmy Carter was the proverbial outsider. Following a Naval career, he took over the family business and became a successful peanut farmer in his home town of Plains, Georgia.
‘The Peanut Farmer’
Jimmy Carter was very active in his church and his community, and his first attempt at politics would be to run for State Senate in 1963. From there he would rise within the state Democratic Party and would run for Governor of Georgia in 1966.
Between 1966 and Carter’s next attempt at the Governorship in 1970, his political style changed. While he was himself very much in favour of civil rights, in 1970, he would run a campaign which would appeal to the racial tensions in the south on a populist platform.
Gone was Jimmy Carter, the peanut farmer and in his place was Jimmy Carter, the ruthless politician who would do whatever it took to win. It worked, as he was elected Governor of Georgia. He quickly changed tact, opening with an inauguration speech stating “the time for racial segregation is over” repudiating his populist message in favour of his actual values.
By 1976, on the heels of Watergate, Carter, famously characterised by the press as “Jimmy who?”, ran an insurgent campaign and clinched the Democratic nomination and the presidency.
The March of the Moderates
One of the first Leaders to visit the newly inaugurated President Carter was James Callaghan. Both Carter and Callaghan were keen to cultivate a healthy relationship after the challenging decade in Anglo-American relations. For Carter, a strong European ally in Britain could defrost the tense relationship that America had with the West German Chancellor Helmut Schmidt.
On 11 th March 1977, Callaghan visited Washington DC but was met with very little fanfare. A schedule nineteen gun salute was cancelled as, less than a mile away, Washington’s City Hall had been raided by gunmen. What was lost in pomp was made up for in warm words with Carter reaffirming the “unbreakable friendship” between the US and the UK. He admitted to feeling that “Great Britain is still America’s motherland”.
Callaghan praised Carter in equal measures for improving “the political tone of the world”. However, in and amongst the political posturing was the decline in global economic conditions. Free trade and economic recovery were high on the agenda as well as relations with the Soviet Union.
Both President Carter and Callaghan’s Foreign Secretary David Owen were critical of the human rights abuses being perpetrated by the Soviet Union – which was a significant shift from the previous Nixon/Ford policy of détente. Callaghan struck a more cautious tone, fearing continued tension would lead to further splintering of East and West. For a British Prime Minister to meet a sitting US President so early int their tenure showed a real commitment to the improving relations which would continue into May for the G7 summit in London.
Jimmy Carter was a fan of Dylan Thomas and had hoped to visit the poet’s home in South Wales on his visit to Britain. Callaghan, who was facing several by-elections in the North, convinced Carter that he would have an excellent time in Newcastle instead. A President visit to anywhere outside of London is a relatively novel event, and the Georgie faithful showed their appreciation by lining the streets for Carter. Treated to a Rockstar reception, he spent four hours at the head of a procession, stopping to make his first speech in Newcastle.
After some coaching from Callaghan, the President showed himself to be in touch with the Geordie public. He greeted the crowd with “Howay the Lads”, honouring himself as “a proud Geordie from Georgia”. He spent the day greeting crowds of people young and old, more akin to a Presidential Campaign than a G7 summit.
In a sense, with Carter’s natural campaigning abilities and Callaghan’s wealth of statesman experience, the two complimented each other. There was a real admiration between them. Callaghan admitted that Carter is “a man who combines such hard-headed common sense with an idealism that has given America a new thrust since he came to office.” While it is easy to dismiss such events as mere publicity stunts, an American president visiting Britain and receiving an overwhelmingly positive reception seems very bizarre today.
Carter and Callaghan would continue to work together on issues, from nuclear proliferation and the environment to peace in the Middle East and closer relations in Europe. Carter often sought advice from the more experienced Callaghan as they worked towards achieving a more stable and peaceful world.
While the “special relationship” had arguably never been stronger, by the end of the 1970s, both Cater and Callaghan – and their respective parties – would meet similar fates.
Callaghan was sustained in Parliament only by alliances with other parties such as the Lib-Lab pact, but the events of the 1979 “Winter of Discontent” would fatally wound the Labour Government. Returning from Guadeloupe after a four-nation summit with Carter, Chancellor Schmidt and French President Valéry Giscard d’Estaing, Callaghan response to waiting journalist was infamously reported by the Sun to be “Crisis? What crisis?” Labour dropped from holding a five-point lead in the polls in November 1978 to trailing the Conservatives by 20 points in February 1979. The opposition parties won a motion of no confidence, and the stage was set for a landslide victory for Mrs Thatcher.
One year later, despite the great strides Jimmy Carter had made on the international stage, issues such as the Iran Hostage Crisis dominated the headlines. Seen as a symbol of America’s lost prestige in the world, it opened the door for Reagan and the Republicans revival.
A consequence of this was an energy crisis which saw Crude Oil prices skyrocket. This lead to several states such as California, New York, Pennsylvania, Texas, and New Jersey, introducing gas rationing. It ended in the bizarre spectacle of drivers being able to purchase fuel every other day: based on whether the last digit of their license plate numbers was odd or even.
The low economic growth and inflation (dubbed stagflation) which had plagued President Ford continued for much of Carter’s term in office. Against this backdrop, Carter delivered one of the most extraordinary speeches a sitting President had ever given: The ‘Malaise’ Speech. More of a sermon than an address, Jimmy Carter reflected on the depressed state of the union and the more profound problems behind the issues facing America.
Ahead of the Election, Carter’s prospects were not good. He was facing a bitter internal challenge from the “Lion of the Senate” Ted Kennedy. Although Cater secured the nomination, animosity between the two men ran deep. In the election, Carter was up against the charismatic ex-Hollywood star Ronald Reagan. In similar tactics to Callaghan, Carter painted his opponent as an extreme candidate who would divide the nation. Reagan zeroed in on the failures of the Carter administration to remedy the nation’s problems. Carter was swept from power, and Ronald Reagan was elected the 40 th president of the United States in a landslide election.
Reflecting on their times in office, both Callaghan and Carter believed they were victims of a political sea change. Thatcherism and the Reaganism dominated the 1980s. There would not be another Democratic President for twelve years, and Labour would be out of power for eighteen years, and both parties had been transformed during that time.
However, both men remained very active following their respective defeats. Callaghan remained an MP and became Father of the House in 1983 before becoming Baron Callaghan of Cardiff and serving in the House of Lords until he died in 2005.
Meanwhile, Jimmy Carter completely redefined what a post-presidential career looked like. He established the Carter Centre which has advanced the quality of life of millions of people across the world, especially in some of the poorest nations. Carter and his wife Roselynn have played an incredibly active role, observing elections, fighting diseases, improving agriculture, and assisting diplomacy over the years. Along with a Noble Peace Prize in 2002, Jimmy Carter, at 96 years of age, continues his work and has become one of the most respected humanitarians in the world.
Labour leaders have often had mixed results on the international stage but the closeness of the relationship between Callaghan and Carter in the latter years of the 1970s represents a level of respectful cooperation that had not been seen since the post-war Attlee/Truman years. It now remains to be seen whether Biden and Starmer will get the chance to rekindle the special relationship betwen the two parties.
Tyler Hawkins is from Huddersfield and is working as an engineer. He has been involved in the Labour Party for the past 10 years. His research looks at the politics of Britain and America.
Behind the Photo: Medic James E. Callahan
Medic James E. Callahan of Pittsfield, Mass., looks up while applying mouth-to-mouth resuscitation to a seriously wounded buddy north of Saigon, June 17, 1967. Communist guerrillas had raked a U.S. battalion with machine gun fire in a jungle clearing. (AP Photo/Henri Huet)
The above photograph of James E. Callahan is one of the most famous photos taken during the Vietnam War. Photographer Henri Huet captured a young medic trying to save the lives of his buddies in the midst of machine gun fire on June 17, 1967. It is not just that which makes this a remarkable image, it is the look on Callahan’s face that tells the entire heart wrenching story. A story of desperation and helplessness of sadness and loss. Arguably, the quintessential story of Vietnam.
Medic Callahan giving mouth-to-mouth resuscitation to a dying soldier. (AP Photo/Henri Huet)
In this photo, Callahan is giving mouth-to-mouth resuscitation to a dying solider. Time wise, I think this photograph was taken directly before the famous one above.
With sniper fire still passing overhead, Callahan treats a U.S. infantryman who suffered a head wound when a Viet Cong bullet pierced his helmet. (AP Photo/Henri Huet)
During the three-hour battle in war zone D, about 50 miles northeast of Saigon, Huet again captured Callahan while the medic treats a different infantryman’s injuries. During the guerrilla ambush on the 1st Infantry Division on June 17, 1967, thirty-one men were killed and more than 100 wounded.
If, after seeing these photos, you wonder to yourself about the fate of Medic James E. Callahan. Did he make it out of Vietnam or did he succumb to the war?
James in front of his pictures now located at the War Museum in Ho Chi Minh City in March 2008. Photo Credit: Martha Green
After a quick Google search, I found more information on Callahan. Born in 1947, he was about 20 years old when Huet immortalized him on film. James did indeed survive the war. He served as a sergeant in the U.S. Army from 1965-69 and served as a combat medic during the Vietnam War. After the war, he was a life member and president of the Pittsfield, Massachusetts, Chapter 65, VFW.
In March of 2008, James returned to Vietnam. Martha Green, member of Chapter 65 and an Army Nurse in Vietnam from 1968-1969, was friends with James. She even took a picture (as seen above) of James in front of Huet’s photograph of him at a museum in Ho Chi Minh City. Of the trip back to Vietnam, Martha described the impact it had on James in an email to me:
Jim’s trip back to Vietnam was one of healing, and it served its purpose. There was the feeling that a tremendous burden was lifted from his shoulders after his return to Lai Kei to revisit the location of the battle where those iconic pictures were taken. His family noticed a sense of peace that came over him that he hadn’t had for so many years. I was very happy that I was part of that healing process.
Sadly though, James passed away on July 29, 2008 after a motorcycle accident. After his death, the Pittsfield chapter was renamed the James E. Callahan Chapter 65 in his honor.
Rev. Phil Salois, “Taps,” Vietnam Veterans of America, January/February 2010.
Vietnam Veterans, James E. Callahan Chapter 65, Pittsfield MA (Facebook Page)
*A special thanks to everyone who reached out either in the comment section or by email with your stories and additional information about James Callahan.
Although an Englishman, born in Portsmouth in 1912, James Callaghan held a Cardiff-area seat from 1945 until 1987. He had joined the Labour Party in 1931 and was an active trade unionist, having set up the Inland Revenue Staff Association.
His junior parliamentary career involved work at the Minsitry of Transport and the Admiralty. By the 1950s, he was a constant in the Shadow Cabinet the in 1961 he became shadow chancellor.
On Labour's victory under Harold Wilson in 1964, he became chancellor of the exchequer, but economic circumstances were not conducive at the time for a successful period in that office.
He offered his resignation after the devaluation of the pound, but was persuaded to swap jobs to become home secretary.
As home secretary he oversaw the deployment of United Kingdom soldiers in Northern Ireland.
Labour were defeated at the 1970 election but instead of moving to take over from Harold Wilson, Callaghan remained loyal to his party's leader. He added foreign secretary to his CV in 1974 when Wilson won that year's election.
As foreign secretary he oversaw Britain's entry into the common market then in 1976 he took over from Wilson as prime minister he was a compromise candidate, but popular with the Labour electorate.
Callaghan was not a left winger in the Labour Party, and as prime minister he was delicate in balancing the make-up of the cabinet.
His government was weakened as by-election results removed Labour's majority in Parliament, relying on deals and coalitions with minor parties, then resulting in the so-called 'Lib-Lab Pact' with the Liberals.
Callaghan decided against calling an election in 1978, which has since been called his greatest mistake. He took a chance on a worsening economic situation improving by 1979, but instead he got the winter of discontent.
A series of strikes, power cuts and cut working hours made his government deeply unpopular, then in March 1979 parliament passed a vote of no confidence by one vote he was forced to call a general election.
Margaret Thatcher began her 12-year reign as prime minister for the Conservatives, and Callaghan resigned as leader of the party in 1980.
In 1983 he became father of the house as the longest-serving MP, then a knight of the garter in 1987, the same year as he stood down from the House of Commons.
He was made Baron Callaghan of Cardiff, and died the day before his 93rd birthday in 2005.
Callaghan, (Leonard) James, Baron
Callaghan, (Leonard) James, Baron (1912– ) British statesman, prime minister (1976). Callaghan entered Parliament in 1945, and succeeded Harold Wilson as Labour Party leader in 1976. He is the only prime minister in British history to have held all three major offices of state: chancellor of the exchequer (1964), home secretary (1967) and foreign secretary (1974). Callaghan also has the dubious distinction of being only the second post-war prime minister never to have won a general election. His tenure was marked by delicate negotiations with David Steel in the Lib-Lab Pact, and strife with the trade unions which culminated in the ‘winter of discontent’. He was defeated by Margaret Thatcher in the 1979 general election and became a life peer in 1987.
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