For much of the postwar period, Britain imported more than it exported. The resulting trade deficits were widely seen as a sign of approaching economic doom; that a once-great trading and manufacturing nation could no longer make its way in the world.



In 1980, this pattern went into reverse. That year, and in 1981 and 1982, there was a rare British trade surplus in goods. Yet the economic commodity most valued by Margaret Thatcher’s often struggling first government was still an import. It was not an industrial product, but something much more modern; an intellectual product, a theory – monetarism.

The theory was laid out in 1980 in Free to Choose, a surprisingly watchable imported television series broadcast by the BBC, which showcased the thinking of the American radical right. It was presented and co-written by Milton Friedman, a University of Chicago professor with deceptively merry eyes and a folksy drawl.

According to Friedman, the most acute problem of western economies was high inflation, which was principally caused by profligate governments “printing too much money”. The solution – monetarism – was for governments to control the amount of money circulating in their economies, by raising taxes or interest rates and cutting public spending.

Friedman went on: “Inflation is like alcoholism … the good effects come first. The bad effects only come later. When it comes to the cure, it’s the other way round. When you stop drinking, or you stop printing money, the bad effects come first, and the good effects only come later … [But] every country that has been able to persist with [monetarism] … has been able to cure inflation.”

A globe-trotting intellectual superstar, Friedman was too busy to work for Thatcher. Instead, much of the technical and intellectual support for this risky policy venture came from the tiny community of British monetarist academics. One of them was Alan Walters, a quietly spoken man with an icy-blue gaze who, like Friedman, had visited and supported the brutal but economically innovative Pinochet dictatorship in Chile. Walters became Thatcher’s chief economic adviser on 1 January 1981. Another was a former PhD student of Walters, with a voice like sandpaper and a machine-gun laugh, Patrick Minford.



It was like having a case study on your doorstep. You had to be a bit careful, but in many ways it was very instructive Patrick Minford

‘A voice like sandpaper and a machine-gun laugh’ ... economist Patrick Minford. Photograph: Jane Bown

At the start of the 1980s, Minford was teaching at Liverpool University. Once Walters started at Downing Street in 1981, Minford told me, “I was constantly in touch with him. I was providing him with consultancy on macroeconomics. I’d meet him at No 10. We would discuss unemployment; whether interest rates were too high – the overall economic situation.”

What Minford offered was particularly enticing, even in an increasingly competitive market for new Tory ideas: an analysis which seemed to prove that monetarism would work in Britain. He called it the Liverpool Model.

“Economics problems are just like engineering problems,” Minford explained to me briskly. In the late 1970s and early 80s, he went on, Liverpool University had a single mainframe computer. “In the social sciences, no one much used it. I kind of schmoozed the computer director. Computer directors always like to expand their empire, so he gave us [Minford and a few research assistants] loads of time on the mainframe.”

They used it to build a model of how he believed the British economy functioned. “We would set the model up, and then we would simulate it with shocks of various sorts” – such as changes in overall government spending, or in the level of welfare benefits, or tax rates or wages. “And then the data would speak.”

In a strikingly short 1981 pamphlet titled The Problem of Unemployment, Minford wrote: “Estimates based on the Liverpool Model suggest that a combination of a 15% cut in real social security benefits ... and a reduction in the union [wage] mark-up to its level in the mid-1960s ... would reduce unemployment in the UK by around 1.5m by the mid-80s.”



In a May 1982 lecture in the City of London, titled The New Classical View of the Economy, he made another large claim: “To cure inflation permanently, you require that cuts in public borrowing [and, therefore, public spending] and money supply be permanent ... The cure can be effected with minimal disruptive effects ... if a government with credibility in the pursuit of such cuts is expected.”

Between 1971 and 1981, the population of Toxteth fell by more than a third. Photograph: Denis Thorpe

Minford’s zeal was reinforced by how he saw the city he taught in. Liverpool University is just north of Toxteth – or Liverpool 8, as residents preferred to call it, after its postcode. During the 19th century, when the city was one of the richest ports in the British Empire, Toxteth’s criss-crossed rigging of streets had housed merchants and sea captains, in terraced Georgian mansions of fine brick and cream stucco, set along boulevards with self-congratulatory names such as Upper Parliament Street.

But by the 1980s, this prosperous, prestigious world, like the sea captains, was long gone: bombed in the Second World War alongside Liverpool’s docks, half a mile downhill by the River Mersey; partially redeveloped after the war as low, boxy council houses and blocks; and partially left to rot. Most of the surviving mansions had been subdivided and rented out or simply boarded up. Flaking, damp, with buddleia sprouting like unkempt hair from their basements and back walls, the houses faced stretches of waste ground, where uncleared rubble from the war mixed with fly-tippings and dog shit. Inhabited streets ended abruptly or degenerated into roofless shells, broken into and stripped for their lead and copper. Confident Victorian churches and public buildings – some functioning, some abandoned – stood like islands under a sky that seemed too open, too unobstructed for a city landscape. After dark, prostitutes used the shadows.

Margaret Thatcher delivers her ‘lady’s not for turning’ speech at the 1980 Tory conference. Photograph: PA

Between 1971 and 1981 alone, the population of Toxteth fell by more than a third. In extreme form, the area exemplified the wider decline of Liverpool. Since the Edwardian era, the city’s commercial zenith, its long chain of working docks – with their colonnaded quays and warehouses like palaces – had been thinning and corroding. Britain’s maritime trade had moved steadily to other ports on the east coast not the west, closer to Europe.

Since the 1970s, the factory jobs that were meant to replace the dock work had been disappearing too, with Liverpool plants increasingly regarded as disposable branch facilities by manufacturing conglomerates based elsewhere. Since the 1950s, Liverpool’s population had been dropping faster than in any other city in the country: from a peak of almost 900,000 to under 500,000 in 1981.

Much of Liverpool was still handsome, with its bright estuarine light and its steep city-centre hills, stacked with centuries of grand buildings from past booms. It still had cultural leverage and charisma, with its ongoing tradition of clever pop music from the Beatles to mouthy new bands such as Echo and the Bunnymen; and a quick-passing football team, Liverpool FC, that was in the middle of a period of unprecedented dominance of both the English and European games. Yet all this swagger was, at best, inadequate compensation for, and at worst a distraction from, the depopulation and the decaying economy. Early 1980s Liverpool, even more than the country’s many other tatty, depopulating cities, could be seen as a warning: the fall of Britain writ large.

“It was just like having a case study on your doorstep,” Minford told me. “The British disease in its terminal phase. Productivity – hopeless. Union militancy – very strong. Living on benefits – the norm. I saw whole streets doing that at first hand.” On weekday lunchtimes, he and Liverpool University colleagues used to go to a pub on the northern edge of Toxteth. “You had to be a bit careful. But in many ways it was very instructive.”

Liverpool’s a funny place. There was this feeling​: ‘He may be in the enemy team, but at least he’s in Liverpool!' Patrick Minford

Police with riot shields face a group of rioters during the Toxtexth riots in July, 1981. Photograph: Keystone/Getty Images

Once he became known nationally as one of the government’s few academic cheerleaders, Minford had to be rather more careful. By the early 1980s Liverpool, previously politically fickle, was moving strongly leftwards, with the aggressive Labour splinter group Militant surging in municipal elections, and the number of local Conservative MPs rapidly collapsing. In his Toxteth pub from 1981 onwards, Minford said, more quietly than usual, “There was a bit of aggro.”

But then his impregnable grin returned: “Mostly quite friendly aggro. Liverpool’s a funny place ... There was this kind of feeling: ‘He may be in the enemy team, but at least he’s in Liverpool!’”

Minford actually lived in Birkenhead back then, across the Mersey but only a few minutes’ drive away from the city. During 1981, he began to get anonymous phone calls. “‘We know where you are,’ sort of thing,” he said, quiet again, fiddling with the cap of a mineral-water bottle. “We got threats, so we went ex-directory. The police were alerted. We didn’t want to encourage people to turn up on the doorstep.”

Other political enemies were slightly more subtle. “I was regarded with a mixture of contempt and hatred by colleagues in the profession.” Minford waved a meaty hand: “I just wrote them off. I thought, ‘It’s lucky I don’t want to get a [university] chair anywhere else. I’ve got my chair in Liverpool. No one can stop me!’”

Later in our conversation, though, Minford conceded that the sheer scale of the shake-out in Britain’s jobs market had surprised him. The initial versions of the Liverpool Model had assumed, as did many Thatcherites, that the country’s “natural” rate of unemployment was low, and therefore purging the economy of inefficiencies with monetarism would mean, at worst, hundreds of thousands of redundancies – rather than millions.

“In the Liverpool Model, we were too optimistic about the speed with which the economy would ... come right,” Minford admitted, “although we were closer than many of the pessimists.” Then he paused, untypically: “The bit we were way out on was unemployment.”

By the early 1980s, Toxteth had effectively become Liverpool’s ghetto. Photograph: Sipa Press/Rex

Young, black and gifted

In Toxteth, unemployment had been high for decades, but during 1980 and ’81 it surged. According to the 1981 census, in the Granby electoral ward, which included Toxteth, 39.6% of men were jobless. A 1989 report on race relations in Liverpool by Lord Gifford, a radical QC, and Wally Brown, a well-informed Toxteth black activist, concluded that for much of the 1980s, “the real black youth unemployment figure in the Liverpool 8 area [was] 70–80%.” The figure for young black men – the least favourite recruits of employers in the city – was almost certainly even worse.

By the early 1980s, the narrow triangle of Toxteth, only a few minutes’ walk from one side to the other, had effectively become Liverpool’s ghetto. The process had started in the early 20th century, when the district’s cheapening property and proximity to the docks had drawn merchant seamen, many from east and west Africa, to settle there. They stayed and intermarried. Jimi Jagne’s family was typical: “My mother was Chinese, born in Liverpool. My dad was a sailor from the Gambia.”

Growing up in Toxteth in the 1970s and early 80s, Jagne told me: “I was told by the other black kids, ‘Don’t go here. Don’t go past here. Because the skinheads will get you.’” He was a scrawny, slightly nervous child, and almost the only time he crossed this invisible cordon in his free time was on Saturday afternoons, to go shopping in the city centre.

By his early teens, Jagne still lacked confidence. He passed the 11-plus, but was too overawed by grammar school to take up a place. Instead, he became a studious but beleaguered pupil at a heavily white secondary modern north of Toxteth, more interested in Charles Dickens than fights with his taunting classmates.

One darkening winter afternoon in 1978, Jagne began his walk home from school as usual. Wearing his uniform and carrying a schoolbag, he was passing Liverpool’s huge, blood-red brick Anglican cathedral, which guards a hilltop just beyond the northwestern boundary of Toxteth, when:

In the car, one of the policemen had been making threatening faces and saying things – I was scared absolutely shitless Jimi Jagne

Jimi Jagne, now a community activist and entrepreneur. Photograph: Andrew Teebay/Liverpool Echo

“An Austin Allegro started crawling alongside me. There were two police officers in it, and it was a marked [police] vehicle. One of them wound down the window and asked me where I was going. I explained that I’d just come from school ... The car stopped. One of the officers got out ... He put his hand on my shoulder, and touched my bag ... He said, ‘I’m going to look inside it.’

“I was too small, too young and too naive to argue. I just let him take it. He opened it, and there were some exercise books, my PE kit, and a towel. And he said, ‘Have you robbed any of this?’ I said, ‘No.’ Some of the books had my name on the front. ‘I’ve got to ask you some questions,’ he said. ‘You’ve got to get in the car.’ I said, ‘I don’t want to. I want to see my mum. I live round the corner.’ He said, ‘I’m not interested in all that. Get into the car, you black swine!’

“So I got into the car. I knew that on [nearby] Admiral Street there was a police station ... We drove past it, and carried on. And carried on. Then we were along Aigburth Road [south of Toxteth] and I didn’t know the area at all. We drove through Aigburth, then Garston, and into Speke, which was the very south of the city. It was just a wasteland then, mainly mud ... By that point of time it was dark.

“In the car, one of the policemen had been turning round to me, making threatening faces and saying things – I can’t remember what now, because my mind had gone blank. I was scared absolutely shitless. On the wasteland, he pulled me out of the car and … emptied my bag into a huge puddle. Then they pushed me into the puddle, and started laughing, and said, ‘That’s what you get, you daft little black cunt!’ And just got into the car and drove off.”

A man is arrested by police during the Toxteth riots. Photograph: Mercury Press

Jagne walked home in his cold and filthy clothes, with his ruined homework, hours late – too scared and ashamed to tell his furious mother what had happened. Soon afterwards, for the first time, he began to become “a little bit politicised”. He read up on the slave trade, in which Liverpool, and some of Toxteth’s original mansion-owners, had played a central role. He discovered the writings of the American black radical Malcolm X, and “hung around” with older Toxteth boys who had become militant Rastafarians.

In July 1980, Jagne left school and went on the dole. Without work, without much money, without many daytime amenities or access to the rest of the city; unpredictably harassed by the police; largely ignored by Liverpool and national politicians – young male Toxteth stood around under the flaking Georgian porches and on the overgrown street corners, and waited for diversions. Jagne was one of those waiting: “Everybody would rush to a [police] incident if they got word of it.”

At about 9.30pm on the mild, showery Friday evening of 3 July 1981, a young black man on a motorbike, chased by an unmarked police car, reached the corner of Granby Street and Selborne Street in the middle of Toxteth. The man was local, but has never been officially identified. The policemen suspected his motorbike was stolen.

At the street corner, a favoured spot for people to gather and pass the time, the motorcyclist lost his balance and fell off. The officers tried to arrest him but a small crowd surrounded them, suspecting an instance of police harassment, and was quickly swelled by other angry residents. At least eight more patrol cars arrived. According to Jagne, who was in the crowd, now about 40-strong, “Police started threatening, shoving. And then a [police] baton struck someone. So some guys started picking up stones. Bricks started flying over.”

In the mêlée, the motorcyclist broke free and ran off, while one of the crowd, Leroy Cooper – another young black local from a family with a well-known history of friction with the police – was arrested for assaulting officers. For the next few hours, three or four groups of youths, a dozen people in each, roamed Toxteth throwing stones at any police vehicle that passed within range. At least half a dozen had their windscreens smashed.

The next day, from dawn, Toxteth was flooded with police. Many residents took it as a sign that the policing of their neighbourhood would, from now on, be even harsher. Meanwhile, news and rumours spread about the Cooper incident, and some residents began to think about a stronger response than stone-throwing.

Three months earlier, in Brixton, south London – one of several other rundown British inner-city districts made combustible by rising unemployment, racial tensions and over-policing – a botched police operation similar to the Toxteth motorbike confrontation had led to three days of rioting, the fiercest in Britain for half a century, reported around the world: 299 policemen were injured.

A policeman stands guard after another night of rioting in Toxteth. Photograph: Keystone/Getty Images

Jagne and his friends were transfixed by the Brixton coverage: “We talked about it for weeks and weeks and weeks. All the circumstances that led to Brixton were exactly the same, mirrored ours ... The impression we got from Brixton was that although there were youths arrested, there were also police officers injured – and it focused a lot of attention on that black community. Those two things appealed to us enormously.”

On 4 July, the day after the Cooper incident, what Jagne and others called “the uprising” began in Toxteth. Jagne was involved from early on. Thirty years later, wearing a big Afro and a tight corduroy worker’s jacket, he still looked like a 1970s or 80s black radical, rather than the respectable community activist and entrepreneur he had since become.

We started our interview in a café at the Albert Dock in Liverpool, a cleaned-up and restored Victorian complex where maritime trade has been replaced by tourists; but Jagne quickly suggested we walk the mile to Toxteth and continue talking there. When we reached Upper Parliament Street, which was still gappy and gaunt and poor, like much of Toxteth, he stopped. Then he recalled the events of July 1981 with gusto:

“Each evening, some of us would walk out into Parliament Street in balaclavas. Or we’d drive [stolen] cars out into Parliament Street from side streets and set them on fire. I felt for the people who were on the buses that went along Parliament Street – they would look out of the windows, absolutely terrified ... But all we wanted was to get the street clear. You don’t do that by politely asking buses and passing cars, ‘Can you divert?’ You’ve got to take the street now.”

An arena had been created. Now the police could be drawn into it and confronted. The rioters put out the street lights by repeatedly kicking the metal plates that covered their fuses. Then they looked for weapons – and some of the best came from a regeneration scheme that had begun in Toxteth earlier that summer.

We’d set cars alight. We wanted to clear the street. You don’t do that by asking politely ... Jimi Jagne

‘An arena had been created’: rioters made barricades out of stolen cars. Photograph: Denis Thorpe

On one stretch of Upper Parliament Street, fist-sized rocks were piled up, ready for use as landscaping. Excavators and a bulldozer were parked but not securely locked. Along nearby Grove Street, once one of Toxteth’s finest, a long screen of scaffolding covered the front of several Georgian terraces. The piles of rocks became stocks of missiles; the scaffolding was unscrewed and the poles made into improvised lances. The bulldozer was hotwired and used to build barricades out of stolen cars – and to plough through more of the scaffolding, scattering and freeing more poles. An excavator was hotwired and turned into a sort of armoured car.

Other vehicles were commandeered: milk floats stolen from the local dairy, throttles jammed open with concrete blocks so they could become driverless battering rams; rental cars seized from a local hire business; even a fire engine. A school was broken into and javelins taken out of the sports cupboard. Spiked metal railings were broken off from the front gardens of Toxteth mansions. Derelict properties supplied bricks and planks of wood. From inhabited houses came sledgehammers, chisels, baseball bats, bicycle handlebars and milk bottles for making into petrol bombs. Jagne quickly learned how to assemble and use them.

“The bottle had to have a wide-enough neck. You filled the bottle about two-thirds of the way up. Then you needed plenty of length on your rag. Somewhere with some light, from car headlights or a streetlight that was still working, you lit the rag and put it in the bottle at the last minute. And then you threw the bottle like a javelin” – standing on the pavement of Upper Parliament Street, with lunchtime cars going past, he mimed the action – “so the petrol jumped up the rag, and didn’t spill on to you.”

When the bottle hit something or someone, it sprayed a 20-foot area with broken glass and burning fuel. “It was a really evil device,” said Jagne, dropping his voice. “Did I think I was gonna kill someone with one? I’m not a violent person, but it did cross my mind.”

Aftermath of the riots: ‘It is hard to argue that the staggering level of joblessness under Thatcher played no part.’ Photograph: PA Archive

In July 1981, Jagne was only 17 years old. Just before the riots, he had got his first good job as an apprentice electrician. And yet, “I became increasingly involved, night after night. At first there was a bit of scepticism towards me … because I looked like a kid … But I was out there, and starting to make suggestions to [the other rioters].I would say, ‘We need people to go over there.’ Or: ‘The bombs that have just been made – take them to the other side of the road.’”

Rioters charged the police lines with lengths of scaffolding like medieval horsemen. They drove an excavator at officers. They attacked fire engines. They hacked at police vans with axes. They picked up and used abandoned police helmets and riot shields. They seized a fire hose and turned it on officers as a water cannon. Some other Toxteth residents watched approvingly from the pavement or their front doorsteps or balconies. On 28 July, the Liverpool Echo reported: “One pensioner in his slippers ... standing next to an overturned truck, shouted fiercely, ‘Don’t burn the cars, burn the coppers!’”

From the Liverpool University campus, a few minutes’ walk to the north, you could clearly see the flames. A police cordon, effective for once, protected the university and the rest of the city centre – but not all the university staff. “One of my colleagues in the economics department,” remembered the campus’s most famous Thatcherite, Patrick Minford, “was living in one of the riot streets. Either me or Kent [Matthews, a colleague and fellow monetarist] was in touch with him during the trouble. As the rioters were coming down the street … we went round to his house. We decanted him to another street that was out of the path of the rioters. He went to stay with another colleague.”

I asked Minford whether the riots had given him any second thoughts, at the time, about monetarism and the Thatcher government. Only weeks before the disorder, in his pamphlet The Problem of Unemployment, he had written, “Unemployment is ... unlikely to cause major social unrest.” Yet, while racism and unjust policing had clearly been the riots’ long-term causes, it was hard to argue that the new and staggering level of joblessness in Toxteth under Thatcher played no part; after all, there had been no riots there under her immediate predecessors.

For once, Minford lost his fluency. “Well ... I think that, you know ... the riot was pretty alarming.” But then his bulldozing certainty returned: “The thing is, I think the behaviour in Liverpool really pointed up the sanity of Margaret Thatcher’s policies. All she had to say was, ‘Look, the policies are working, and there’s nowhere more in need of them than Liverpool.’”

Extracted from Promised You A Miracle: UK80-82, by Andy Beckett, published by Allen Lane (£20). Order it for a reduced price from the Guardian Bookshop here, or by calling 0330 333 6846. Read more about Penguin Random House’s latest releases here