The Tories have a new line of attack on Labour – that they would take us back to the 1970s, as Hammond alleged this morning (2’19” in). This raises the question: what was so bad then?

It’s not that wages did badly. Bank of England data show that they rose 22.7% between 1970 and 1979 after adjusting for RPI inflation. That’s substantially better than in the last ten years.

Nor, really, was the problem that much of industry was state-owned. True, it was. But most Tories at the time didn’t see this as a massive problem. As the Institute for Government has pointed out (pdf), the 1979 Tory manifesto “barely mentioned” privatization and the privatizations of the early 80s were seen mainly as revenue raising measures rather than as a deliberate means of expanding the market economy: that rationalization only followed later.

Nor even is it that the 70s saw high personal taxes on the rich. They did. But these continued well into the 80s. It wasn’t until 1988 that the top income tax rate was cut from 60%. If John McDonnell keeps his word, the top tax rate under a Corbyn premiership will be lower than it was for most of Thatcher’s.

Instead, there’s another reason why Tories in particular regard the 70s as a period of crisis. It’s because it was – for profits. The share of profits in national – and also the rate of profits – slumped in the mid-70s. Not unrelatedly, so too did the share of the top 1%.

The reasons for this are discussed well in Marglin and Schor’s The Golden Age of Capitalism. Essentially, the long boom led to rising wage demands*, slower productivity and a spike in oil prices. Inflation – which people remember as the hallmark of the 70s – was the product of this. Workers wanted higher wages, capitalists wanted higher mark-ups and this led to higher prices. As Wendy Carlin and Sam Bowles say “inflation arises from conflicts among economic actors, when they are powerful enough that their claims on goods and services are inconsistent.”

From this perspective, the true achievement of the Thatcher government was not so much to shrink the state as to weaken working class power and hence restore the conditions necessary for profitability.

Now, you might think there that what I’m saying is that the crisis of the 70s was a rich man’s problem.

No. Falling profits caused a sharp fall in capital spending. Had profits not recovered, it’s likely that capital spending would have fallen further and so growth would have been consistently weak and unemployment high. In this sense, low profits in a capitalist society are everybody’s problem.

This is why the slump of the 70s matters. It suggested that the full employment and rising wages of the Golden Age were unsustainable. Yes, Thatcher rescued capitalism, but at the expense of the misery of unemployment for millions.

In this sense, though, it is dangerous for Hammond to remind us of that period. We can read the 70s not just as evidence that social democracy is doomed to fail, but as evidence that the demands of capital and the demands of workers are, ultimately, fundamentally irreconcilable. As I said, in this sense it is he rather than McDonnell that is the Marxist.

* Of course, high wages in themselves don’t squeeze profits if they are returned to capitalists as workers spend those wages. In the 70s, though, this didn’t happen in part because households’ savings rose.

Another thing. In his interview with Nick Robinson this morning, Hammond said: “Since 1979 when Britain turned its back on the policies of Corbyn and McDonnell…living standards in this country have doubled.” By one obvious measure, this isn’t right. GDP per head has risen only 85% since 1979Q2. What’s more, GDP per head since 1979 has risen by only 1.6% per year, compared to a rise of 2.6% per year between 1955 (when current data began) and 1979. By this measure, turning our back on the policies of Corbyn and McDonnell led to slower growth.