As new Labour prepares for its first post-election conference the lives of two old Labourites are to be published. Brian Brivati to Kenneth Morgan about Jim Callaghan

Being a vice chancellor was quite a good preparation for writing the life of a prime minister," says Kenneth Morgan, former vice chancellor of the University of Wales, Aberystwyth, and now official biographer of old Labour's last prime minister, James Callaghan.

Morgan used his university managerial experience to understand some of the problems that faced the last Labour premier before Tony Blair: "Quite a gain to be running something, of course it was very very different, but one got the sense of making decisions, managing budgets, exercising a little power." If running Aberystwyth in the 1990s was anything like running UK plc in the mid-1970s then it is hardly surprising that Morgan has retired to concentrate on writing history.

One of the biography's most striking images is of Jim Callaghan swimming off the coast of Guadeloupe during Britain's "winter of discontent" in 1979. Callaghan's line, faced with a Britain crippled by striking trade unions, was "crisis, what crisis"? It was the worst moment of his tenure, and the moment, according to Morgan, in which the political skills of a lifetime seemed to desert him. The phrase "crisis, what crisis?" was in fact invented by the Sun newspaper, yet this response and this period, the endgame of his government, dominate the popular perception of "Sunny" Jim. Morgan, however, makes clear that there was much more to him: "He is the only person to have held every major office of state, every part of his career encompasses an important aspect of British history. At the Treasury he was involved in the devaluation of the pound. His É«ºÐÖ±²¥ Office period included concerns with race and civil liberties and Northern Ireland, as foreign secretary he was particularly involved with getting Britain confirmed as a member of the European Economic Community. Then as prime minister he was in power during a very important period, ending in a very dismal way in the winter of discontent, but also including a quite considerable period of economic growth. He also had a major role in foreign affairs ... in general, the more senior the person I spoke to, the higher their estimation of Callaghan."

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Morgan stresses that in Germany and the United States, Callaghan remains a well-known figure, while throughout Africa and Asia he is well regarded for his exceptional grasp of foreign affairs and development issues. In retirement he has worked hard with virtually no recognition at home, on several issues, especially poverty. Yet in Britain his image is frozen in the grim winter of 1979. Morgan points out that Callaghan never spoke the words of the famous Sun headline; he actually said: "I don't think other people in the world will share the view that there is mounting chaos." But it was, as Morgan makes plain, a public relations disaster that set the tone for the abysmal 1979 campaign, overshadowed in the gallery of bad Labour campaigns by 1983 but in many ways a much worse performance.

When Callaghan lost that May, he disappeared from view: his reputation and legacy attacked by a generation of Thatcherite writers. Among premiers, Callaghan was neglected. There have been three recent lives of Harold Wilson, Clement Attlee has been sanctified in Peter Hennessy's writing on the 1940s and will get a new life by Francis Beckett this autumn; Ted Heath and Margaret Thatcher have received the attentions of John Campbell; the Churchill industry churns out a couple of books a year; even Ramsay MacDonald is back in vogue with a new edition of David Marquand's classic biography. But since his dry and conspicuously unrevealing memoirs, Time and Change, there has been a virtual silence on old Labour's last PM. The Callaghan years were condemned as an unfortunate coda to the age of old Labour, but with this book's publication in the wake of new Labour's landslide, Callaghan's stock is rising and the late 1970s are back in the spotlight. And what a time it was.

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Until the structure of European politics changes drastically again, no British prime minister will face the combination of social, economic and political pressures that Callaghan did in his short premiership between 1976 and 1979. They will face wars and the death of princesses, but not the same level of sustained economic and social pressure. The European Union and the Thatcherite trade union laws have seen to that. Callaghan's government was the last gasp of British social democracy trying to defend an imaginary independence in the world economy through an unreformed pre-Thatcherite state. By many of today's standards - level of unemployment, economic growth, the gap between rich and poor - it worked remarkably well, but by the standards of governability, in those last six months, it failed. This failure was used by the new right to shift the basis of state intervention towards the free market, away from public ownership towards privatisation and away from free collective bargaining towards single or non-union agreements. Only the welfare state remained in broad outline as it had been.

Callaghan presided over the end of the world he had come into politics to create, and disappeared almost without trace under the weight of Thatcherism. But even as he fell, in a campaign in which Morgan frankly sees Callaghan as having been much better than his party, he was well aware of the need for change. Indeed, Morgan speculates that Callaghan might have won the 1979 election if he had not had the Labour party attached to this government. There were limits to his ability to change direction but he realised the need for reform.

Callaghan recounts in his memoirs Harold Wilson telling him that when seeing the same problems recurring and coming up with the same answers, he knew it was time to go. But Callaghan tried to change. As Morgan says: "Tony Blair has made a lot of the Australia example; in many ways Callaghan was trying to do what the Australian party did under Paul Keating, have a national accord with the unions, but the unions in Australia proved to be rather more sensible than the unions in Britain." Failing to change the party and losing the election Callaghan resigned.

Much followed on from the winter of discontent - not least the rise of Militant and Tony Benn's leadership campaigns. If Callaghan had won the election it is conceivable that he could have gradually modernised the party and redirected macroeconomic policy against inflation, accepting in the process a higher level of unemployment, but it is not likely that he would have been able to legislate against the trade unions nor that they would have reformed themselves without anything less than new laws. Callaghan was a moderniser who could not modernise.

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The limits to Callaghan's revisionism were built into his own sense of history. As Morgan says, "he thinks that parties have roots and traditions and in a very simple way that the Labour party does represent a fairer society which means redistribution and greater equality through the role of the state. The unions, rightly or wrongly, were the embodiment of that fundamental role. Anything that would have weakened the union ties he would have regarded as not acceptable." This was the root of his problem. He could not have broken the cycle of political and economic militancy without shifting Labour as a party of government away from the industrial wing. His whole political life argued against doing that.

Part of the limits on Callaghan's ability to change must also lie in his personality. "Sunny Jim", "Sailor Jim", the jovial uncle with immense self-confidence and experience: chancellor, home secretary, foreign secretary and PM, adviser to the Police Federation, anti-unilateralist, friend of the unions and world leaders, was also socially conservative. Morgan is sure that "he was capable of change, but the Labour/union party was not". I am not so sure. Callaghan comes across as the personification of an age and a movement, both incapable of responding to changes in the world economy of the 1970s.

Nothing Morgan has written suggests that Callaghan's sense of patriotism, equity, responsibility and collectivism would have allowed him to step out of his time. Though he was a fine chief executive officer, he was incapable of being the radical leader the party demanded at the end of the 1970s or the modernising leader it needed.

But in the long run there will be seen to be much in common between the age of Heath, Wilson and Callaghan and the age of Major and Blair: Thatcherism will seem like a long and bad dream from which the country has slowly awakened. Back in the mainstream of European politics with some changes in the arrangements of the state's role in industry, but with the essence of the civilised society having survived, Callaghan's government will appear less like the end of an era and more like a gentler, more humane and more democratic root to a reform in the relationships between the state and the unions that was abandoned in favour of much unnecessary violence.

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Morgan enjoyed writing this book more than any of his many others, except his history of Wales. He connected with Callaghan over art and chess, argued with him on some issues and feels that Callaghan will disagree with some of his judgements, but retains what comes across as a strong affection for a man he first met in 1959. Callaghan, in turn, should be grateful to Morgan for rescuing his reputation from Thatcherism.

Kenneth Morgan's Callaghan. A Life is published today by Oxford University Press.

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Brian Brivati is reader in history at Kingston University. His biography of Hugh Gaitskell will be published in paperback on October 2 by Richard Cohen Books.