Label of love: 2 Tone Records

Think we've got it bad now? Thirty years ago, Jim Callaghan's useless Labour government was trounced by a certified snatcher of children's milk. And while leftwing politicians licked their wounds, fascists were busy indoctrinating disenfranchised white youth with racist ideas.

But there was a tonic for collective despair: from the decaying motor town of Coventry, 2 Tone Records promoted a "black and white, unite and fight" stance while launching a fashion, dance and musical craze that peaked with the 1981 summer of riots.

It started, not with a tune, but with a 'toon. Fusing an early Peter Tosh album-cover image and the rude-boy guise of Clash bassist Paul Simonon, label founder Jerry Dammers created the cartoon Walt Jabsco, 2-Tone's monochrome dancing mascot, aped by pork pie hat-wearing youth across the country.

Originally known as the Coventry Automatics, 2 Tone's mainstays the Specials were formed in 1977. The Clash's manager briefly took them under his wing where they morphed into the Special AKA, evolving from clunky reggae-rock to their own punk take on Jamaican ska. Their short-lived relationship with the Clash camp gave them the impetus to write the first 2 Tone salvo Gangsters, based on Prince Buster's Al Capone, with its opening line: "Bernie Rhodes knows, don't argue!"

The Specials needed a flipside but had spent their £700 studio budget, which had been raised from friends and family. So Dammers unearthed an instrumental rocksteady cut, made two years previously by drummer John Bradbury (who soon joined the band). The track was called the Selecter by the band of the same name. The success of the split single prompted guitarist Neol Davis toswiftly recruit musicians from Coventry's tiny reggae scene, including singer Pauline Black, to make the Selecter the second 2 Tone septet.

"At the beginning, all 14 of us in the Specials and the Selecter collectively made decisions on how 2 Tone was run and who we signed – we were terribly egalitarian and high principled," says Black.

After the first single, 2 Tone made a deal with Chrysalis to become its autonomous subsidiary, rejecting an approach from Mick Jagger and Rolling Stones Records.

The Specials soon discovered the ska revival went beyond Coventry. The North London Invaders, renamed Madness, provided 2 Tone with its second single, another Buster tribute (The Prince) before heading to Stiff Records. The Beat, from Birmingham, stayed for just one cut, (Tears of a Clown), before launching their label, Go-Feet.

In November 1979, six months after Gangsters reached the top 10, the Selecter, the Specials and Madness all appeared on the same episode of TOTP (with On My Radio, A Message to You Rudy and One Step Beyond) and took turns in headlining a frantic tour – captured in the film Dance Craze.

But within six months the first cracks had appeared. In interviews, Dammers was depicted on the verge of a nervous breakdown and comparing 2 Tone to Frankenstein's monster.

The Selecter, feeling that 2 Tone had become just another commodity, implored Dammers to dissolve the label. Announcing their departure after one disappointing album and three hit singles, the band said in a statment stated: "Due to the success of 2 Tone, many of our ideas have been hampered."

Black says now: "The problems started when all the bands started going their separate ways with their own British and US tours. There was infighting. We were all in different places and our shared vision fragmented quite quickly. Initially we'd all shared the same stage and based the 2 Tone tour on a Motown revue."

Dammers caused further ructions when he insisted on widening 2 Tone's musical palette. He brought exotica, muzak and music hall to the More Specials album, and signed funk-punk band the Higsons from Norwich and Leicester no wave funk band the Apollinaires.

Despite internal troubles, Ghost Town proved the pivotal 2 Tone release, encapsulating the urban alienation, decay and the violent mood on the streets in 1981 – few would agree its reign at the top of the charts as Britain's inner cities blazed was coincidental. It also destroyed the Specials.

Dammers soldiered on with the remaining half of the band, and made increasingly uncompromising records while reverting to the Special AKA – including The Boiler with Bodysnatchers singer Rhoda Dakar, a horrific monologue about an attempted rape.

He nearly bankrupted the label with 1984's In the Studio, savaged by critics but saved by the success of single Free Nelson Mandela. Despite being over-orchestrated and a tad cheesy, the song raised anti-apartheid awareness to the point where it became untenable on the world stage.

History seems about to be repeated as the re-formed Specials (minus Jerry Dammers) could be playing Ghost Town live as a summer of rage erupts around them, should police prophecies come true. Black says: "We're in the same situation now as when 2 Tone began. I still live in Coventry and it really is turning into a ghost town – like everywhere else, I guess."

People are getting angry this time too, but who will play 2 Tone's pied-piper role 30 years on?

2 Tone tonics

The Selecter: On My Radio / Too Much Pressure (1979)
The Selecter had the edge over the Specials when it came to creating authentic skinhead reggae – although Pauline Black's vocals owed more to punks such as Lena Lovich. Ironically, it was the radio the lyrics castigated that propelled the Selecter into the top 10. Both tracks captured the band at their most exhiliarating and anthemic, with a fuller sound than the Specials.

The Beat: Tears of a Clown / Ranking Full Stop (1979)
Given that Jerry Dammers's original concept for 2 Tone was as a British Motown, it was only fitting that Birmingham's Beat dared to reinvent Smokey Robinson for their debut. The dextrously slick and sharp punk-reggae guitar sound developed by Dave Wakeling, and the hyperactive call-and-response between him and Ranking Roger on the B-side, would briefly up the 2 Tone ante, until they left to set up their own label operation, Go-Feet.

The Specials: More Specials (1980)
The first Specials album was striking for its immediacy, but the second album has far greater depth and inventiveness. The best muzak ever made can be heard on International Jet Set while a nuclear holocaust has never sounded so imminent as on Man At C&A. And it's hard to top the lyric on the organ-fuelled Pearl's Cafe: "It's all a load of bollocks, and bollocks to it all."