CHAPTER 1 Two formative periods in post-war British politics The first period was led by the Labor Government from 1946 to 1951 whose Prime Minister was Clement Attlee. This government set up a certain number of policies based on Keynesianism and Welfare State. This post-war settlement put in place a system of full employment and a system of social services. Within this context, Attlee’s government undertook the nationalization of major industries and public utilities and the creation of the National Health Service. The Conservatives were opposed to Keynesianism in the first place, but then this settlement was accepted by all parties.
From this period to the early 70s, there was a global consensus/agreement between the Conservatives and the Liberal Democrats. But during the 1970’s there was a worldwide depression which led to the disensus. The second period was led by Prime Minister Margaret Thatcher, from 1979 to 1990. She set up a new set of policies which is called ‘Thatcherism’. > Two consensus: Keynesian welfare State and Shumpeterian workare state 1946-1951: Clement Attle 1951-1955: Churchill 1955-1977: Anthony Eden 1957-1963: Harold Mac Millan 1964-1970: Harold Wilson 1970-1974: Edward Heath
I – The First Period : the Keynesian Welfare State. Keynesian welfare state A welfare state
Full employement : the employement rate has to be maintained below 3%. Demand-side economics system : the state invests by adjusting interest rates. It is called the ‘Stop and Go System’ ( the goal is to create a lot of production and when inflation becomes important the system stops) . The Keynesian Welfare State and its decline. 1942 : William Beveridge wrote the Beveridge Report. He actually was the first one to talk about a welfare state. The 5 giants to fight are : disease, ignorance, squalor, want and idleness. Everybody is entitled to allowances, insurances, assitance, retiring pension, …
This impulsion brought people together. 1944 : the Butler Education Act said that school is mandatory from the age of 6. 1956 : With the Suez crisis there was the beginning of distrust At the same time, Japanese have a growth of 8% whereas Britain only 4. 1957 : Prime Minister Harold MacMillan scraped the relationship between UK and the USA. 1958 : Rediscovery of Poverty. Some people had difficulties to survive which means that the Welfare State policy failed. MacMillan introduced the Earnings-related Scheme. It is a system of pension fund. The Welfare State system had provided a retirement pension to people. gt; This was the reintroduction of capitalism in the economy. At the end of the 1950’s, we realized that the fabulous and idealistic system wouldn’t be sufficient for the United Kingdom to survive in a very competitive worldwide economy. In the 1960’s, the new industrialized countries such as Japan and Taiwan grew in power and represented a threat. The industry started to suffer from its ‘lame-ducks’. > the de-industrialization became necessary. In the 1970’s : vietnam war, big financial problem, unemployment and it became obvious that the world was so interrelated ( interdependant) and Britain couldn’t remain isolated. 970 – 1974 : the new Prime Minister is Edward Heath and he tried what we call the ‘U-turn policy’ which broke with the Keynesian system to a more liberal minded system. This U-turn policy failed so he tried to go back to the Keynesian system : it didn’t work either. II – The worldwide depression : the decline of Great Britain. The depression. The growth rate in Britain was inferior to all other countries, especially the newly industrialized countries. But Great Britain had maintained a sterling stone: it was still a country governing a large area of countries thanks to the Commonwealth.
The Imperial Preference dated of 1931. All the exchanges had to be made in France. But problem is because of financial difficulties. Britain was forced to put an end to the imperial preference and to the sterling stone. During the war the USA granted the UK money. After the war, the assets were sold back in US dollar and the UK was forced to accept the domination of the dollar. The UK then realized they were no longer a great power in the world’s economy. They spent too much money protecting their currency instead of maintaining a good economy.
This period is called ‘The Period of Great Disruption’ (perturbations). The British economy which followed the the 1973 oil crisis and the 1973-1974 stock market crash had fallen into recession. It knew great difficulties in every field : Britain was engaged in a vicious circle: inflation, unemployment rate (more than 10 %), growth of insecurity area (financial security, job ). ; This vicious circle had an impact on the whole nation and it led to the decline of Britain. Causes of the depression. A profound alteration in the economy : the structure of the economy had changed.
Manufacturing and agriculture declined whereas business services and education increased. This phenomenon is due to a change in economic habits. Reasons : Competition from the newly industrialized countries : cost of production and of the workers were much cheaper. Higher demand for services than for manufacturing sector : the shift is in favor of health, education property, ownership, … Women work : movement of emancipation Trade unions. Trade and globalization By tradition, Britain had been a trading nation. Institute and put in practice the laisser passer. They were inventors of liberalism.
In the 60’s Europe was developing a kind of protectionism . The world was divided in 2 or 3 main blocs. All nations are confronted of the necessity of globalization. It remains that foreing trade in Britain is still the same from the end of the WW2 to today. ‘The British Disease’ : There is an empirical reason. For example, Prime Minister Margaret Thatcher had a messianic role by introducing herself by “the one who was going to save the United Kingdom”. In 1982, she sent troops in the Falkland Islands (war against Argentina) to recover the lost territories and restore the very powerful nation.
Thesis of this depression. There are 4 thesis for this decline : The Imperial thesis : Difficulty to maintain a world role in the economy. The Empire was expensive to maintain. The supply-side thesis : the state intervened too much in the economy and damaged it. The State thesis : State takes care too many things at the same time The Cultural thesis : there is a very deeply rooted anti-insutrial political culture. Who can be responsible for the British decline ? The Labor Party was accused of being an obstacle to the British economy: obstacle to free market economy.
The State was also taken responsible: too much intervention, it was over active. The state gave priority to maintaining the value of the sterling and this for a very long time. The USA had helped but after the war, they increasingly demanded that British give up the sterling zone. Capital is big money. Britain is a very old aristocratic country and is still based on aristocracy. This idea is opposed to the industrial activity. The globalization had a very severe impact on national economies. The states could no longer maintain their pressures and their actions just like they used to do.
III – The New configuration of the State / Thatcherism. The end of the Keynesian Welfare State. The welfare state was also criticized by people who thought it would lead to totalitarism. The state must be streamlined to be more efficient (reducing the number of functionaries for example). In Keynesianism we had a system called “one nation politics”. This system lasted from 1945 to 1975, it was THE model. The state represented one nation. The idea was the reduction of spatial inequalities: one national economic space, an essential geographical unit. 975: end of the system because the massive public expenditure. It was impossible to resolve economic rigidities. It became possible to resolve problem like inflation, unemployment, rising cost of welfare, the low performance of lame ducks. But It was impossible to maintain increasing demands and ressources. ; Necessity to withdraw from the intervention of the state. Prime Minister Margaret Thatcher / Thatcherism 1979 : Prime Minister Margaret Thatcher is elected and she decided to reduce the impact of the Welfare state of the economy. Spirit of work: forced people to work.
She privatized a lot of companies They would be more competitive. She attempted a kind of economic and intellectual revolution. NEW KIND OF ECONOMY. The priority of Prime Minister Margaret Thatcher : To reduce public spending, the deregulation ( laisser faire ). She wanted to reestablish the primacy of market as main steering mechanism. For that, competitivity of the manufacturing sector had to be boosted. The idea was to streamline the manufacturing sector, to cut back the public sector, to reconstitute these productive investments. How? Two ways:
Shift resources into the new technology sector. Stimulate enterprise; by deregulating the market, encouraging popular capitalism. She wants also to reduce the power of some organizations, trade unions…. It was only from 1987 that Ms Thatcher promoted her policies. Thatcherism mixed populism and authority. She was opposed to dependency culture (common good, commonwealth). There was a trend of privatization. Thatcherism also wanted the extension of market principles into the services of the welfare state. 1990: NHS and Community Care Act. But there was a lot of unemployment. gt; It was difficult to remove the whole welfare state system. Therefore, they were forced to reduce their plans but they didn’t go as far as they wished. III Blaijorism Thatcher resigned in 1990. She was forced to resign by the conservative party and was replaced by John Major ( She was critized in her own party). He was a soft kind of Thatcher. He was a conservative too. He launched the workfare state to make people work. He started a new kind of consensus : The Schumpeterian Workfare State. Major created a niche for Great Britain in Europe. He want to deregulate the labor market.
There was an acceptance of the main steering mechanism of the market. 1992: Maastricht Treaty. J. Major opted out of the social chapter. 1997: Tony Blair arrived and did exactly the same: it was a kind of new consensus. He transformed the labor party and creates the « New Labor ». He wanted to deregulate the labor market. ; They insisted on the idea to adjust to global market because nothing could be done against it. TB followed the Rhenish model : idea of collective interest, share holding values. TB had developed the « third way » of the political system. The ideas were:
Opportunity: Minumum wages were developed Responsability: You must accept work. Community : To oppose social polarization and segregation Conclusion: We can notice 2 things about the workfare state: We can talk of hollowing out of the state. The European laws replaced the British ones. There was a devolution of power. The NDPB (non department public bodies) was created to transfer some powers. The second thing is the shift from government and governance. More responsabilities were given to individuals and communities.