The political background and Economic Realities of Modern Britain
1. The post-war consensus policy
Phase 1 – 1945-79
Phase 2 – 79-97
Phase 3 1997-modern
· Labor Government in 1945 under Prime Minister Clement Attlee established what was later called the post war consensus between two parties, the conservative and labor parties
· C on fundamental economic and social matters, so that Britain could rebuild itself economically and socially after WW2.
· Despite ideological differences, both C and L Governments followed the principles for the national economy formulated by great pre-war economist J.M. Keynes.
· Principles: capitalist society could only survive if government a controlled è managed and ñ planned much of the general shape of its economy.
· The requirements of war had increased the belief in and practice of government planning
· Labor nationalized those industries and services considered central to the national economy (coal, steel, gas, oil, electricity supply, railways)
· Labor also established virtually full employment and a welfare stare
· This policy guaranteed free health and education, pensions and benefits for the old, disabled, sick or unemployed.
· The maintenance of the welfare state and full employment were accepted by the conservatives as fundamental responsibilities of government.
· However, neither principle could be ensured without an expanding economy
· Conservative Prime Minister Harold Macmillan “managing the post-war economy was like juggling four balls in the air” (an expanding economy, full employment, stable prices, strong pound)
· Full employment – government successful
· Keynesian economics – macroeconomic theory based on the ideas of John Keynes
· The general theory of Employment, Interest and Money
· Government policies could be used to increase demand thus increasing economic activities and reducing unemployment and deflation
· Solution to depression – stimulate economy – combination of two approaches – a reduction in the interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving
· Economy – stop-go cycle – periods of inflation followed by crises in the balance of payments, the difference between the value of total imports and exports.
· Doing only half well as other industrial countries
· Decline of the manufacturing industry, once Britain’s proudest assets.
· Consensus beginning to collapse – reasons – the doubling number of the unemployed in two years 1974-75, to exceed 1M; Winter of Discontent – the trade unions refused to accept the pay restraint demanded by the labor government’s economic strategy; labor lost the election of 1979 which was fought over two major issues: the question of union strength and the broader question of national economic decline
· While labor proposed continuing with the same economic policies, the victorious C, under their new leader Margaret Thatcher offered a radical alternative.
2. Thatcher’s age (1979-1990)
1975 she became convinced that the C had implemented basically socialist-type policies since 1945.
She brought an entirely new tone to government. A conviction politician.
She decided to establish a genuinely free-market economy unconstrained by government, which she regarded as true Conservatism
She decided to destroy socialism, which she blaimed for the country’s ills.
He targets were the Labour strongholds:
- Council estates – public housing rented by local government to people on low income
- The trade unions
- The local authorities
- The nationalized industries – coal and steel production, gas, oil and electricity supply, and the railway.
- Keynesian economics were fundamental wrong headed
- That all controls and regulations of the economy, except regulation of money supply, should be removed
- Government borrowing should be limited by reducing expenditure in the public sector
- High interest rates should be set to discourage everyone from borrowing
- This, according to her philosophy, would create a stable economic climate with low rates of inflation and taxation.
- This in turn would allow a market economy to recover
- The government role in economic revival would be minimal beyond securing these stable conditions and cutting public expenditure.
Mrs Thatcher free-market agenda and conviction politics paralyzed the country in a number of ways
- High interest rates made it impossible for many manufacturers to borrow money
- Her refusal to assist struggling industries led to dramatic changes
- Decline in total output in one year since the Depression of 1931 and the biggest collapse in industrial production in one year since 1921.
- Britain’s share of world trade fell by 15% between 17979 and 1986, a larger fall than in any other industrialized country during that period. In 1983 the import of manufactured goods exceeded exports for the first time in 200 years.
Unexpected social consequences – may 1979 – 1,2M unemployed. 1983 – 3M
Stress created by the government policies began to divide the nation.
Growing gulf between the richest and the poorest all over the country.
Mrs Thatcher was determined to break with the past and did not look back. She began to sell into private hands many publicly owned production and service companies, and even the regional water authorities. She had two basic interests:
- To free these areas from government control
- To persuade ordinary individuals to buy a stake in these enterprises
Government began to turn Britain into a share-owning democracy
Between 1979 and 1992 proportion of the population owining shares rose from 7to 24%
1980 – personal wealth rather than public ownership.
She set about controlling government spending. She failed to reduce government expenditure significantly
She undermined local authorities (or councils) by limiting their ability to raise money, by reducing their authority in some areas like education, training, research.
Margaret Thatcher resigned in 1990, when she lost the confidence of 1\3 of her party colleagues.
Her measures were considered not to be effective.
She faced major increases in costs: pensioners were living longer, unemployment figures stayed high, the cost of the health service and the armed forces rose rapidly.
By the 1990s Britain shares fell by 6%
The commitment to reduce government spending conflicted with the need for investment in education, training, research and development in order to produce long-term improvements in the economy.
3. John Major’s Period (1990-1997)
Valued the idea of consensus. More highly
- 1992 won the conservative election – worst period of recession since 1930s
- Administration was never successful
- Raised taxes
- Deep split between the growing right wing and the center left of the party
- Government’s majority in P was so reduced that it had to depend on vote of Ulster Unionist members of P
4. Tony Blair (1997-2007)
Labor party, youthful vigour
Long-term issues its priority – raising educational standards
Argued for constitutional reform
Decentralize power and be more openly accountable than any previous G
- Birmingham – water, road and rail transportation, manufacture of autos and bicycles and their components, electrical equipments, guns and all kinds of metal products
- Liverpool – food processing (flour and sugar), electrical equipment, chemivals and rubbers
- Leeds - communication
- Cardiff – coal-shipping port, oil and gasoline distribution
- Glasgow - leading seaport, chemicals, tobacco, tourist business
- Mixed farming
- Market gardening
- England – St.George’s cross, red rose and three lions crest (bage)
- The Union flag – Union Jack – symbolizes the administrative union of the countries of the United Kingdom
- Named after James I
- The flag is flown (birthdays of royal family, Commonwealth day, Coronation day, the Queen’s official birthday, Rememberance day, State opening and prorogation of parliament, St david’s day, Georges’ day, Andrews, Patricks)
- Ireland – saint Patrick and Shamrock – the holy trinity
- Scotland – St Andrew, thistle – symbol of defense and bluebell
- Wales – Saint David – daffodil - leek
Oak tree – symbol of England
Three Lion crest – Crusades
Coat of Arms – Lion, Unicorn of Scotland – chained
God and my Right
Evil to him who evil thinks’
Wales is not represented on the shield, because it was not it’s part
National anthem – several songs which are used on special occasions
God, Save the queen
Wales – Land of my Fathers
Scotland – Flower of S and S the Brave
England – Jerusalem and Swing Low Land of Hope and Glory