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Margaret Thatcher - The Post-war Consensus And Conservatism

This essay discusses Thatcher`s perceived break from the post-war consensus and whether she fundamentally changed Conservatism

Date : 26/03/2014

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Conrad

Uploaded by : Conrad
Uploaded on : 26/03/2014
Subject : Economics

Thatcher`s premiership was characterised by sharp rightward shift on economic and social policy, a clear change from the post-war political consensus. Whilst there had already been some deviation from the post-war consensus, particularly the acceptance that Keynesian demand management could not solve Britain`s economic policy, Thatcher`s policies of monetarism, anti-trade union legislation, privatisation, the cutting of taxes and a reduction in generosity of the welfare state represented a clear break from the post-war consensus. In order to decide whether Thatcher changed Conservatism in a fundamental way, it is necessary to define Conservatism. Some consider that the Conservative party has no fundamental ideology and is prepared to alter its policy significantly in order to keep power. Others consider Conservatism to mean gradualism, rather than radical change. Under the first definition, Thatcher would probably not be considered to have changed Conservatism fundamentally, under the second, she would.

Whilst Thatcher`s policies were radically different from those under the post-war consensus, Thatcher could only have broken the post-war consensus if it had remained intact up to 1979. Keynesian demand management was discredited in the 60s and 70s, as it failed to deal with the problem of stagflation. Callaghan stated in 1976 that `the option no longer exists` to spend your way out of recession. However he failed to make the shift to monetarism, instead adopting a contradictory mix of the two policies; expansionary fiscal policy and tight monetary policy. These policies worked in opposite directions and failed to deal with both high inflation and high unemployment. Public opinion had already turned against the trade unions after the three-day week and `The Winter of Discontent`. Despite this Callaghan was did not take on the trade unions, due to his links with them. The failure to adopt monetarism under Callaghan or to take on the trade unions show that the post-war consensus had not completely ended before Thatcher came to office.

The shift to monetarism under Thatcher marked a clear shift in policy objectives from targeting full employment to a low stable rate of inflation. Unemployment reached three million under Thatcher, and never fell below 1.5 million. This change alone demonstrates a clear break from the post-war consensus. Thatcher also privatised almost all state-owned industries which had been nationalised under Atlee, with the exception of British Rail, and the British economy shifted from being a mixed economy to a largely market one. The generosity of the welfare state was reduced, though the rise in unemployment meant the welfare budget rose as a percentage of GDP whilst Thatcher was in office. The indexing of most benefits was changed from average earnings to inflation, a lower measure. The top marginal rate of tax was also cut dramatically from 98% to 60% and then 40% in attempt to increase incentives for workers. Whilst these policies mark a clear break from the post-war consensus, there was little change in foreign and defence policy. The Anglo-American alliance continued and Britain purchased new Trident nuclear missiles from the US. Furthermore whilst Thatcher introduced some competition in the NHS, she realised that privatising the NHS would be very unpopular. This pragmatism and the continuity of foreign policy suggest that consensus remained in some areas; however the huge economic and social changes meant that Thatcher did break the post-war consensus.

Whether Thatcher changed Conservatism in a fundamental way is a far harder question to answer and depends on how Conservatism is defined. It can be argued that the Conservative Party have no real ideology and have consistently shifted their policies in order to remain electable. This first occurred with the adoption of One-nation Conservatism under Disraeli, which emphasised the obligation of the upper-class to help the poor. This was an attempt to win the support of the male working class, who were enfranchised by the 1867 reform act. After World War Two the Conservative Party shifted left to reflect a shift in the medium voter, in order to be electable in 1951. If one accepts that there was a rightward shift of the medium voter in the years before 1979, then Thatcher`s radical policies merely reflected public opinion, and in doing so, did not change Conservatism fundamentally. It is clear that by 1979 the public had already turned against the unions, and wanted a change from the high tax, high inflation and wage restraints under previous governments.

On the other hand, one could consider the concept of Conservatism to embody the idea of gradual, rather than radical, change. Thatcher`s policies led to huge economic and social change, and were implemented quickly. This is inconsistent with gradualism. Her industrial policy accelerated the shift in the economy from manufacturing to services and consequently led to high levels of structural unemployment, especially in the North which had previously been dependent on manufacturing. She also curbed power of the unions, a marked change from the tripartism of the 70s and earlier when the unions held significant power over policy decisions. By completely changing Britain`s macroeconomic policy from Keynesianism to monetarism she accepted huge social suffering in the form of unemployment and falling living standards for the bottom 10 per cent, whose incomes fell by 16 per cent in real terms during her premiership, in order to implement her economic beliefs. However it is not clear whether Thatcher changed Conservatism, or simply deviated from it. Disraeli thought that Conservatism is what Conservatives do and if one accepts this then Thatcher, as a Conservative, did change Conservatism. The size of the policy shifts makes it clear that this was a fundamental change.

In conclusion, Thatcher broke the post-war consensus. Although it is clear that the consensus had already weakened, the target of full employment, an intrinsic part of Keynesian demand management, remained. The economy was mixed and the unions maintained their power up until 1979. Thatcher`s policies changed all of these things, marking a break from the post-war consensus. The concept of Conservatism is difficult to define, and its definition is key to ascertaining whether Thatcher fundamentally changed it. Thatcher`s policies did not reflect the gradualism that some people believe defines Conservatism. However the history of the Conservative party demonstrates clearly that policy was often changed to reflect a changing electorate, or changing views of the electorate and this can also be seen under Thatcher. Overall it is difficult to decide which definition is better, though as the Conservatives had made fundamental changes in policy before Thatcher in order to remain electable, the little ideology definition may fit Conservatism better. Under this definition it is clear that Thatcher did not change Conservatism in a fundamental way. Bibliography Knight, N., Governing Britain since 1945. (2006). Jessop, B., "From Social Democracy to Thatcherism: Twenty-Five Years of British Politics." (1992). Marsh, D. and R.A.W. Rhodes, Implementing Thatcherite Policies: Audit of an Era (1992).

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