Is Thatcherism Best Described as a Revolt Against the Post-war Consensus?
There is great disagreement over the value of the achievements of the Conservative governments under Mrs Thatcher, but whether it is seen as successful or a failure, most acknowledge that the advent of ‘Thatcherism’ was a major turning point in the recent political, social and economic history of Britain. The 1979 general election was in many ways the most significant since the end of the war, as it signalled the comprehensive end of what became known as the Post-war Consensus, changing fundamentally the way in which the country was governed. To understand whether Thatcherism was a reaction against this consensus we have to first understand what the consensus was - and why it ended.
The consensus emerged in the difficult but optimistic years following the war. It came at least partly from a desire to create the "New Jerusalem", creating social and economic progress from victory. It was in a sense a reaction against the ‘consensus’ that went before, that of a generally non-interventionist government, which was discredited by the memory of the 1930s. The consensus, inaugurated by the policies of the 1945-51 Labour government, marked a great increase in the role of government in peacetime economy and society, something which remained generally unchallenged for decades by successive governments. This does not mean that there was no disagreement between parties and nothing was at stake at elections, as there were many instances of bitter conflict between parties and party identification remained high - but the consensus was a set of parameters in which policies could change, almost agreed goals but disagreement on how they should be achieved. For example, the retreat from Empire was generally agreed on, but the pace and the timing was a matter for difference between the parties.
The term Post-war Consensus is used broadly to mean two things. Firstly, the style of government - which interacted with other groups in society, especially the Trade Unions far more in formation of policy than before the war. Secondly, the range of policies enacted - which were based to a large extent on the work of Beveridge and Keynes, with broad agreement on such issues as full employment, welfare, role of Trade Unions and Britain’s international role. This was popular with the electorate and was not significantly challenged by any of the successive governments until the 1970s, when the broad mainstream agreement started to fall apart. To understand fully the reasons why the consensus lasted as long as it did and why it eventually failed we must look at each part of it in detail.
Perhaps the most important feature of the consensus was the commitment of government to provide full employment. This was something which was very popular with the electorate, especially in 1945, with the memory of the misery of unemployment in the inter-war years still fresh in the minds of many. The work of Keynes was very influential in the pursuit of full employment. He said that it could be achieved by using government spending, taxation and borrowing to regulate aggregate demand and create employment. IN times of recession and unemployment, the government would borrow, spend and cut taxes, creating jobs and pumping money into the economy. This interventionist approach was adopted by both parties - the 1950 Conservative manifesto said "We regard the maintenance of full employment as the first aim of a Conservative government." This seemed to work very well through the 1950s and much of the 1960s, with unemployment remaining very low, but by the 1970s it no longer seemed possible, and in 1975, a Labour government abandoned full employment as its aim. According to Keynes, they should have solved the economic crisis by increasing demand, but James Callaghan stated this was not to happen...
"We used to think that you could just spend your way out of recession and increase employment only by cutting taxes and boosting government expenditure...it only worked by injecting bigger doses of inflation into the economy followed by a higher level of unemployment at the next step...the option no longer exists"
Full Employment was still a vote winner, but it prevented government from making unpopular, necessary decisions. The government realised that Keynes ideas were not working and in the long term could greatly undermine prosperity as inflation and borrowing spiralled upwards. The 1979 Conservative manifesto did not mention full employment, and their policies were not intended to achieve it. Therefore a vital part of the consensus ended, discredited by obvious failure and abandoned by even the Labour Party for pragmatic reasons - it could no longer be maintained. This does not mean that it was a dead issue before Mrs Thatcher came to power - The Callaghan government found the economic crisis too deep to provide full employment; Thatcherism rejected the idea that government should have any role in trying to provide it.
Another major plank of the consensus established by the Attlee government was the concept of the mixed economy - where the government owned large sectors of the economy and runs them in the best interests of the country. This was very valuable just after the war as much of the economy was smashed and under invested following the war. The state needed greater control of the economy to rebuild it. This policy of a mixed economy, with some areas in public control and others in private hands. The two parties did differ over the mixed economy, at least in rhetoric, but in practice they acted the same, neither making dramatic reductions or increases in the size of the public secret. The first sign of this breaking down was the Heath government, which at first had more free market and non-interventionist aims, though this did not last long and the government accepted a prices and incomes policy and nationalised the financially troubled Rolls-Royce and Upper Clyde Shipyard. The Labour governments of 1974-79 did extend the public sector a little, but not significantly. This was the time, just when full employment was seen as no longer possible, that opinion started to turn against the mixed economy. Opinion on the Right of the Conservative party, dominant under Mrs Thatcher believed in a serious attempt to "roll back the state", while the increasingly powerful left wing of Labour wanted to greatly extend it. When the Conservatives were elected in 1979 they set out on a major privatisation campaign, gathering pace especially as the revenue from the sales was valuable.
Privatisation is an issue where the Thatcher governments made an apparent total break with the past. They congratulated themselves on the success of privatisation, which have lifted a burden from government, removing the strain of supporting consistent losses from the treasury and fulfilling a major plank of the new Thatcherite ideology - increasing market forces in the economy, allowing the freedom of competition and the drive of profitability to increase efficiency and service. The plans have been criticised for selling industries too cheaply ("selling off the family silver" as Harold Macmillan said) and not creating competition, but though they received noisy protest at the time from the opposition and unions they are not likely to be reversed in any number by any future non-Conservative government. Many of the public industries had become hugely inefficient without the pressure of making a profit, and privatisation did much to remedy this. It is a clear rejection of a substantial part of the consensus which has been accepted as a fact of life by most, except a few on the left, now generally out of favour with even the Labour party. Whether privatisation was as major a change in thinking as it was in practice is doubtful - many believed it could not be achieved because of the opposition such a move would bring, and it is possible the mixed economy remained for sometime simply on ‘inertia’, and privatisation only pressed ahead when it turned out to be far easier than expected.
Another important part of the consensus was broad agreement on the role of the Trade Unions. The consensus was that the unions were an important economic actor and so should be consulted on the formulation of economic policy. This assumption originated from the war, when the unions had played a valuable role in the war effort. There was an acknowledged need to control the actions of the unions with law because of the damage they could do, especially with inflation, but legislation had little effect. This is another area where the policies of the Thatcher governments were a direct reaction against a central part of the consensus. The Conservatives had become more hostile to the unions during the 1970s. They had seemed increasingly outside the law, ignoring the courts and the government. Most damning, they damaged the government of Edward Heath and helped cause his defeat in the February 1974 election, fought on the issue of whether the Miners or the Conservatives ran Britain. The unions also helped bring down the Labour government in 1979, and were then faced with a Conservative government determined to strike at their power and influence.
Mrs Thatcher’s hostility to unions was increased by her belief in monetarist ideas, which said that unions can increase wages at the expense of overall employment, meaning the economy is less efficient and productive.In such views trade unions are detrimental to the economy and any reduction in their influence, including their role in economic decision making, benefits the whole economy. The Thatcher government attacked the union power - the great increase in unemployment 1979-83 meant they were less attractive and lost 3 million members, and legislation limited union freedom to strike and made them legally responsible for actions of their members. Consultation with the unions almost ground to a halt. All this went directly against much of the thinking behind the consensus period’s treatment of the unions, and was a reaction against its lack of success.
The final major component of the post-war consensus was the welfare state. This consisted of the health service and the social services. They were established after the war as available for all at the same level and on a national scale, and like full employment, the mixed economy and the role of the Trade Unions, their continuance was not seriously questioned until the 1970s, when both left and right started to feel the situation was inadequate. The welfare system of benefits was criticised by the left for not redistributing income well enough, and by the right for undermining the productivity of the economy. The Thatcherite Conservatives disliked the welfare system because it was increasingly expensive and so needed high taxes, which were opposed by the right because they reduced incentives to work harder, and because reliance on state handouts reduces self-reliance. This did not mean they wanted to end the welfare system, but reduce levels of welfare and its tax costs. In reality they managed to change little - with so many receiving benefits, any reduction was bound to face great resentment. Total expenditure actually rose considerably due to the substantially greater number of people claiming unemployment benefit and pensions. Therefore while the Thatcher governments were far more opposed to the welfare state in ideology and rhetoric than any other pervious post-war government, they did little to decrease its dominance in the lives of people.
One component of the consensus that has not been attacked by the Conservative governments since 1979 is the National Health Service. In contrast to the rhetoric launched against the other elements of the consensus, the NHS was declared by Mrs Thatcher "safe in our hands" in 1983, and in 1987 she claimed her government had "spent more on the Health Service than any pervious government". Also in 1987 the Labour Party claimed "Labour’s proudest achievement is the achievement of the National Health Service". Despite some reforms to the NHS, there seems little political space for any government or party to move away from essentially free health care, and so it remains a part of the consensus which is alive and well.
Therefore the "Thatcher Revolution" can easily be seen as a reaction against the post-war consensus. It rejected many vital areas of it on principle and enacted policies which would have been unthinkable politically only years earlier in a government of either party. By the 1970s Britain’s relative decline in the world since the war was painfully evident, and many turned to the consensus policies for a reason for this. The policies of Mrs Thatcher reversed many things taken for granted for over 30 years in an attempt to stop the rot which was seen as having crept into the nation’s economy and society. Thatcher’s rise to power did not mark a sudden break with the past - opinion had been swinging against the consensus for several years, since even the late 1960s - shown by the free market intentions of Edward Heath’s government in 1971 and the divides over incomes policy, scale of public ownership, the EEC and industrial relations between the two parties in 1974, and most especially by the abandonment of Keynesian Full Employment policies by the Labour party government in 1975. However, the sheer scale of the changes to the economy and government made by Mrs Thatcher made this change in attitude apparent for the first real time, and so marked the end of the consensus.
Dennis Kavanagh & Peter Morris, Consensus Politics from Attlee to Thatcher, Basil Blackwell, 1989
Terry Gourvish and Alan O’Day (ed.), Britain since 1945, Macmillan, 1991
Malcolm Smith, British Politics, Society and the State, Macmillan, 1990