2010 Election: Keynesianism vs. Deflation?

Many commentators have suggested that the recent recession is in the same league of the Depression of the 1930s which began to enter its direst phase in October 1929 with the collapse of the US stock market and came into full effect in 1931 with the folding of the Kreditanstalt bank in Austria and the subsequent weakening of the global banking sector.  The Depression affected different countries in different ways but generally led to mass unemployment, in some countries only peaking in 1936 and really only came to an end with rapid rearmament in many states in the period 1938-9.  The Second World War disrupted the global economy but also provided stimuli.  However, in 1945-7 it looked like many states would continue to suffer low production and consumption and so continue to face high unemployment.  The Marshall Plan in 1948 providing millions of dollars to states of western Europe helped to pick up demand which stimulated the US economy and in turn other economies across the world, not simply in Europe but late Japan and South Korea too.  Other factors such as the decline of colonial empires so freeing up markets to a wider range of states, organisations such as OECD and the EEC fostered trade, consumption and production.  This was aided by low oil prices sustained in part by neo-colonial relationships between the industrialised powers and the oil-producing states.

In the 1930s there was a clear lack of ideas about how to deal with the Depression.  For the dictatorships the drive for rearmament and related infrastructure, notably road building, did stimulate certain sectors of the economy but at the expense of light industry and consumption of domestic items.  Unemployment was ended by effectively drafting workers into state projects and in many cases throwing certain people out of jobs, for example, Jews, Socialists and Communists in Nazi Germany.  The Soviet Union underwent a massive programme of industrialisation combined with collectivisation of agriculture.  The country was starting from a lower industrial base and the consequences of the programme was the starvation of millions, though, by 1939 the USSR had become more industrialised than a decade before.  In the democracies the only real approach to combating the Depression was deflation and protectionism.  This involved particularly cutting back government expenditure, making more government employees unemployed and restricting welfare payments.  Currencies were freed from the gold standard and allowed to float but economies put up tariff barriers to protect their internal industries and those states with colonial empires developed trade with their colonies but firmly shut out other providers.  With the dictatorships also pursuing a policy of autarky, i.e. to make themselves self-sufficient for raw materials and markets whether through direct control or bilateral, often barter deals, trade was choked off.  This tendency was the one which Marshall Aid and initiatives such as the Bretton Woods process on currencies aimed to address after the Second World War.

There were some voices in the democratic states arguing for a different approach to the Depression.  Democratic forms of economic planning were advocated by centre, centre-left and centre-right groups, in the UK by the Liberal Party and people such as Harold Macmillan, later Conservative British prime minister.  Most notable was the work of economist John Maynard Keynes (1883-1946).  Keynes's principles developed following the First World War.  He opposed the harsh reparations imposed on Germany seeing a weak German economy as being damaging to the whole European economy and thus much of the global economy.  He opposed the rigidity of returning to the gold standard for setting currency exchange rates as happened in many capitalist countries in the 1920s.  With 'Treatise on Money' (1930), 'The Means to Prosperity' (1933) and 'The General Theory of Employment, Interest and Money' (1936) he outlined his policies for counter-cyclical economic approaches.  Basically he felt that depression could only be combated by stimulating consumption rather than reducing it through deflation.  He believed in the 'multiplier effect' that if the state pumped money into the economy to create work, often through major infrastructure project, then unemployment would not rise and with more people in work they would continue to consume products which, in turn would keep consumer good production going so keeping even more people in work.  In contrast to the balanced budgets, i.e. government receipts and expenditure were generally equal, Keynes was happy for the state to borrow in the short-term to fund the projects to keep employment levels higher, believing in the long-term that the maintenance of the tax revenues which would rise as the economy revived, would pay off the money borrowed.

Though there is some dispute about how directly Keynes's ideas influenced US policy, the New Deal, started 1933-4, introduced by President Franklin D. Roosevelt (1882-1945), president 1932-45, seems to be based on the kind of assumptions that Keynes's ideas used.  Roosevelt established a swathe of government agencies many of which produced public works projects to provide employment.  Examples include the Civilian Conservation Corps for agricultural workers, the Works Progress Administration, which included units for employing actors and writers and the vast Tennessee Valley Authority for public works building hydro-electric energy generation dams and facilities.

In Britain Keynes's approach was seen to be adopted in the 1941 budget, though of course, with the war in full force at the time, stimulus through arms spending and borrowing to fund the war, were likely steps anyway.  After the war the Labour Government initially pursued economic planning which was seen as a more Socialist approach to the economy compared to Keynes's Liberal (in the British sense of the word not the US meaning of it) economics.  However, by 1948 and certainly by 1950 they were moving more to Keynesian assumptions.  France pursued economic planning up to the 1980s but had things such as tax breaks to stimulate certain sectors of the economy and unlike British nationalised industries, large state-owned companies such as Electricite de France (now EDF Energy) strove to stimulate other sectors. Other states in Europe such as West Germany worked on Keynesian assumptions, keeping a predominantly capitalist economy but stimulating it with government regulations and funds, especially for regional development.  Partly Keynesianism, though forming the basis of economic assumptions after the Second World War was not really needed as there was an economic boom until the mid-1970s when the US economy became recessed in the early 1970s and then the sharp oil price rise in 1973-4 brought the boom to an end. Though there were some minor differences from 1950-1974 no-one in British politics really challenged Keynesian assumptions; they did not even challenge the mixed economy with a sizeable state-owned sector, which had been a Socialist rather than Keynesian policy.  Keynesianism was not used in a sophisticated way.  By the mid-1950s credit controls had generally been given up and the UK tax authorities eschewed tax breaks in the way they were used in many continental countries.  The basic tool was simply manipulating the base rate, the basis of the interest rates that banks charge.

In 1976 the pound was put under so much pressure that the British government went to the IMF (International Monetary Fund) for money to strengthen the currency (in those days the exchange rate with the dollar was reported on a daily basis and any move was seen as a source of concern, probably equivalent to falling house prices in the UK nowadays.  It is interesting how the British makes a fetish of particular economic indicators rather than looking at the broader economic picture; before the currency, the balance of payments had been the key focus).  The IMF demanded a deflationary approach to the economy, which had about 20% of industry under state control at the time.  From 1976 onwards there was consequently a move from Keynesian stimulus approaches in times of recession back to deflationary processes.  In the US there was the rise of monetarist economic approaches, which after 1974 gained ground in the British Conservative Party, though even after 1972 under Conservative prime minister Edward Heath there had been some minor steps in this direction until he fell in 1974.  Monetarism sought a strong control of the availability of money as a way to combat inflation, which was a key problem once oil prices had jumped, something they would do again following the Iranian Revolution of 1979.  Monetarism was wedded to 'free market' economics perceiving the end of state involvement in the economy through privatising state-run industry and reducing regulations on companies so allowing them to impose the pay rates and conditions that they wished.

Margaret Thatcher embraced monetarism and her regime 1979-90 saw it pursued increasingly vigorously with privatisation of the state sector, removal of regulations and reduction of the state, including dismissing a third of the civil service.  Private business was lauded and allowed to make as big profits as it liked and to move capital from the UK whenever it wanted.  The impact for the average person, however, was mass unemployment and an abrupt ending of established British industries.  In the move to a post-industrial economy after 1973 in the USA and 1974 in the UK, this was going to have happened anyway but monetarism made it more brutal and sudden.  Workers were encouraged to make themselves employable by taking lower pay and working longer hours, so reducing their ability to consume.  This seems to run counter to Keynesian approaches.  By the end of the Thatcher period, as I have noted on previous postings, the assumptions had shifted towards continued acceptance of monetarism.  In 1995 the Labour Party abandoned its objective of nationalising any industry.  When it came to power in 1997 it granted independence to the Bank of England to set the base rate so giving up the remaining Keynesian tool.  The Labour governments, bar in minor cases, before 2008, did not take back into state control industries that have been privatised.  This is apparently now called the Washington Consensus.

The financial crisis from 2007 onwards has led to what some have termed a Keynesian 'resurgence'.  It is fascinating how the faith in monetarist approaches dropped away so quickly.   In Germany and India both of which had retained a strong state role in the economy, but also the USA and the UK which had been at the forefront of monetarism, leading economists, bankers and politicians began talking about stimulus.  The President of the World Bank advocated developed countries pledging 0.7% of their GDPs to stimulus.  In January 2009 President Obama passed a US$787 billion (£512. billion: €589 billion) stimulus bill.  In November 2008, the British government launched a £20 billion (US$30.6 billion; €23 billion) package equivalent to 1% of the UK's GDP.  Much of this has gone into supporting banks rather than stimulating the economy through public works and there has been a challenge in that the supposed 'easing' of lending has not risen to the extent that the governments hoped.  This reflects that during the Thatcherite/Washington period financial institutions were given so much freedom that it is now impossible really to get them to do anything governments want, for example, even reducing bonuses.  Inadvertently the British have effectively nationalised two banks, but as was typical with British nationalisation of the past, they have not asserted much control over their behaviour and kept an 'arms length' approach.  In addition, in the face of claims of 'unfair competition' from other banks the government has not used its banks to drive certain behaviour by example or provide freer lending to stimulate business.  The state is not as strong as it was in Keynes's day and mulit-national companies and banks are often more powerful than governments as we have seen in resistance to various 'windfall' taxes and attempts to restrain bankers' behaviour.  However, stimulating (parts of) the economy through borrowing, now at £152 billion (US$232.6 billion; €175.1 billion).

Thus, it seems for the first time ever that Keynesianism is being implemented to combat what it was designed for, i.e. a depression.  In British politics because in the 1950s up to the mid-1970s there was consensus of the need for Keynesian economics and it was just over the details rather than the economic approach.  By 1979 even the Labour Party had stepped away from Keynesianism and whilst it did not embrace monetarism in the way the Conservatives did, it was no longer a strong advocate of an alternative economic path, partly because the economics then were focused on wage and price inflation which had not been a characteristic of the 1930s depression when there had often been over-supply depressing prices rather than excess demand or at least excess demand for income whether from sales or pay as was the case in the 1970s and overall was stimulated by the artificially raised oil price, oil being vital for freight of all kinds at that time and things like plastics at a time when plastic packaging was growing massively.

In 2010 we do have a difference between the continuation of Keynesian policies under Gordon Brown and with David Cameron, the revival of not even really monetarist but in fact deflationary policies as pursued by Conservative leaders such as Stanley Baldwin in the 1930s and overseen by the cross-party National Government set up in 1931.  Cameron's emphasis on the need to reduce public borrowing so reducing the available stimulus to the economy (though no-one would envisage a balanced budget these days) and swingeing cuts to public services is text-book deflation; it will cause unemployment not least amng public sector employees and raise unemployment, increasing social welfare payments and suppressing domestic consumption and through fear of job losses, domestic demand even from those still in work.  Keynesianism is not simply about stimulating consumption but with it the confidence to consume. Cameron is pretty old fashioned in his approach to the economy even in Conservative terms.  Perhaps this is because the Thatcherite approach of the free market now seems so debased with constant reports of vast profits for those in big business at the expense of jobs and homes for ordinary people.  This is the first time in British history that the two key economic approaches of the 20th century are being brought face-to-face and as a consequence Britain stands at more of a crossroads that this lacklustre campaign suggests.

Conservative Policies - Thatcherite Bigotry & Pain Return

I know I have complained that the Conservative Party who have this conference this week have been lacking in policies, but this is because I feel that no party which see themselves as the heirs presumptive to control of the British state should be able to simply slip into place without offering something to the electorate. This is a charge that David Cameron, leader of the Conservatives has face for many months now. To some degree the continued assumption that he will win the next election has meant Cameron has felt little need to outline any policies. Partly this is because on the key issue facing the UK at present, the recession, the Conservative line since about 1974 is that no government can do anything about economic downturns and it will do more damage than good if it tries. Though few people seem to have picked up on it, the Conservative emphasis on cut-backs is really no different from the deflationary policy of the 1930s adotped by the UK when faced with the Great Depression and contrasts sharply with the post-Keynesian, stimulus approach of Obama and Brown.

Given that Gordon Brown seemed to rally flagging Labour supporters last week at the Labour Party conference, Cameron seems to feel under some pressure to come out with policies. However, as I suggested recently these are in the flavour of what the Johnson administration has been attempting in London: the mix of frightening Thatcherite-authoritarian policies and simply headline grabbing policies that mean very little in substance. Given that I do not read 'The Sun' newspaper (I do not want to give any more cash to Rupert Murdoch and no longer travel on London Underground where I would pick up a range of right-wing newspapers to monitor for free), I was glad Polly Toynbee repeated the list of 10 pledges that Cameron outlined in 'The Sun' last Friday. Now the covers are coming off we can see why Cameron has been quite quiet on his policies, which if the bulk of the population pay attention to, will make them worse off. These pledges are Bushite with a British flavour. Fortunately he has not made a pact with the fundamentalist Christians (to some extent Blair exhausted that avenue in his years in office), though he does seem to be seeking 'moral' behaviour through economic policies, but certainly he is clearly addressing the super-wealthy that George W. Bush portrayed as his core constituency.

The broadcast media have picked up on the policies aimed at those people on benefits. Of course, this group has been hammered constantly since the 1980s. Yet, all parties seem to think that there are millions of lazy people dodging work and simply claiming from the state. The view that these people notably on incapacity benefit (about 2.6 million people) but also single parents, are not trying hard enough to find work. Given that unemployment is at 2.4 million people, many of whom were in work until recently, does Cameron really believe that UK companies have the capacity to take on, say, 1 million more workers. For the past twenty years anyone signing on for benefit has had to go through rigorous checks and periodic reviews. People who have had tax credits overpaid are often compelled to pay them back. The Labour governments have kept on tightening the regulation and monitoring of people on benefits in the way Cameron says he wants to; of course to his partisans, Labour is still not strict enough. Cameron seems to assume, like many right-wingers, that the whole civil service and local government is filled with people who simply bung money and housing at the people right-wingers dislike, feckless single mothers and immigrants. Of course, most local councillors and many civil servants are conservative (many are Conservative) and are very hostile to just the groups that the Conservatives want to target.

What so many people forget is that the bulk of people on benefits want to work. We live in a highly consumerist society and you are not seen to exist if you are not consuming. Consumption can only really come when you have a regular, good income. Consequently most people want to work. Work also provides a social network and if Cameron actually spoke to some single mothers and some people on incapacity benefit they would find that isolation and loss of dignity are additional painful factors for people in those conditions, work can help resolve such situations. There are lazy people in the UK but from other countries and Britain's history I would reckon these number around 60,000 people of working age in the UK at present. The bulk of the others on benefits would rather not be.

Of course, like so many governments, the Conservatives simply focus on the supply side of the labour market without looking at all at intervening in the demand side, i.e. the employers. I worked in a job centre in the mid-1990s when unemployment was much lower than now and saw how the disability officers struggled to place even a handful of disabled people in employment. Employers turned up their noses at such people and still do despite all the legislation. I had an employer in recent years moaning on about how terrible it was when people 'concealed' their disabilities. I have an 'unseen disability' diabetes and used never to mention it to anyone in any job. Even working for a liberal employer which worked with a lot of disabled people as consumers I found my managers made no efforts to address disabilities in our workplace and I was criticised for literally hours (I had to share a car with my boss one day) about how my disability had impinged on a meeting when my blood sugar went low because the meeting dragged on so long. Eventually I spoke out and found there were other concealed people with conditions among the workforce who had been suffering. This was at a supposedly liberal employer with quite an involvement with disabled people so imagine what it is like trying to get work with the average hard-nosed company especially in this period of economic difficulties.

The same applies to single parents. Of course, the default assumption is that these are all teenaged mothers. In the 2001 census it showed that of the 11.7 million children in the UK 22.7% lived in lone parent familes, around 10% lived in step families and 45,000 children were in care or other communal establishments; of the lone parent families 91% are headed by a mother. This means 65% of children in the UK live with their two natural parents and in fact 75% live in two-parent families. The latest figures I can find for teenaged mothers is that they had 41,700 in 1998, this compares to 2.65 million children in lone parent families three years later. It is clear that teenaged mothers do not make up the majority of single parents. Of course, by definition and teenaged mother soon ages into a non-teenaged mother. However, my point stands that a lot of single parents are older women left alone due to separation, divorce and death. As seen from the step family figures, probably half will not remain in this state forever. In addition, new family models such as two single mothers living together is becoming more common. Will that be counted as a step family in the future or two lone parents?

As the recent case with the two female police officers banned from taking care of each other's children shows, the laws at present seem to weigh against lone parents working to provide a more developed family structure for their children, and, vitally for Cameron's policies, attempting to create structures that allow the women to work. Child care is costly for even middle class parents let alone working class ones. Family structures are fragmented because people have been compelled and are facing even more pressure at present, to move to find work in other areas. Yet, the alternative of informal child care arrangements between friends is being ruled out. I can see that this may be a back handed policy to try to encourage contraception, but that will happen only long term and does not deal with the current issues of raising children. Mothers last week were told that their children will be less healthy and less intelligent if they work full-time but Cameron wants them all to go out to work. Presumably this is because it is felt the lower classes are getting too uppity and keeping them overweight and ill-educated will stop them challenging their superiors! Of course, this contradiction between supporting families in the shapes they come in today and yet getting more women into work has been one that plagued Blair as much as it will Cameron.

No government in the past thirty years has really attempted to address it, instead they put pressure on the parents to solve it for themselves. What they fail to realise too, is that it is not simply about lone parents, but two-parent families too. If you see a school or a childminder's at collection time, you will see that fathers as well as mothers come and collect. This is because with two working parents you are not better off than with a working lone parent. You could have four parents per child and if they all worked, as Cameron wants them too, then they would still need someone to sort out the child care. Having two parents does not make the child care issue go away as some assume. Since the late 1960s it has been basically impossible for a two-parent family to survive financially without both parents working. Yet, the lazy assumption of politicians is somehow is that Daddy goes to work and Mummy raises the children and this falls down when there is only Mummy. However, for forty years it has been falling down even when both parents are around, but Cameron's mind, like that of many politicians, is stuck in 1957.

This is much the same thinking behind Cameron's plan to 'reward marriage'. There are already tax breaks for married couples anyway. Marriage in itself is neither good or bad, it is simply a legal state. What is 'good' or 'bad', even moral/immoral is the behaviour of the people in that relationship and how they treat each other. Men taking responsibility is declining and more could be gained in education on what it really means to be a man, not in the macho sense which is all that seems to be emphasised these days, but in a sense of being a human capable of being in partnership with others. We certainly need education in what it means to be a father as many men seem to have no clue. In addition, with the Thatcherite consensus feminism seems to have become a dirty word and with the rush to return to Jane Austen behaviour combined weirdly with the widespread sexualisation of society, women are being clobbered from both sides and men feel themselves freed from any responsibility either because they are like some late 18th century gentleman or they are something resembling a Los Angeles pimp handling his 'ho's (whores). This is no basis for any marriage. A marriage in name only is no marriage and does not deserve reward. Will Cameron reward civil partnerships? It could be argued that they reduce promiscuity among gay men and decrease bullying in lesbian relationships, so surely they should be rewarded? Of course, you can have a 'bad' civil partnership as much as you can have a bad marriage, but somehow to Cameron stability comes with marriage, and, no doubt because of his 1957 perception of the world, that leads to economic stability and that, he believes, reduces expensive dependence on the benefit system.

The key problem with so much about benefit 'reform' it simply believes that if you hammer lone parents and the disabled with so many financial penalties they will be compelled to get the work that they are believed to be shirking. You need to compel employers to be fairer in their recruitment and stop being prejudiced against disabled people and working mothers. We also need a lot more free, state-provided childcare. This is the only way you will get most lone parents into work. By pressing child carers to become pre-school teachers and by legislating against informal child care arrangements you are exacerbating the problem. Of course, in the Thatcherite-Blarite-Cameronite mindset, none of this is the concern of the state and people must sort out their own lives. People can be as moral as you like, marry before they have children, not divorce and have the father stay around, but they cannot buck the pattern established by employers and the cost of living in the UK.

I will now turn to the other elements of Cameron's pledges. I think the same morality angle is behind the policy to increase magistrates' sentencing powers from 6 months to 1 year as magistrates' courts are seen as the point at which the low level crime which exercises voters the most is dealt with. The point about people using knives to kill should expect a prison sentence seems fine too. I would add to that, that people who use cars to kill should also expect a prison sentence, but naturally that would upset too many of Cameron's speeding, 4x4 drivers for him to accept it. The key issue is where all these prisoners will go. Labour has failed to build more prisons, no-one wants them in their district and yet the public want more prisons. They do not want crematoria or wind farms either but we need them all. Cameron will find it even tougher to force through the building of more prisons because he will be more sensitive to the opinion of rural voters in the areas where such prisons will be built. I anticipate that magistrates, as a result, will be compelled effectively to use house arrest and more electronic tagging, either that or we will have to have the prison hulks of the past or form criminal ghettos in certain cities ('Escape from Moss Side' anyone?).

One is to reduce the number of MPs by 10%, which Toynbee sees as gerrymandering as the reductions will not come in large, low populated rural constituencies where the Conservatives are strong but in areas that back Labour. This seems to be a step to avoid the repeat of the 1997 landslide. I am sure that by the mid-2010s Labour will bitterly regret that Blair abandoned any steps towards proportional representation. Ironically the landslide of 1997 might prove to have been one of the most damaging things to happen to Labour's long-term future. Of course, Conservatives have adopted such tactics before notably the regime of Dame Shirley Porter on Westminster Council in the late 1980s. Given that she fled to Israel and was compelled to pay a £12 million 'surcharge', i.e. fine for her part in that scandal (reduced from the original £27 million originally imposed), I believe she should have had the 'dame' title stripped from her. She claimed she had only £300,000 in assets, but was clearly a multi-millionaire. Kit Malthouse, one of Boris Johnson's deputy mayors who has taken political control of the Metropolitan Police, only joined Westminster Council in 1998. However, it is not difficult to argue that such attitudes that rewarded a leading Conservative who had adopted a policy now clearly seen by the House of Lords as having been gerrymandering, persist in the Conservative Party. Someone should track down where Westminster Conservative councillors from that era have gone now, I would bet some are advising Cameron whether directly or indirectly.

It is not surprising given that contempt of the electorate that Cameron wants to replace the Human Rights Act. Of course, this is seen by the right-wing as a law which only favours criminals and terrorists but in fact protects the average Conservative voter as it does everyone else. This is the false assumption of so much Conservative policy that if you are doing things correctly or morally then you have nothing to fear, so there is no need for legislation to protect you. As the murder by police of Ian Tomlinson a passerby of the G20 protest and of Jean Charles de Menezes shows, you can be anyone and yet be caught up by and killed by the state machine, however law abiding you might be. The Universal Declaration of Human Rights is over 65 years old and yet the UK Human Rights Act is only 11 years old. The reason why Bush had prisoners held at Guantanamo Bay rather than on US soil is because the establishment of the republic that became the USA had a Bill of Rights which the regime's policy was violating. Anti-terrorist legislation has been used in the UK to put people against which no evidence has been brought, under house arrest. Scrapping the Human Rights Act will simply make such approaches easier and strip away a lot of defence we have against and increasingly authoritarian UK state.

Economically Cameron's pledges are aimed at benefiting his 'core constituency' of the very wealthy. The Thatcher years locked all parties but particularly the Conservatives into always being seen to cut taxation or rather find it from no direct sources which usually dent consumption further. Cameron will cut corporation tax from 28p to 25p in the £ which will clearly benefit companies who are back awarding their leading lights millions of pounds in bonuses. What such a cut needs to be accompanied by is a compulsion on the percentage of profits that need to be reinvested in the company and a restriction on how much profit can be sent overseas, but of course the Conservatives would never limit their greedy friends in that way. He wants to raise the inheritance tax threshold on money and property left from £325,000 to £1 million. Even at £325,000 only 6% of the population pays inheritance tax. Apparently the rise will, however, cut tax receipts by £1 billion in favour of the very richest people in the UK.

Despite this £1 billion windfall, Cameron wants to reduce the budget deficit currently at £175 billion. Of course, believing in a Keynesian approach I see nothing wrong with that, but it seems to be anathema to all political parties who now seek to reduce it. I would certainly argue that without that deficit unemployment would already be over 3 million and the burden on the UK of that greater slowdown in the economy, i.e. lower tax returns and consumption would mean we would be in a worse state. A limit on bankers' bonuses and a windfall tax on utilities could do a lot too, but seems to have been ruled out by those who have the real power in the UK. Cameron will have to introduce cuts across public spending and in this we leap right back into the 1980s. Thatcher cut the civil service staff by one third in the 1980s and it has never returned to those levels. Part of the problems for schools, social workers and hospitals stems from the cuts imposed in the 1980s especially in terms of hospital cleaners, and we are reaping the results even twenty years later. Cameron says he will not cut back the National Health Service, but as it seems apparent he will not cut back on defence (the Trident nuclear weapons programme currently costs £76 billion with which you could punch a huge hole in the deficit) and in fact promises the so-called Military Covenant (which sounds terribly Cromwellian) and arguing soldiers should be properly equipped to do their jobs. I accept the latter point about proper equipment and this is one point that Labour should be very embarrassed upon. However, the UK should not still be involved in Afghanistan 8 years on and Iraq 6 years on in wars that were started on false bases and mainly for US profit. Cameron will not reduce military involvement in these countries and by saying he will equip them better is indicating the defence budget will rise, suggesting that he will need to make cuts elsewhere to pay for this as well as reduce the deficit. If the Armed Forces expand they will absorb more of the unemployed, but of course, single mothers and the disabled are precisely the type of people they do not want to employ. This show that there is so little linkage between one policy and another, so much policy from all parties is handled in a vacuum.

Cuts will come somewhere and if not ameliorated by tax rises which have been ruled out nor in health and defence will have to come in other areas. It is unlikely he will squeeze the Revenue & Customs or the Borders Agency in which so much faith to 'protect full up Britain' is being place. As has been shown recently social welfare, the poor cousin of health care needs more funding. Yet, Cameron will freeze council tax for 2 years. This is returning to the Thatcher approach of the poll tax, in believing that local people would favour low tax charging Conservative councils over high-spending Labour ones. It always forgot that in any town the majority of the electorate actually benefits from high council spending. In addition, this will have to be balanced against high profile cases such as the killing of Baby P and the shortage of social workers. Council spending has been pared down and pared down to a situation in which many cannot afford the upkeep of leisure facilities and have had to reduce refuse collection to an unhealthy frequency. Yet the mantra that somewhere there is massive 'waste' is still chanted. Cameron will apparently find this waste and cut it as if the Labour governments never even thought of this. Ironically cutting back on social welfare and local authority activity cuts into the kind of employment disabled people and single mothers are very likely to go into, certainly if they want something better for their futures (rather than the futures of the wealthy) than working in a call centre.

This brings me back to my point recently about 'adult' movies and call centres being the only places locally with work that does not need you to have followed a lengthy path of specific qualifications. Women performing naked in front of webcams is rocketing, generating £1.1 billion in 2008 (up from £730 million in 2006) with companies saying they have 40-150 UK women signing up each month; the largest has 27,000 women on its books. So is this the kind of moral Britain that Cameron is driving for, especially in targeting single mothers?

So, overall, when pressed for policies, Cameron has really simply returned to Thatcherism with all its benefits for a small elite in British society and new sticks to beat the marginalised, those seen as the 'undeserving' so much harder. Despite his lip service to morality, in fact, by simply squeezing the supply side of the labour market he will make it harder, with more children left 'home alone' and more women pushed into dubious work. Cutbacks will lead to the deaths of more children and elderly people. Those unfortunate not to get work let alone work paying a wage you can live on, will again be demonised and as in the 1980s will breed a generation of young people resentful of the society which seems to mark them from birth as useless. There is a basic lack of understanding of how the UK economy and society works because too many politicians care only about wooing the super-rich (not even the middle class) and have assumptions about society that were outdated fifty years ago. I know it is hackneyed now, but in 2009 it seems as relevant as it did at the time: “I warn you not to be ordinary, I warn you not to be young, I warn you not to fall ill, and I warn you not to grow old.”

P.P. In fact remembering those words from 1983 sent me to dig out the whole quotation from Neil Kinnock and it seems eerily appropriate even 26 years later:

"I warn you. I warn you that you will have pain – when healing and relief depend upon payment. I warn you that you will have ignorance – when talents are untended and wits are wasted, when learning is a privilege and not a right. I warn you that you will have poverty – when pensions slip and benefits are whittled away by a government that won’t pay in an economy that can't pay. I warn you that you will be cold – when fuel charges are used as a tax system that the rich don't notice and the poor can't afford.

I warn you that you must not expect work – when many cannot spend, more will not be able to earn. When they don't earn, they don't spend. When they don't spend, work dies. I warn you not to go into the streets alone after dark or into the streets in large crowds of protest in the light. I warn you that you will be quiet – when the curfew of fear and the gibbet of unemployment make you obedient. I warn you that you will have defence of a sort – with a risk and at a price that passes all understanding. I warn you that you will be home-bound – when fares and transport bills kill leisure and lock you up. I warn you that you will borrow less – when credit, loans, mortgages and easy payments are refused to people on your melting income."

Some of this will be my epitaph.

The Post-War Consensuses in Britain

Whilst I might have lost some of my short stories in the shift between computers over the past few years, I am often surprised what other things I stumble across untouched for many years when looking in old files. This seems to be an essay I produced in about 2001. Since then I imagine many people have written on the issues it raises but interestingly some of it seems to be relevant again as we stand on the cusp of a general election. As I note, with reflection, it seems possible that the next government may try to shift things back to policies of the Baldwinian consensus of the 1930s and it is interesting to look at the current policies of David Cameron's Conservative Party in this context. So, this essay is dated, but I think some of the themes remain relevant and anyway interesting.

The Post-war Consensuses

The word consensus is often used in particular to describe the British political scene after 1945 when it is argued that the assumptions of both the Conservative and Labour parties were the same on many issues. As Dennis Kavanagh and Peter Morris state in ‘Consensus Politics From Attlee To Major’ (1994) consensus refers to “a set of ideas and conventions about the nature of the scope of political - and particularly governmental - activity. ... in other words, a set of governing assumptions and expectations.”

Britain seems to have gone through phases in its political histories when there have been such assumptions unchallenged by the two main parties. More broadly it is argued that consensus is always apparent in the British political system as there are few challenges to the way the system of civil society works or even to the basic institutions in Britain. It is rare that any revolutionary alternatives from the left or right have come forwards. Partly this continuity has been provided by the continuity of civil servants especially those who rose from junior positions in wartime to senior ones by the 1970s. In addition, there are long-term assumptions fostered by Treasury culture which any minister finds hard to resist, for example, defence of the pound and a need to restrain expenditure. Kavanagh and Morris point to the perpetuation of the grammar school system certainly to the 1970s and even today, and to restrictions on immigration introduced by both Labour and Conservative governments as showing a commonality of assumptions by the two parties. Other examples would be the enduring membership of NATO, the continuing close relationship with the USA, ambivalence towards the European communities and a desire to maintain nuclear weapons. Whilst other policies have been voiced, especially when in opposition, once in power, both the main parties have adhered to these established approaches.

The periods of the clearest consensus have, however, been occasionally interspersed with much sharper adversarial politics, most notably between 1979-94 when a new consensus was being established. It could be argued that a consensus only really comes out of upheaval and it solidifies when the party in opposition realises it stands no chance of being elected unless it adopts the policies of the other main party. With this in mind we will look first at the key phases of consensus in the 20th century.

1) Consensus in the 20th Century
In the 20th century it can be argued that Britain saw three consensuses. The first, in the 1930s, extending from the ideas of Stanley Baldwin (Prime Minister 1923-4, 1924-9 and 1935-7) argued for a laissez-faire approach, without large-scale governmental intervention in the economy even in times of depression. It was summed up by reference to deflation and an attempt to maintain the role of sterling as a world currency and yet work within the closed bloc of the Sterling Area. [Whilst in 2001, I would have not imagined this consensus returning, in 2009, it seems very much like the approach that the Conservative Party under David Cameron favours.]

1a) The Attleean Consensus
The best known consensus came in 1945. The concept of the post-war consensus was effectively developed by Paul Addison in his 1975 book, “The Road to 1945”. Kavanagh & Morris define the consensus as based on two elements. The first was agreement on the style of government involving institutionalised consultation between the government and those important in the economy, i.e. employers and unions, something which developed during the Second World War. Keith Middlemas in ‘Power. Competition and the State, 1, Britain in Search of Balance, 1940-61’ (1986): calls this the ‘continuous contract’. The second was the range of policies which persisted from the late 1940s to the mid-1970s in handling social and economic needs, broadly termed the Welfare State and Keynesianism.

To some extent, consensus after 1945 can be seen as reflecting the new political reality of the post-war world. In the inter-war period though the Liberals faded away Labour had not yet really staked its place firmly in the British political structure, and the majority of Labour MPs joined the National Government coalition alongside Conservatives and Liberals in 1931. In this inter-war period then, the consensus was still the one between Conservatives and Liberals as the main parties. Post-1945, Labour was the clear rival to the Conservatives and thus the consensus was between these two, slightly further apart.

The unexpected victory in 1945 of the Labour Party in 1945 committed to nationalisation of the ‘commanding heights’ of British industry combined with the liberal attitude to developing a welfare state, reflected a shift in popular opinion towards favouring a more interventionist approach by government. This stemmed from the failure of laissez-faire economics in Britain in the 1930s in contrast to the USA’s New Deal and the evidence of government intervention in the Second World War which was seen as effective in ensuring sufficient war production. Labour’s objectives were generally realised in its term in power 1945-51 - 20% of industry was nationalised and a welfare state embracing the NHS, social security and education, was created. Importantly, in terms of the widespread support these policies received, aside from nationalisation, many of the ideas had come from two Liberals - William Beveridge and John Maynard Keynes.

William Beveridge’s report during the Second World War laid the ground work for the welfare state. It was Liberal rather than Socialist in design, building on the reforms by the Liberal governments of the pre-First World War period. It relied on full employment but also on the fact that people would be happy to contribute to insure themselves against future need such as ill-health, unemployment and old age. The fact that the system was funded through national insurance contributions, rather than taxes as would be the case in a Socialist system, reflected this. In addition, it was the Labour government which introduced charges on dentures and spectacles in 1951 as a way to better fund the system.

John Maynard Keynes was another Liberal, an economist. His writings in the inter-war years had aimed to reduce the bitterly high levels of unemployment. He saw this problem as caused by insufficient demand in the economy. Simply put, his argument was that the government should stimulate demand in the economy through manipulating the interest rate system to encourage investment. Though he saw a role for direct government intervention he certainly did not back large-scale nationalisation or direction of the economy in peace-time. Keynes’s ideas were first adopted in the 1941 budget to act against excessive rather than a lack of demand. Despite a brief flirtation with economic planning after 1945, by 1948 Labour was committed to using Keynesian methods to manipulate the economy. The commitment to full employment inherent in Keynesianism was a key part of the Attleean consensus until it became untenable in the 1970s.

Added to these two key elements was a willingness to work with trade unions. The tripartite approach of wartime of government working with both employers and unions was followed throughout the post-war years and received a boost from the Conservative government of Harold Macmillan in 1961 with the creation of the NEDC which brought together employers, unions and government in an attempt to effectively plan the economy and promote growth. This was an approach built on, though not successfully, when Labour came back to power in 1964. This really continued until the strikes of the early 1970s and the election in 1979 of Margaret Thatcher, a strong opponent of unions.

A further element of the post-war consensus was foreign policy. The first post-war Foreign Secretary, Ernest Bevin, previously a leading trade unionist and an ardent Labour member, was in fact conservative and almost Conservative in his outlook. He was a committed anti-Communist and welcomed assistance from the USA. He favoured the development of NATO to secure US involvement rather than the creation of a European Army. In addition, the 1945-51 Labour governments, like all British governments subsequently, continued developing or buying nuclear weapons. This attitude was only challenged by Labour in the early 1980s when in their most radical phase. All of these policies, adopted 1945-51, were continued by the Conservatives when in office.

The relationship to the Europe communities has always proved a more complex issue, but there were supporters and opponents of European integration in both leading parties, and Conservative prime ministers Harold Macmillan and Edward Heath applied to join the EEC as much as Labour prime minister Harold Wilson. There was also an ongoing consensus on the need to peacefully disengage from empire, despite the discomfort of some of those in the Conservative Party.

Though Conservative support for the use of Keynesianism and no attempt to scrap the Welfare State in the period before 1975, are often taken as showing that the consensus had shifted the political ‘centre’ towards the ‘left’, there are a number of factors to recognise. As mentioned above, these basis of they key consensus policies had been developed by Liberals rather than Socialists. Winston Churchill, prime minister 1940-5 and 1951-5 had himself been a Liberal 1906-22 and involved in a reforming government that had laid the foundations of the later welfare state. Thus, there was less distance for Conservatives to go to accept these centrist concepts than if they had been truly Socialist. Indeed, Churchill and the Conservatives stood more firmly against policies they saw as Socialist, and opposed economic controls and some elements of nationalisation, for example steel and road transport which they denationalised when the returned to power. It was seen as acceptable to Conservatives on efficiency grounds, however, that other elements of the UK economy such as coal mining and the railways were nationalised. State control had been adopted right across the economy in the wartime and was seen to be pretty efficient long after the war had ended; the final wartime economic controls were not scrapped until 1956, five years into the Conservative period in office. The Conservatives accepted if not celebrated the mixed economy which was in part state-run but still predominantly capitalist. This was summed up in the phrase ‘Bustkellism’ to characterise economic policy of the 1950s, combining the names of the Conservative Chancellor after 1951, R.A. Butler with the Labour Chancellor 1950-1 Hugh Gaitskell.

Being out of power for 13 years, 1951-64, encouraged the Labour Party to reflect on its policies. Though not envisaging a large shift of the kind carried out in the 1990s, there were attempts at adjustment in its outlook especially to address the growing prosperity of 1950s and early 1960s Britain. In 1956, influential Labour thinker Anthony Crosland questioned whether the commitment to state ownership of industry, which Labour had held since 1918, was relevant in the era of prosperity which Britain was then experiencing. In 1960, the Labour leader Hugh Gaitskell tried to scrap this commitment by abolishing Clause 4 of the party’s constitution. He was defeated and following Gaitskell’s death in 1963 and his replacement by Harold Wilson who favoured a more Socialist and technocratic approach, this brief concern for Labour came to an end until it was revived in the 1990s to face a new consensus.. In addition, ironically with British competitiveness seeming to flag in, by the 1960s the Conservatives were moving towards planning the economy. To some degree this was influenced by Harold Macmillan (Prime Minister 1957-63), who in the 1930s like many across the British political spectrum had seen some degree of economic planning as the only way to lift the country out of the Depression.

1b) The Myth of Consensus?
In the mid-1990s, most notably from Harriet Jones and Michael Kandiah eds., ‘The Myth of Consensus: New Views on British History, 1945-64’ (1996), there was a challenge to the accepted views of the post-war consensus. Partly they and other historians argued that the Cold War, as much the Second World War, shaped the post-war policies, for example, in encouraging co-operation with unions and a mixed economy. In addition, they feel that factors such as the speed with which Britain decolonised prevented greater diversity of opinion arising.

Historians such as Kandiah and Nick Ellison, in ‘Egalitarian Thought and Labour Politics: Retreating Visions’ (1994), show that within the Conservative and Labour parties there was a wider range of opinions on a whole range of issues than is often discussed. For example, they point to the 1958 resignation of the Conservative Chancellor of the Exchequer, Peter Thorneycroft, who sought a more monetarist approach as opposed to Macmillan, the prime minister who much more favoured an economic planning even interventionist approach. Similarly, within the Labour Party there were always those who favoured nuclear disarmament and aimed to push on nationalisation to embrace a far larger section of industry. This is taken to suggest that support for Butskellism was in no way comprehensive even within each of the parties let between them.

Other historians such as Jones and John Ramsden in ‘An Appetite for Power: A New History of the Conservative Party’ (1999) show that the Conservatives had a different view of the welfare state. They favoured private rather than council construction of houses; targeted rather than universal benefits; private rather than state-backed earnings related pensions, all policies which were the reverse of the Labour approach. Ben Pimlott, as in ‘Harold Wilson’ (1992), claims that by the late 1960s and certainly in the 1970s, there was difference between the two main parties on even fundamental issues. Andrew Gamble and S.A. Walkland in ‘The British Party System and. Economic Policy 1945-1983’ (1984) in fact portray the 1970s as a period in which the adversarial nature of politics was so harsh that it was disruptive to the economy. Overall, one must be careful not to just take the concept of consensus as applying to all policies or as being unchanging over time. This is too simplistic and, whilst consensus remains a useful tool, it should not just be taken unchallenged.

2) The Thatcherite Consensus
It seems difficult to see how the Labour Party could even approach Margaret Thatcher’s policies which emphasised monetarism. Her approach to the economy and by extension society shook the assumptions of the Conservative Party itself. The shift away from the old-fashioned paternalistic One-Nation Conservatism came in a number of steps. First was Edward Heath’s 1970 victory based on the so-called ‘Selsdon Programme’. This aimed to break with the Keynesian approach to the economy, or what was perceived as the Keynesian approach, though in the post-war era in popular usage the term had extended a lot to cover far more state intervention than Keynes would have approved of. The programme aimed to reduce state involvement in the economy, to privatise industries, curb union power, free market forces and encourage greater industrial efficiency.

This approach was short-lived and by 1972 had been abandoned in favour of greater state intervention to bale out failing industries. For the first time in the British economy high inflation was combined with rising unemployment. This was partly sparked by the end of the post-war boom provoked by the quadrupling of fuel prices. Cheap fuel had enabled the boom to continue from around 1950 onwards. The problems worsened for Labour when they returned to power in 1974. To cover its debts the government had to borrow from the IMF (International Monetary Fund) which forced deflation on the British economy.

In 1976 the prime minister James Callaghan abandoned the commitment to full employment which both parties had backed since the war. He also said ‘[w]e cannot now, if we ever could, spend our way out of a recession.’ This effectively marked the abandonment of the core element of Keynesianism, that the state should stimulate demand through expenditure. In addition, this step was paving the way for the harsh monetarist approach adopted when Margaret Thatcher came to power in 1979. Jim Tomlinson has argued in ‘Public Policy and the Economy since 1900’ (1990) that the economy in the later 1970s shows that Keynesianism does not work. Effectively it was not tested through the post-war boom when it was not needed to counter unemployment. When it was needed, in the 1970s to tackle that problem, it failed. However, it must be recognised there were other factors such as external inflationary pressures that prevented a Keynesian solution.

Thatcher was won over to monetarism in 1975 and through it gave a new, apparently more dynamic direction to the Conservatives. Once in office 1979-91, for Thatcher, monetarism was just the foundation of a broader economic and social policy. This involved ‘rolling back’ the state by privatising almost all of the nationalised sector combined with continued tax cuts proved popular with the public which was seen as stimulating the economy. The approach, however, also included centralising powers from local authorities, imposing expenditure cuts and in theory giving greater choice in terms of welfare services, though this was all achieved through greater central state intervention.

Kavanagh in ‘The Reordering of British Politics: Politics After Thatcher’ (1997) sums up the essence of Thatcherism which we can see forms the foundation of the Thatcherite consensus. Of course, how these ideas were translated into policy was not always accepted even across her own government or party. However, as with all enduring attitudes it is their presence over time and, thus, them becoming assumptions that people no longer challenge, which forms the foundations for a consensus. The assumptions were that: delivery of services comes better from the private rather than public sector; government can do little good but can do great harm and so its involvement and expenditure must be restrained and allow free enterprise to boom. Thatcherism emphasised self-help but also responsibility for one’s actions and thus taking the blame for one’s own situation, rather than expecting the state to alleviate this. Of course, the state was seen as having an important role in both defence and law and order; expenditure on these was not to be curtailed. In foreign policy Britain had to establish its continued importance through military intervention, nuclear weapons and its close relationship with the USA. Though the harsh social attitudes moderated somewhat under John Major (Prime Minister 1991-7), the foreign policy line is still visible today.

Though the years of Thatcher in power saw some of the greatest antagonism between the two main political parties, by the mid-1990s things were changing. Neil Kinnock, Labour leader after 1983 had proven successful in purging the extreme left from the Labour Party but the fourth defeat in a row in the 1992 general election indicated that if they wanted to return to office, Labour had to do more than simply moderate their own party. Tony Blair became leader following the sudden death of John Smith in 1994. He had a clear objective of moving Labour towards, what, after 15 years of Conservative rule, was becoming established as the new consensus. This approach was embodied in New Labour. Unlike Gaitskell, Tony Blair in 1995 he was able to scrap Clause 4 and the Labour Party’s commitment to nationalisation.

Once in power Labour showed how far it had adopted the Thatcherite consensus. It kept to the Conservative expenditure planes bequeathed by John Major. It went further and made the Bank of England independent, so giving up an essential element of Keynesianism: the ability of government to manipulate interest rates. The changes to the welfare state particularly in education and health, brought in under Thatcher were only slowly altered or were not reversed. The government aimed to privatise the London Underground and air traffic control and repeatedly discussed privatising the Post Office. The only real break from Thatcherism has been devolution to Scotland, Wales and London and it is clear that in these locations the Thatcherite consensus is less popular than centrally. The fact that since 1997 the Conservatives have struggled to develop distinct policies shows how much Labour has captured the consensus ground of Thatcherism for itself.

3) Conclusions
In ‘The Civic Culture’ (1963) and ‘The Civic Culture Revisited’ (1980) two US political scientists, Gabriel Almond and Dan Sidney Verba argued that British society was stable and did not face violent political challenge because of three trends: continuity, deference and consensus. Consensus in Britain is seen to embrace not only individual policies but also assumptions about the political system as a whole. It is difficult to argue that British institutions have been challenged to any great extent and thus can be stated convincingly that there is a consensus on how the British political system runs and what issues it should address. However, as this essay has shown, the consensus on policy is more complex.

It does appear that assumptions can penetrate into the British political scene which then make up the thinking of both the main parties. However, it is wrong to assume that consensus is a blanket attitude. Within it there is room for diversity between and within the political parties. In addition, at certain periods especially the 1970s and 1980s the differences between the main parties have been very sharp, and have encouraged the reverse view that Britain was plagued by the severity of its adversarial politics. Thus, consensus remains a valid concept for interpretation of British politics and society in the 20th century but one which must be used sensitively and with care.