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Analyse the conservative approach to state intervention after 1979 and outline Labours response since 1997

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Analyse the conservative approach to state intervention after 1979 and outline Labours response since 1997 The conservative approach to state intervention post 1979 has been on the whole to go for the minimum as is illustrated in their economic policy and this was included in their critique of government economic policy at that time. On the whole the government felt that levels of state intervention were far too high in regards to the economy which led to various negative consequences such as making industry uncompetitive and laid back since the government would bail them out at the first sign of smoke as Labour always did. They also felt it destroyed the incentives for individual entrepreneurship leading people into not achieving their full potential as it was not worth there while, this led to lack of money within the economy as well as top businessmen leaving for pastures new. On the whole Thatcher was a strong advocate of believing regulation by the state should be minimised as it had a large amount of control over things like wages, prices, profits and production systems which was thought to stifle business expansion. Most regulation was in nationalised industries and the way this problem was solved was through privatisation which was a major step towards reducing state intervention in the economy. ...read more.


The second main way of carrying through monetarism was reducing the levels of government spending. If the government was spending more then its income it resulted in a deficit which would certainly not stimulate the economy. Geoffrey Howe's budget planned to slash spending including in the following ways, put cash limits upon the public sector, Raise minimum lending rate to 14%, Sell public assets and switch to indirect tax. This was moving away form the Keynesian demand management belief since Keynes would keep unemployment down by a deficit but in this budget it was reduced even if it resulted in short term recession and unemployment which as further tightened in 81 with massive rises of indirect taxes on petrol. This was fairly effective since it resulted in a budget surplus in the mid 80's but public spending continued to rise due to increasing unemployment as the burden on social security increased which also resulted in a tax deficit as the unemployed could pay neither direct nor indirect tax. Finally a free market economy was to be created. This was linked with a reduction in government spending, they stopped employees and employers making wage policies allowing the marker to dictate wage levels instead. Not considering income policies helped it break away with Keynesian policies and privatisation helping the government to reduce its role with the state. ...read more.


Also there is a general consensus that the British economy should stay part of the European union with both parties now accepting this inevitability. The EU also helps to minimise state intervention as it now controls huge sections of the economy such as fishing quota policies which are now decided elsewhere from parliament meaning less state intervention in this regard for either party and it is nigh impossible to now disentangle the UK economy from that of the EU without major uproar and widespread opposition. Overall due to the level of consensus there is relatively little difference between the way the economy has panned out between the conservatives period in charge end the dominance that the Labour party currently are enjoying. On the whole the economy has become relatively depoliticised since the Thatcher years as politicians have less control over this increasingly globalised and privatised aspect of the agenda. Now with Brown's decision to give the Bank of England the power to set the level of interest rates the economy has become less prone to state intervention then ever especially with a clear end to the grip that Trade Unions once had over the Labour party. Overall state intervention over this period has decreased and barring a crisis it is likely that this will remain the case unless the Liberal Democrats manage to gain power, even through a coalition government. ...read more.

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