Why and to what extent did the 1980s mark a change in the role of the state in post-war Britain?

Authors Avatar

Why and to what extent did the 1980s mark a change in the

role of the state in post-war Britain?

When the Conservative Party, led by Margaret Thatcher, was elected to government in 1979 they took control of a country in economic decline, with growing unemployment and inflation spiraling out of control. Previous governments, both Conservative and Labour, had been unable to find sustainable solutions for these problems and both parties were aware of the need for a change. Margaret Thatcher’s government set about changing the role of the state by abandoning Keynesian demand management in favour of monetarist economics and creating an environment where competition and free market forces could operate effectively and efficiently. In the Conservative Party manifesto of 1979

Britain’s economic circumstances had deteriorated gradually but steadily during the 1950s and 1960s but there was a dramatic decline during the 1970s when unemployment began to increase rapidly. The average unemployment figure for the 1950s was one third of a million, the 1960s half a million, 1970-74 three quarters of a million but between 1974-79 the average was one and a quarter million. Inflation also began to rise from 3 percent in the 1950s, 4.5-5 percent in the 1960s, and 9 percent in 1970-74 to a staggering 15 percent in 1974-79. Added to these problems economic growth was declining from an average of 2.8% per annum between 1949-73 it fell to just 1.4% per annum between 1973-79. This ‘stagflation’ caused irreparable damage to the economy, with declining exports, increasing imports and with a welfare service under immense pressure. Britain was labeled the ‘sick man of Europe’, suffering from the so-called ‘British disease’. Whichever party had been elected to power in 1979 would have needed to move away from the consensus policies that had existed since the end of the Second World War. Mrs Thatcher was determined to reverse Britain’s decline and make any changes necessary to achieve this.

The Keynesian Economic Theory had been practiced since the Labour Government of 1945, with the main priority being the maintenance of high employment. But by 1979 confidence in this theory was falling because the unemployment figure had reached approximately one and a quarter million. Margaret Thatcher adopted a monetarist economic policy, which required a reduction in public sector borrowing and the setting of ‘publicly-stated targets for the growth of money supply’; this theory was based on the works of Milton Friedman. Her priority was to control inflation which was perceived as ‘too much money chasing too few goods’, by reducing the amount of money in the economy, at the expense of higher unemployment if necessary. This was put into practice using the medium-term financial strategy aimed at reducing the growth of the money supply and over a period of years eliminating inflation. The government needed to control its own spending by setting strict spending targets, but these were often exceeded and the chancellor forced to set new targets. However in 1985 growth figures were well above targets, 19 percent against a target of 5-9 percent and yet inflation did fall sharply. It is thought that this was the result of the mass unemployment and recession caused by high interest and exchange rates that made imports cheap and exports too expensive, resulting in the collapse of many British companies.

Join now!

At the end of the 1970s Britain had a mixed economy, with many public sector industries that had remained under state ownership since their privitisation by the labour government of 1945. These industries were very unpopular with the general public, as they were perceived as being inefficient, wasteful, and a constant and continual drain on public resources. The Conservative government of 1979 started a program of transferring and selling these industries to the private sector. The intention of this program was to reduce government intervention in businesses and encourage a free market. This was continued and extended during the ...

This is a preview of the whole essay