The breaking of Consensus and the Thatcher Revolution

The breaking of Consensus and the Thatcher Revolution

The post_ war consensus had been the basis of Labour and Conservative policies between 1945 and late 1960. In fact, divisions began to surface within the parties themselves as they attempted to find more distinctive solutions of their own.  Consensus began to wear thin and dissolved into its constituent parts with the Conservatives moving towards Capitalism and the Labour shifting to socialism.

The great strength of the post – war consensus had been its apparent capacity to deliver permanent material prosperity. Yet, the 1960’s and 1970’s confirm a disappointment as far as the British economy was concerned. As a matter of fact Keynesian economics seem to be unable to cope with the economic crisis of 1970. It grew ineffective to produce growth, full employment and a stable level of prices. The term stagflation was coined to describe a combination of low growth, rising unemployment and inflation. Keynesianism was, thus, discredited.

Britain as the world third greater power no longer had meaning. Impediments superseded the economic growth. In fact, Britain’s annual rate of growth between 1955 and 1964 averaged just 2.8. More importantly, the British share of the world trade in manufactured goods significantly fell from 19.8 % to 13.9 % in the same period. Consensus was, then , challenged as Britain was perpetually threatened by crisis after crisis mainly balance of payment deficit , industrial disruption paving the way for the real break which came after the 1979 general election.

Indeed there was a clear need for new ideas and instruments of policy. Following the General election of 1979, the Conservative Party gained power and Margaret Thatcher promoted the policies known as Thatcherism. Actually, it strengthened the powers of central government curbing the powers of trade unions and the local government. It was characterized by free market economy in which the role of the state must be reduced and people should be given the freedom to show their initiative in business. The economy must be free to develop according to the demands of the market forces. She enhanced monetarist policies   that inflation is caused by printing money and can be cured by restricting the money supply. Moreover, in the interests of efficiency, taxation should be kept low, state-controlled industry should be privatised, and free market forces are allowed to operate. Her government, actually, privatized nationalized industries such as British Telecom, British Steel and Gas. This belief was that privately – owned companies were always more likely to produce positive results such as efficiency and profits than those owned by the state. It was mainly based on the fact that government should intervene only to create a free market by lowering taxes, privatizing state industries and increasing restraints on trade unionism. Interestingly enough, it also enhanced deregulation reducing state constraints in the interest of market competitions namely reducing STATE control over business .

Additionally, Thatcher’s government introduced reforms within the trade unions. One of the drastic measures was that Unions had to hold a ballot among members before calling for strikes. It was clear enough that there was a tight control of the union’s power.

Thatcherism was a turning point in Britain’s history with her policies of privatization, deregulation, control of tax and spending which created better economic opportunities for Britain yet the Labour suffered from the social changes that gave the Tories and Thatcherism their chance.

In short, the breakdown of Consensus was due to its ineffectiveness since it no longer served the interest of the British nation. Subsequently, Thatcherism came into existence to remedy the growing problems that caused Britain’s recession.