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A Safe Pair of Hands? |
For
over 30 years the post-war settlement has been systematically eroded
and it looks as though we may see the end of the welfare state in our
life times. The austerity measures David Cameron has delivered unto us
have come with the promises of the "Big Society". Perhaps the political
class has a Victorian model in mind, the philanthropic capitalism that
prevailed throughout the 19th Century. The welfare state constructed
under the Labour government of 1945 to 1951 never pleased everyone and
it was met with strong criticism from the right-wing media with
The Financial Times
in the lead. But the criticism of the welfare state took on a much more
mainstream character in the 1960s and became increasingly emphatic
throughout the 70s. Even though the social democratic era which lasted
for 30 years has been likened to a "golden age" of capitalism as a
significant growth and development was achieved by historical standards.
It culminated in the rise of the Thatcherites and the subsequent 30
years of neoliberalism.
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Second-Hand Ideas. |
The
transition did not simply come about out the growing criticism of the
welfare state in the 1960s and 70s, there was a propagation of
neoliberal ideas throughout this period and it began with the Institute
of Economic Affairs. It was a right-wing businessman Anthony Fisher who
founded the Institute in 1955, it was the first of 150 think-tanks which
he would set up to disseminate "second-hand ideas". In
the early 50s when Anthony Fisher was an isolated figure working with
Major Oliver Smedley after they met at the Society for Individualists.
Both of them were opposed to the state planning involved in the
reconstruction of Britain after the Second World War. Smedley and Fisher
were convinced that the increasing power of the state would lead to the
end of democracy. For them even the Milk Marketing Board and the Egg
Marketing Board were enemies of liberty. Importantly, it was Friedrich
Hayek who talked
Anthony Fisher into setting up think-tanks in order to the shape the
dominant discourse and ultimately influence public opinion to achieve
political change.
By then the British Empire was
falling apart with the rising tide of revolutionary nationalism in the
Third World. The political class was determined to see to it that the UK
could be invigorated to the level of an economic powerhouse in spite of
the collapse of the Empire. With the achievements of the 1940s came a
state apparatus of economic planning in which technocrats worked to
secure prosperity in Britain. The National Economic Development Council
was set up in 1961 with the growth target of 4% between 1961 and 1966.
At the time NEDC was dominated by Keynesian economists who were
convinced that it was possible to control an economic boom, so that the
rise of aggregate demand would not necessarily lead to the economy being
flooded with imports and wage rising leading to inflation. There was no
new theory, just a new use of old methods. NEDC pledged to plan
investment in industry as the government would hold down inflation. The
Conservative government poured money into the economy and by 1963 it
looked as though the economy was on track with the plan as a boom was
underway.
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A Soviet Spy? |
In
opposition the Labour Party responded with a national plan which would
be run by the Department of Economic Affairs, that would aim to deliver a
great deal of growth in 6 years as well as the expansion of British
industry would be stable insofar as it is controlled. If Labour could
succeed in doing this then there would be little need to redistribute
wealth because there would be more for everyone. Harold Wilson came to
power just as the economic boom initiated under the Conservative Party
began to overheat, imports were flooding the country and wages were
rising. It looked as though the Labour government had to devalue the
pound in order to make British exports cheaper abroad. It was in part
the inability of the political class to accept British decline which led
to a refusal under Wilson to devalue the currency. Instead the Labour
government opted to pin down wages and prices, as well as initiate
spending cuts and cancel election promises. There were repeated runs on
the pound as foreign investors lost confidence in the Labour government
before finally Labour conceded the devaluation of sterling, but by then
it was too late and the economy grinded to a halt.
In
doing so the Labour government under Harold Wilson had unwittingly
undermined the notion of the planning apparatus as a unique and certain
method to secure significant economic development at a faster pace.
During this time that the City of London became increasingly important
as the government acted to protect and enhance the powers of finance
with respect to the global flow of finance capital. The protection of
finance capital through the manipulation of interest rates conflicted
with the needs and interests of domestic manufacturing capital. A
structural division within the ruling class emerged as the conflict held
back the expansion of the domestic market via the restriction of
credit. The commitment to a strong pound had undermined the export
position of
British industry, this laid the ground for the balance of payments
crises of the 70s. These contradictions played a fundamental role in the
breakdown and regeneration of the British state-corporate nexus which
composed the transition from social democracy to neoliberalism.
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