Thatcher and the end of Consensus Flashcards
What was consensus politics?
-A period during/after WW2 up until the election of Thatcher in 1979 that consisted of a cross-party agreement that governments of all colours would ensure a commitment to:
• Mixed economy
• Full employment- since 1945, all parties agreed that unemployment, which had been high in the 30s (reaching 25%in 1933) would be kept low by government spending.
• Welfare state
A large part of consensus politics was based on the economic framework of J.M Keynes- known as Keynesianism. Concept that planning was good for society.
-There was broad consensus that nationalised industries created from 1945-51 were required to maintain Britain’s essential services like gas, coal, electricity and the railways.
-Another aspect of consensus was the belief that the government would try to control prices + wages.
What is monetarism?
- An alternative political theory to Keynesianism + consensus politics that dominated Britain after WW2.
- A set of views that inflation depended on how much money the govt printed. The school of thought also believes that money supply is the main way of determining economic growth. The theory relied on the free market to determine wages and prices.
- It was a return to the more Laissez Faire approach to politics- a school of thought from the Chicago School of Economics and is also closely associated with Milton Friedman who suggested that the govt. should keep the money supply fairly steady.
- It was this approach of the govt. stepping back from the economy with a liberal attitude that made monetarism link closely with the economist/philosopher F A Hayek, known for his defence of classical liberalism. As well as other renowned thinkers in this field such as Karl Popper and Sir Keith Joseph.
- It was associated more with the right of the Conservative party in the 1970s and was first introduced into the British economy under Thatcher who disliked the post-war economic trend that she thought of to be a ‘nanny state’ although Heath attempted to implement it but buckle under the power of the TUs.
- against ‘lame ducks’
What was the British disease?
-In a nutshell: Britain’s inability to pay its way…
-When there is a balance of payment deficit (borrowing too much and producing too little). + not being efficient enough and competitive enough compared to other countries.
-Some suggest that it was caused due to Britain’s decline after WW2.
-The power of the TUs linked to the British disease.
• demanding rise in wages due to growing inflation which then cause a vicious circle of inflation continuing to grow due to rising wages. The increase in wages meant that money couldn’t be invested in research and development of industry, preventing industry from becoming more efficient.
• The manifestation of the British Disease was the pattern of strikes such as the miner’s strike of 1972 and the more devastating miner’s strike spanning a year from 18984-85. -Other than the economic problems that the strikes caused, some of the most memorable aspects of the strikes such as the lights going out, leading to a 3 day week, made Britain appear as the ‘sick-man of Europe’ at the time.
-Another example of the British disease would be the ‘winter of discontent’ of 1978/79. The visceral image of rubbish piling up in the streets and the news that grave diggers were refusing to bury the dead made it appear that there was something inherently wrong with Britain’s ability to manage its economy and its workers: ‘disease’.
It was just after this winter that Thatcher came into power.
What was the de-regulation of the City (1986)?
What was the de-regulation of the City (1986)?
- London’s financial market’s before 1986 were subject to a number of regulations that made it difficult for them to compete with foreign banking centres, especially New York.
- The Financial Services Act of 1986 deregulated the London Stock Market and was nicknames the ‘Big-Bang’ because of the increase amount of trade that was expected from this.
- This Act revitalised London’s money market by ending the Stock Exchange’s monopoly on share dealing.
- London therefore became a hub for world financial services.
What was Privatisation?
-After 1983, Thatcher’s govt. accelerated the sale of Britain’s state-owned enterprises and utilities into the private sector.
-Thatcher’s opinion of privatisation was that it was ‘fundamental to improving Britain’s economic performance’.
-Thatcher thought that nationalised industries were:
• inefficient and over-manned
• Would be better able to raise investment capital once released from govt. control
-Thatcher increased the number of shareholders by 8m by 1990 from the time she came into power. It was her belief that this policy would reward hard-working families who would achieve an economic stake in society’ from this policy.
-Thatcher’s long term plan was to create a ‘share-holding democracy’. It was thought that by workers having a share of the business that they were working for, it would not only be the bosses benefitting from profit but also workers which would unite the bosses and workers in their aims.
Who were the ‘wets’ and ‘dries’ of Thatcher’s cabinet? What were the reasons for their differences of opinion?
Some Wets: Jim Prior-secretary of state for employment, Francis Pym- Foreign Secretary, Michael Heseltine- Secretary of State for Defence.
Some Dries: Geoffrey Howe- Foreign Secretary, Keith Joseph, Norman Tebbit- Employment Secretary, Nigel Lawson-Chancellor of Exchequer, Cecil Parkinson-Secretary of State for Trade + Industry, William Whitelaw-Home secretary.
-The ‘wets’ were generally on the left of the Cons party. - ‘One Nation Tories’ whilst the ‘dries’ were on the right of the party. They were Thatcher’s allies- mostly monetarists.
-Although ‘wets’ were brought into the Cabinet quite early on in Thatcher’s leadership such as Prior and Pym, she surrounded herself with loyalists like Tebbit and Parkinson.
-The main differences in opinion revolved around differences in ideological views. Thatcher wasn’t willing to accept alternative arguments without confrontation. the mere fact that she regarded the wets as wets e.g. feeble, willing to compromise with the unions etc. showed her divisive attitude
-One of reasons for differences in opinion came about after the retirement of William Whitelaw who was a calming and unifying figure for the party.
Thatcher’s set of principles were broadly supported by the ‘dries’ in what became known as Thatcherism.
-A number of differences in opinion divided and alienated Thatcher from her Cabinet. E.g.- Howe was too European for Thatcher’s liking.
-Thatcher blamed Lawson for the inflation of the late ’80s.
What was Conservative anti-trade Union Legislation of the 1980s?
Thatcher believed that:
1. The existing laws on industrial relations had been ‘abused to protect restrictive practices and over-manning, to underpin strikes, and to coerce workers into joining unions and participating in industrial action against their better judgement’.
2. Union power made British firms uncompetitive because high labour costs and restrictive practices meant that business was lost to more efficient overseas companies.
3. Jobs would become available once British industry adjusted to market conditions and unions lost their power to control labour conditions.
Thatcher’s legislation:
• The Employment Act of 1980 outlawed secondary picketing + increased rights of employees who refused to join unions. Govt. money was made available to encourage unions to hold secret ballots.
• The 1982 Employment Act restricted sympathy strikes and allowed closed shops only if a ballot showed 85% support. Anyone sacked for not joining a union became entitled to high rates of compensation (fines meant that it would be made difficult for TUs to fund strikes).
• The Trade Union Act of 1984 required unions to hold secret ballots of their members before launching industrial action.
What were the reasons for the failure of the miners’ strike of 1984-85?
- Miners weren’t united. Those who wanted to continue working formed a break-away union: Union of Democratic Mineworkers in December ‘84.
- Strike, beginning in March, held in spring + summer. Less of demand for coal.
- Lab party reluctant to support Arthur Scargill (NUM leader) + he received little public sympathy-seen as an extremist.
- Violent incidents on picket lines undermined public support for the miners.
- People thought that it was impossible to continue to subsidise the mining industry.
- The govt. was prepared to use considerable force to protect the rights of miners who wanted to continue working and it wasn’t swayed by the levels of violence + unrest.
- April ‘84, Scargill refused to hold national ballot to determine whether to continue strike action. Stopped strike being legitimate + alienated many mineworkers.
What was the Poll Tax?
- Thatcher thought that ‘the rates’ the general tax public payed (a tax on the owners of property and business) was ‘manifestly unfair’ as she calculated that more than half of electorate didn’t pay rates. -She believed that if more people paid taxes, there would be a greater interest in local politics and the spending of the local council.
- The poll tax/ Community charge was brought in in 1988 where the rates were replaced with a flat-rate tax on every individual. It was piloted in Scotland in1989 and due to being highly unpopular, millions refused to pay it.
- Thatcher wasn’t deterred however (suggesting that she was becoming more dictatorial in the way that she enforced policies + brought the poll tax into England + Wales beginning of April 1990. The day before it was due to take effect, massive demonstration in Trafalgar Square- 300 people arrested, 400 policemen injured.
- Major abandoned the poll tax and replaced it with the council tax when he came in to power
What was Thatcher’s view of the EU?
What was Thatcher’s view of the EU? -Thatcher was divided in her opinion over the EU and can be considered to be a Eurosceptic.
- She was accepting of the Single European Act of 1986 as she considered it as a step along the way towards the free market that she believed was essential for the economy.
- Yet Thatcher didn’t like the fact that the Act committed the member states to work towards closer monetary and political union.
- Thatcher wanted to protect the sovereignty of Britain and thought that measures taken by the EU would create a ‘European Superstate’ that would undermine this.
- Those who Thatcher believed to be too Europhilic such as Geoffrey Howe were soon demoted and her unyielding attitude towards becoming closer to Europe and joining the ERM and her reliance on Walter, a Eurosceptic caused the Chancellor, Lawson to resign.
‘Eurosceptic’ Definition
- A person who is opposed to the increasing powers of the EU.
- Although some argue that Thatcher wasn’t wholly Eurosceptic but mainly disliked some of the power that it had as a ‘European Superstate’, she certainly didn’t appreciate the idea of integrating Britain further into the EU, famously saying ‘No, No, No’ in parliament in regards to this.
- Eurosceptics within Thatcher’s close advisory circle included her unelected economic advisor, Alan Walters.
What’s ‘New Labour’?
What’s ‘New Labour’? -Tony Blair’s endeavour to modernise Lab party.
-Part of this modernisation involved abolishing Clause IV of the 1918 constitution where Lab pledged to nationalise industry to bring the party in line with Thatcher’s reforms.
-The rebranding of the party as ‘New Labour’ made Blair appeal to Cons- supporting business men and City bankers whom he reassured about Lab’s policies.
The Blair style change to Lab’s image went a lot further than Kinnock had from 1983-1992. -However, his expelling of the members of the extreme left went part of the way towards these reforms for Blair’s more right leaning party.
Reasons for Thatcher’s fall in 1990
• the terror of the Poll Tax.
• Economic difficulties: the stock market crash and Lawson’s inability to control the impact of this by reducing income tax rates which inadvertently pushed up prices + therefore increased inflation (8.3% 1987). -disenchanted home-owning mortgage payers (the people Thatcher admired) paying heavily for the houses they were encouraged to buy.
• Divisions over Europe: The rift between hatcher + her colleagues weakened her authority as it alienated important political allies such as Howe and Lawson.
• Thatcher’s growing isolation and unpopularity amongst her colleagues and electorate. -Many Tory MPs believed that they would lose the next election if Thatcher remained in power. The slow stab in the back of Thatcher which she would later recall as ‘treachery with a smile on its face’ began with Antony Meyer’s challenge for the leadership of the party. Although her fall was first triggered with Howe’s parliamentary resignation speech which questioned Thatcher’s leadership in a way that hadn’t been seen in parliament since such senior figures had attacked Chamberlain back in the late ’30s.
-This was the cue for Heseltine to seriously challenge Thatcher for leadership who was eventually advised to step down on which she did on the 22 Nov 1990.
Reason’s for Major’s fall in 1997
Reason’s for Major’s fall in 1997 • 1997 = worst defeat for Cons since 1906
• Major’s lack of authority: - Was elected because majority of party didn’t want Heseltine who was believed to have engineered Thatcher’s downfall. -Had limited experience: MP since ‘79, only in Cabinet since ‘87.
-Ridiculed for being uncharismatic by media.
-Cons majority smashed in his election to 21 seats- made parliamentary defeat more likely.
• Major’s struggle with the Eurosceptics: -Major had to battle to secure ratification of Maastricht Treaty. Eventually forcing it through parliament after facing both Eurosceptics and the Labour Party who made an unlikely alliance.
- Back Wednesday: Britain withdrew from the exchange rate mechanism (ERM) after the measures to curb inflation had failed and it became clear that the exchange rate was too high.
-Heightened Eurosceptics’ argument that Europe didn’t’ offer Britain much.
-Cons reputation for economic competence had been tarnished by this fiasco.
• Major’s leadership election, 1995: A third of party didn’t vote for him- showed how divided Tories were. He no longer seemed in control of his party with the public displays of dissent from Eurosceptics.
• The popularity of ‘New Labour’. A slick media presentation + reforms that proved to business men Lab weren’t socialists in disguise.
What was Black Wednesday?
By September ‘92, measures to control inflation tipped British economy into depression. The exchange rate was too high.
- £ fell sharply in value as international bankers sold it at its artificially high rate before it was devalued.
- Major and his chancellor, Norman Lamont, tried unsuccessfully to sustain the £s value by pushing up interest rates + getting bank of England to buy £s.
- These desperate attempts failed and on 16th December, ‘Black Wednesday’, Britain withdrew from ERM.
