The first general elections in the UK were held in 1945 for the first time in ten years due to the World War 2 and the Labour party under the leadership of Clement Attlee was elevated to power (Jones, 1996). Despite his reputation as the savior of the UK during the Second World War, Winston Churchill and his Conservative Party were thrown out of power (Lewis G. K.1957). In the previous elections before the war, the Conservative party had led the Labour party by more than 200 seats. Labour party championed for the wishes and needs of millions of citizens who hoped for better living standards in a post-war Britain. This was due to a misjudgment of citizen's needs by Churchill and Conservative leaders that caused the party the elections. Labour popularity begun to decrease from 1947 because of the dissatisfaction of citizens with its financial, economic and foreign policies (Marsh, 1999). The party finally lost office in 1951.
During Labour's tenure in government, it instituted major reforms which include nationalization of vital industries, maintaining a high level of employment and formation of the welfare state. Economic controls from the austere wartime continued to be used and later in 1946, the United States granted the UK a big loan. The US in 1948 assisted the UK yet again through the Marshall Plan. Later in 1949 the pound was devalued from $4.03 to $2.80 against the US dollar to make British exports more competitive (Howell, D., 2006).
From the start, the Labour government embarked on massive operation of nationalization of key industries and extension of social services. Among those nationalized were the civil aviation, internal transport, electricity communications industry, coal industry and The Bank of England. Socialized medicine was put into place in 1948. Most of these reforms were as a result of recommendations by commissions instituted during the war. The steel industry was also nationalized in 1948 but it became effective in 1951 after the Conservatives came back to power. They retained the Labour's social reforms but stopped direct economic controls and denationalized all steel companies except one and the trucking industry (Francis, 1997).
After the war Great Britain lost control and power of foreign affairs. UK had offered to help Turkey and Greece to resist communism but they were overwhelmed by financial constraints and the US assumed the task in 1947 (Marsh, 1999). British Empire experienced various changes which include splitting of British India into India and Pakistan. It also transferred its mandate to the United nations in Palestine when it could not maintain peace between Jews and Arabs. In 1949, Britain joined the North Atlantic Treaty Organization(NATO) and fought alongside the United Nations in the Korean war between 1950-1953.
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By the end of World War II, the UK had lost quarter of its national wealth in the war against Germany (Callaghan, ET AL., 2003). The Labour government embarked on extensive reform program. Due to this the government was faced with a huge financial challenge. The government was undertaking a loan negotiation with the US and the Chancellor of the Exchequer forged a way forward economic policy that favored the ordinary working class families. The government retained food subsidies in order to retain low living costs, progressive rates of taxation and regional development was pursued and this helped in averting mass unemployment. Introduction of a mixed economy faltered but after the war nationalization provided a way to salvage industries like those of coal which had been unprofitable and inefficient in private hands (Francis, 1997).
The Beveridge report in 1942 had emphasized on the need to overhaul the social security provision. The concern for the working class encouraged the introduction of welfare reform (Addison, 1975). Labour's National Insurance Act of 1946 for the first time comprehensive cover against unemployment, old age and sickness. The Labour party faced the challenge of an expanded population by a million and property had reduced by 700,000 due to damage during the war. 1 million homes were eventually put up with 80% of these being council houses (Marsh, 1999). To crown it up, Labour introduced free access to hospital services through was the National Health Service (NHS). The free medical care weakened the opposition of the NHS Act by the Conservatives who had voted against it. The free medical care was especially popular with working class women who were not able to insure themselves against ill health.
In 1947, the Labour party started facing serious challenges. In February that year, there was acute fuel shortage coupled with cold weather and the fuel industry came to a halt temporarily (Howell, D., (2006). The Minister of Fuel and Power was under attack. During the summer, a controversy arose when it was clear that the American loan had strings attached, the 'convertibility clause ' oppressed the UK's balance-of-payments and the pound was under pressure on the foreign exchange. This led to the tightening of economic policy. Mr. Dalton, the Chancellor was later in the year in November to resign over delivery of an emergency budget. The government faced criticism and public confidence dwindled (Callaghan, ET AL., 2003).
In 1948, Sir Stafford Cripps succeeded Mr. Dalton as Chancellor of the Exchequer. He continued with war time food rationing policy. This came with criticism especially from middle class women who complained of long queues and poor quality of the rations. During Cripps tenure, welfare expenditure was tightened and the pound was devalued to make British exports more competitive. There was massive dissatisfaction especially with the middle class districts in southern England. Nevertheless Labour and Attlee got back to office in 1950 but 'without power and authority' (Howell, D., 2006).
In the summer of 1950 the Korean war broke out an this proved controversial and divisive. Some labour members of parliament objected to the idea of sending British troops to North Korea saying they were only acting on American wishes. There was also further concern on the already huge defense budget which split the party. Mr. Nye who was the architect of NHS later resigned due to breach of principle of free health service and this brought out the divisions in the party. In 1951, the Conservatives won majority seats but there was better living standards, job security, opportunities were opening up for the young in education and pensions had increased incredibly (Kavanagh & Morris, 1994). There was affordable decent housing and free medical access for millions of citizens.
Winston Churchill was arguably the most popular British prime minister between 1940 and 1945. opinion polls in May 1945 put him on 83% approval ratings and everyone predicted he would win the 1945 general elections with a landslide. Nevertheless, Churchill led the Conservative party to one of the most humiliating defeats of the time. He had led Great Britain to victory against Hitler's Germany in the Second World War. His leadership traits were appropriate for the war but they were not ideal for British politics after the war (Lewis, 1957).
Winston Churchill wanted to consolidate power and authority as a war leader and not his party commitment that led him to the leadership of Conservative party to succeed Neville Chamberlain in October 1940. When he first came into power in 1940, Churchill first invited leaders of the Conservative, Liberal and Labour parties to a coalition government. His administration survived various huddles including external shocks and internal wrangles but it mobilised Britain for total war against Hitler.
The most important of his goals was victory in the war and this cost him because he did not take seriously party and country politics. After the war Churchill found himself in unfamiliar territory and he did not have a clear vision and direction for his party and country. This military victory passionate leader is what Great Britain needed at that time of national emergency but in the process Churchill neglected the interests of the Conservatives during the war years (Lewis G. K.1957)
Churchill's personality was the foundation of the Conservatives campaign and he had the responsibility to put across the conservative agenda. This was a chance for Churchill to prove himself as a post war leader and not only as a warlord. The Labour party had a strong elections manifesto based on nationalization of industries, housing, social security and full employment (Jones, 1996). His passion as a warlord was emphasized when he stated the need to finish the war against Japan. The polls took place on 5th July and by 26th July, it was clear that Labour had won the elections by a landslide gathering 393 seats and a majority of 183 in the House of Commons (Jones, 1996).
Following the results, Churchill was depressed and his party was left in shock. The war exhaustion could be the factor that led to Churchill's fall among civilians and service men. Churchill soon recuperated from the loss and re-asserted himself as a statesman globally and he consequently retained the Conservatives party leadership. He successfully restored the Conservatives patriotic image.
Great Britain were triumphant in the war between 1939-1954 but it rendered a big blow to the economically. It was the third superpower after the USA and the Soviet Union. The British political system was vindicated by the success from the war and it was a model social democracy. The Labour government in 1945 was responsible for the 'post war consensus' but several aspects were brought forward from the war-time coalition government and the ideas of Liberals of John Maynard Keynes and William Beveridge (Kerr, 2001). It was believed that promotion of better equality through social engineering could be undertaken by the government (Kynaston, 2007).
The domestic politics were characterized by some features which include:
1. Keynes proposed a method of management of the economy where the government would maintain full employment. The government committed to this technique. Ministers would use various levers which include tax cuts and government expenditure in order to increase economic activity.
2. trade unions and their activities were widely accepted and their role was subsequently encouraged, contrary to the pre-war times, the government recognized their presence and engaged them in consultations frequently on work place relations and economic policy. The unions had access to the government through full employment and governments turning into income policies to reduce on the inflation rates.
3. a mixed economy was introduced with the government owning most vital industries such as transport, coal, gas and electricity and the economic planning and interventions undertaken by the government.
4. The welfare state. The National Health Services and the national insurance system were introduced to promote income adequacy and to provide free health services in times when the income of a family was affected by old age, unemployment, sickness or death of the breadwinner. The services represented social citizenship provided out of taxation policies and insurance policies.
5. it was widely believed that government could play a more active role of promoting equality through social engineering through various strategies like progressive taxation, redistributing welfare expenditure, comprehensive education programs and regional policies.
Outside the country, Britain joined the North Atlantic treaty Organization (NATO), the transition of the British empire into independent states which came to be known as British Commonwealth, nuclear power which was regarded as a sign of a super power and also Britain joining the European Community was considered. Both the Conservative and Labour governments pursued these policies and Labour believed gaining working class support was necessary to win general elections and consolidate the support of major interest groups (Kynaston, 2007).
Nonetheless, these ideas and policies were contested by various stakeholders. For example the left of the Labour party, the free market and the right of the Conservative party. But most of the politicians, the media, and civil servants were in support of the policies. It is believed British government politics after the World War 2 were characterized by consensus (Kerr, 2001). It is argued that the consensus is always characteristic of all post war governments around the world. For the development and reconstruction of post-war Britain, the politics of consensus were a general strategy and it was supported by the major political players at the time; the Labour party and their opponents the Conservatives. It was the most logical action to take during the time. The country required a fast and effective reconstruction strategy because it had lost much of its national wealth in the war against the Germans and there was immediate need for the country to pull out from the war exploits (Kerr, 2001).
Vast economic challenges caused by the exploits of the war at the time also caused a crisis and poised a threat to the government, whether Labour or Conservatives and there was need to check on the growing anxiety and tension among the citizens. There was a rise in poverty levels at the time and this poised a threat of marginalization of a majority of the population and this could lead into radicalism or even a social revolution. Furthermore the World War 2 was partly due to poverty increase (Kelly, S. 2002).
The Labour party government as a result started the politics of consensus as defined then. The politics included ideas of social justice and national welfare division so that government could prevent marginalization of a majority of the society in post war Britain. Henceforth, the government embarked on social program to breach the ever widening gap between the rich and the poor and in this, the government introduced socially-oriented politics which was then referred as consensus politics. As a result, the politics practically enabled the creation and introduction of social programs aimed at improving the living standards of the ordinary citizen, especially the needy. The National Health Service therefore came as a remedy to provide widely accessible health services to the public across all social classes (Kynaston, 2007).
The need for the government to run the national economy formed a basis of the consensus politics. The massive social oriented programs required funding and that is why vital industries got nationalized to make them more effective and provide the government with much needed funds to finance the social programs. Most economic principles undertaken by the British government at the time after World War 2 were pegged on the Keynesian principles of economics and the government therefore became a dominant player in the countries economy.
With the spirit of consensus politics, the government introduced welfare reforms which enabled the public to access basic essential services such as education and health. The government therefore resulted into more involvement in the economy and interventions in an attempt to channel national wealth to the public in order to provide the citizens with a relatively good quality of life and improving the standards of living to march those of a modern welfare state (Fraser D.,2000).
Nevertheless, it is argued that there was really no consensus in Great Britain's politics. After the World War 2, there was a common objective, that to improve the living standards of the majority of the population, breaching the gap between the poor and the rich in order to cap on a possible marginalization and social revolution. In fact millions of people lived under the poverty ceiling and this fact needed urgent address and this forced the government to act precisely. Hence the issue was not a consensus but a a matter of salvaging the people from poverty (Kelly, S. 2002).
Consensus in principle means involving all members of the society and reaching a compromise on the principle of social justice. In other words, the improvement of the living standards of the poor should come into place by a compromise by the higher social class. In this regard the post-war UK government nationalized crucial industries in order to consolidate funds and industrial effectiveness in order to provide the lower class with accessible an affordable social amenities. In fact the government's on the citizen's welfare was much higher than the loss the former industry owners had to incur (Fraser, 2000).
The UK government did not change its economic relationships even after nationalisation and it was an important factor in the progress and it should have been an important factor in the politics of consensus. This is to mean that the government became the main player in the economy and replaced private owners in ownership of crucial industries. In this way the government re-distributed national wealth to much needier majority of the population. For this reasons it is hard to argue that it was politics of consensus that played centre stage at the time.
It was a matter of government imposing its policies upon its citizens. Even in its attempt to scale up the living standards of the majority lower cadre class citizens, the government did not make a compromise for the upper class to share their wealth with the needy. Instead the government imposed its will on the citizens in investing in social welfare but there was no real effort to improve the society's economic position. This is to say that the lower and middle class were not provided with effective economic methods to drive them out of poverty but the government made its citizens completely dependent on it for all essential services including health, education, social security and even food. In this effort, the upper class standard and quality of life did not decrease drastically after the second world war since they did not split their personal wealth to benefit the less fortunate citizens (Kelly S.,2002).
The post war consensus is a period experienced in U.K after the second world war, which lasted for quite some time that is from 1945 to 1979, Mr. Clement Attlee was the leader of the Labour party from 1945 to 1955, during the period when Mr. Attlee was in power many things were changed by both the conservative party and the Labour party which came into power immediately after the second world war. The changes made were to ensure creation of employment and to lead to the growth of the economy .this was the period of rebuilding Britain's economy (Coxall & Robins, 2006).
Ensuring employment to all, having a mixed economy, ensuring public health, ensuring of equilibrium in economy, were some of the top agendas for Britain's government to stabilize its economy. They expected to meet their objectives by use of the Keynesian economic principles and also through consultations with various bodies like the trade unions. These were to be achieved through the effort of both political parties.
Clement Attlee lead the Labour party to a famous victory over the Winston Churchill's led Conservative party in the general elections of 1945, immediately after the World War 2 which they had won against Germany. The labour party together with the conservative party lead to the settlement of the post war ,this was based on the fact that employment will be created and maintained ,health services ensured ,and social services created.
During the period of his service, Clement with the help of his secretary was able to come up with domestic policies that were greatly appreciated by both parties. The introduction of the National Insurance Act enabled the working class to contribute a certain amount of cash and in return get their pensions and also enabled them to enjoy benefits during sickness, unemployment and death. These benefits were also eligible to their family members. In the same period the government was also able to make most services available to its people. Vital industries including transport, banking and industrial services were nationalized during this period.
The Second World War left Britain a completely unstable nation, the country's economy was badly affected, actually Britain had to survive through help from the American Government, food and other essential commodities were to be rationed so as to enable the nation to reduce its imports and increase its exports to other countries. This really helped Britain to develop its economy and be able to maintain a stable barter trade.
Though Great Britain had successfully achieved its goals, the year 1947 was not a very good year for them, this year was a great winter and it was very cold until the miners were forced to cease from mining (Harrison, 2000). This led to a crisis in that they experienced food and power shortages, the country was badly affected to an extent that they had to introduce power rationing where power was only available for a few days in a week and the organizations like the broadcasting stations were forced to actually close their programs by 10pm whereas other production industries and other large consumers of power were actually not allowed to work for long hours during those 3days that they were provided with power (Harrison, 2000). This was to help in power saving, due to these shortages.
It was due to this crisis that some people planned to replace the prime minister but didn't succeed. Within that period the value of the currency had deteriorated by about 25%. The same year the industrial charter was renewed and various commitments made and the government promised not to reverse the nationalization of the Labour party and it would ensure good observation of the rights of labour (Keith, 1979)
The Britain government was successfully able to decolonize its public and though the Labour party was able to see most of its important decision passed, it split up in 1951. By this time most of its ministers had passed away, due to this the party lost the general election held on 1951 to their opponents by then known as the renewed Conservatives.
Keynesian economic strategy was preferred by the government over those made by the private sector on matters concerning economy with the argument that decisions made by the private sector would delay or lead to insufficient production whereas the policies instituted by the government lead to a productive economy (Sheppard, 2006). The Keynesian economy theory argues that economy would do better when the government /public sector and the private sector combine their efforts but with the government sector playing a bigger role.
Keynes advocates that a reduction on supply with a high demand would affect the economy by leading to unemployment and may also lead to losses of potential output (Sheppard, 2006). It argued that incase of such situation the government should intervene and increase the total demand and by doing this the government will have reduced the rate of unemployment. The government can reduce this rate of unemployment by various means for instance by investing in major development areas like infrastructure and also by reducing interest rate so as to enable the public to obtain goods easily and for investors to be able to venture in various sectors (Marquand, 1988).
Keynes tried to differentiate his rule from that of the classical view. The classical law states that "supply creates its own demand" while Keynes argued that demand of a commodity and its supply affect the output and affect employment in either negative way or the positive way he believed that a reduction in prices would lead to higher demand of the commodity which in turn would lead to an increase in employment sector and a higher production. This theory argues that high investment would not lead to high interest rates in occasions of short terms; instead the rates are determined by the amount of supply and demand of the products within that duration. Whereas the classical theory argues that incase of excessive supply then interest rates are liable of falling.
The neo classical law states that various factors would lead to effects on demand and supply, these factors includes labour and money, it argues that if the labour is too high than the demand then the wages would definitely fall until its demand is also high. The same would happen in case there is too much money then the interest rates would fall until there is a high demand of it with little savings. Too much money would only occur in an economy if there is too much savings would be done due to reductions in investments.
Keynesian theory argued that when there was an active policy of the public/government it would lead to effective productive economy, he said that the public /government should always try and resolve issues like business deficit, economic deficit in a very short time rather than leaving alone the private sector to resolve those problems in a long way. Otherwise this would lead to more serious situations like unemployment and unstable economy.
This theory argues that the government should always encourage policies that will perform against the business cycle, this way the public will be able to reduce fluctuations in business, this can be done through various means like by increasing the amount of tax paid so as to avoid inflation in cases where there is high demand and also by engaging in activities like big project in infrastructure which in turn increases employment and also help in maintaining the amount of cash inflow. This theory was contrary to that of classical economics which said that during the time of inflation in the economy you should reduce taxes and only increase taxes in case where there is a poor performance in the economy.
The Keynesian theory was combined with the classical theory during the post war to come up with a stronger theory which was then referred to as the Neo-Keynesians economics or neoclassical synthesis, this was widely accepted during this period of the post war consensus and was widely used to build up the economy (Harrison, 2000).
The Keynesians theory regarded the monetary policy as being not effective this was highly criticized by the argument that the act of curbing inflation can only deny the financial policy its effects, hence suggested that the main consideration should be on the monetary policy. This criticism leads to revision of theory, so us to adjust in areas that needed to be reviewed.
The Keynesians theory argued that to be able to reduce unemployment then various payment or wages would have to be reduced below the amount of prices, hence this would lead to a reduction in the demand of the commodities and the henceforth reduce the amount of sales in business, hence a reduction in profits as well as revenues. Excessive accumulation of saving will cause a reduction in investment; this should only be caused by a fall in consumer demand or an over investment, in such cases if the economy doesn't fall then the economy equilibrium will be largely affected, its also believed that insufficient power to buy products would also cause a fall in economy.
The Keynesian policy argues that if people would get money and spend it by buying those goods that are consumable saving the rest of the cash this would help in a new production with a self-effacing outside expenditure (Keith, 1979). Also this can be true if the excess expenditure will let businesses to get more labour and compensate for the labour this would in turn promote an extra consumer expenditure, in each step the expenditure becomes smaller hence this would lead to achieving of an equilibrium.