From Keynes to the Rise of Thatcherism - Essay Example

?The Structure of Employment in a Historical Context: From Keynes to the Rise of Thatcherism The economic system in Britain has dramatically changed over the past two centuries. Not to say, political philosophers had a major impact on the government intervention in terms of public spending. The stress on laissez-faire by Keynes was one way to look at the economic system in Britain. Then there was the Beveridge Report in 1942 that established the concept of welfare state at a significant moment of time during the war. The Beveridge Report established the state outlook towards welfare settlements in the post war period. In fact it was a significant development in the sphere of welfare and welfare rights. It established the key features of welfare that had an echo in the decisions made by the more recent governments, though the Beveridge Report was propounded to identify the changes required after the II World War. The past economists such as Keynes and Adam Smith did influence the way the DWP works today, including the current propositions extended by the new conservative and liberal democrat coalition. The influential economists like Keynes in particular made some assumptions regarding the future problems and crisis pertaining to inflation and unemployment and influenced key debates centred on the British economy. In that context, the Beveridge Report definitely created a controversy. The Labour party actually denounced the Report and labelled it to be “Beveridge’s individual contribution” that intended that the people from low income groups would still need to regularly contribute to the national exchequer on a weekly basis, regardless of how much they earned. Professedly the provisions made by the Report were aimed at rescuing the British economy from the effects of the War. With no constitutional measures in place, the Report intended to regulate the requisite provisions only until 1946. The Keynesianism differed from the Beveridge Report with regards to the idea of the multiplier effect. In contrast, the Beveridge Report focused on making a revolutionary change with the contribution of a single idea that the not so wealthy would pay at the same rate of taxation as those who were wealthy, which was a problematic proposition for the poor people. Also the social insurance as the primary provision was proposed to be considered a major part of any comprehensive social policy. The Beveridge Report also ignored the issues related to gender, class and race. The Keynesian ideology on the other hand facilitated a distinct evaluation of the economic system and social security that led the contemporary government to rethink the changes required in the present day British economy. Keynes supported the incentives to government spending and stated that “equilibrium could be established before the point was reached, and therefore the governments wishing to achieve full employment had actively to intervene in the economy by stimulating aggregate demand, and conversely that if full employment resulted in inflation, they should act to reduce aggregate demand, in both cases by using the devices of tax, policy, government expenditure and monetary policy”. Thus the idea of government intervention in a way challenged the notion of laissez-faire. Applying the idea of utility to employment, Keynes said that “if the utility of real wages from a given amount of work was greater than the disutility from work, workers would be able and willing to work; hence supply of labour would be forthcoming on the labour market”. Actually this concept is more complicated than it sounds. Keynes facilitated a clear model to demonstrate the relationship between inflation rates and the interest rates in Britain (Kriesler & Sardoni 1999). This in a sense allowed an understanding of what could happen in the future and the economic frustration rampant in the contemporary society. In that context, Keynesianism extended influential studies in economics as Keynesianism, Post-Keynesianism and Neo-Keynesianism. The proponent of the economic theory in Britain was the classical economist Adam Smith who extended the term ‘free-markets’ and the theory of regulation of free markets. He stressed on the ability of the free markets to operate on their own without any outside intervention. He believed that the division of labour and its interaction with the free markets do work well and create incentives for the people in the long run. However, Smith’s ideology is less marketable as it challenged Keynesianism and proposed an economic structure that could ideally speaking come to its knees, if not protected by government intervention. Keynes exposed the lacunas inherent in this theory by stating that “Long run is a misleading guide to current affairs. In the long run we all are dead”. This statement sounded apt in case of the depression that Britain was facing at that time. From the early Keynesianism to the new Keynesianism, Britain had been a witness to great transitions in the last 30 years that are difficult to analyze and evaluate. However, the evolution of Keynesianism to the rise of Thatcherism in the 80s allows us to analyze the changes in the sphere of unemployment, class and housing opportunities. The core issue being addressed in this debate is the commodity status of labour. Right from the economic liberalism of Adam Smith to the current times, it has been amply evident that capitalism might fail without interventions in the labour market. Polanyi argues that the Poor Law of 1834 well illustrated how people need the ability to survive one way or the other. On the one side if people do not get the chance to work, they should not be allowed to starve, but on the other side benefitting the non-workers would mean the demise of capitalism. The history of labour market well explains the problems associated with the idea of intervention in labour market. Although it sounds fair to extend equal opportunities for work to all, yet in a world marred by disparities in qualification and skills, it is really easier to understand as to who fill get employed first. Even though, historically the economists have disapproved of interventions in labour market, the poor law of 1834 proves beyond doubt the consequences of unemployment and the relevance of the issues associated with wages and social benefits. Keynes justified the idea of intervention in labour markets and the de-commoditisation of labour. In contrast, the Thatcher regime upheld the commoditisation of labour. It took new measures to cut down expenditure on public services and tried to regulate labour by diluting the power of trade unions. It stressed less on the idea of achievement of a welfare state and focused on the self regulating capacity of market. Thatcher did not believe in society but believed in individuals and individual responsibilities. To put simply, Thatcher’s strategy was to cut down spending in certain public areas like health and education to promote growth in the UK. Earlier governments largely depended on the Keynesian doctrine of allowing the economy to achieve maximum levels of employment even when the nation was facing inflation. Keynes stated that “the important thing for the government is not to do the things that individuals are doing already and to do them a little better or a little worse; but to do those things which at present are not done at all (Schuknech & Tanzi 2000: P: 9)”. The great depression saw the rise of many influential economic theorists like Hansen and Lerner who argued that the government needed a yet more improved governmental intervention (Schuknech & Tanzi 2000). Hansen and Lerner considered the ongoing government intervention during depression to be unstable and jeopardizing in its consequences. They argued that Keynesian doctrine does profess a little control over the future, but the very same theory could also lead to unemployment also. Tanzi (2000: P: 10) stated “the great fear of unemployment after the Great Depression came to be tempered by the belief that the application of Keynesian demand policy could eliminate or at least reduce business cycles and unemployment”. However Thatcher and her policies wanted to achieve change by cutting down expenditure on public services. The Great Depression of the past dictated some key changes that Thatcher introduced. She set out clear objectives to achieve economic growth. Though Thatcher’s approach was controversial yet it do succeeded in achieving economic growth in Britain for some time (Evans 1997). Chancellor Lawson lauded Thatcherism as nationalism and free market. Nonetheless, Thatcherism was evaluated as being greedy by many. Letwin (1992) argued that it was reminiscent of the post war era where the rich remained rich and the poor remained poor. Now if Keynes is considered to be “incompatible” with the British economy, what is one to consider Thatcherism and its approach? To put it simply, Thatcherism intended to defend hard core capitalism so as to save capitalism (Evans 1997). Letwin (1992) states that Thatcher believed that in order to have a stable capitalist Britain “social democracy had to be abandoned”. Still, the crux of the matter is that Thatcherism did promote economic growth up to a level and thus opened new avenues for understanding employment, growth and economy in Britain. It is difficult to dub Thatcherism as good or bad, yet it added to the theory of employment and welfare. Same could be said about Keynesianism. The more important points to be understood is that why Thatcher came into power and that would Keynesian theory have helped Britain in those times? The New Conservatives: David Cameron and the Proposition of New Employment Although Thatcher’s theory was controversial and far from the ideals of the Labour Party, the dominating instinct of the Tory Party at that time was to not to allow individuals feel trapped in the term society, but to be individuals and accept the responsibility to work. The ideal of the Thatcher government was to take economy where it was supposed to be. However, the pressing question is that does the Conservative Party today intends to deal with the problems of unemployment and growth in the same way as Thatcher did? Once again Britain is facing rising unemployment and an augmenting depression. Yes, the Conservatives do intend to be influenced to some extent by Thatcherism in the context of increasing the GDP. Yet, they do intend to intervene in the free markets as well. They intend to do so by focusing on creating opportunities for people, like apprenticeships and skill enhancement opportunities, to augment their ability to acquire the requisite skills and to improve their chances of finding jobs. Their salient aims and objectives are: To eliminate the existing program of employment and to create a new program of welfare that provides better opportunities to people. Those on JSA will be provided better services and would be referred to the new system of welfare to increase their chances of getting into paid jobs. There exist many barriers in the existing welfare system and the new system intends to remove these barriers so as to extend support to those who really need it. National minimum wage will still stand at the same range. The Conservative says that it is being done to allow those on the low income to be on the same standing as others. Provision is being made for other services such as clubs to allow for skill building and the exchange of learning and skills that will help the unemployed to benefit from them and achieve a better future. TH Marshal was another influential political theorist who believed that citizenship was what the welfare needed. His definition of social citizenship was the right to work and to have what everybody is bound to have in order to live. However, some may disagree with Marshal’s views as welfare means more than citizenship. Christopher Pearson writes in his book The Welfare State that social welfare should be looked upon more deeply as it is a more complicated concept than what it seems. He states “if social rights are given the legal and practical status of property rights, if they are inviolable, and if they are granted on the basis of citizenship rather than performance, they will entail a de-commoditisation of the status of individuals” (The Welfare State Reader P: 163). He believed that the concept of citizenship is imbued with competition and hence stratifications and class are really crucial in analyzing and understanding welfare in Britain. While trying to account for welfare, when need to consider other aspects such as family, class and stratification. To conclude, it will be pragmatic and apt to say that the economic and political theories need to be seen as varied medicines that are required to rescue the ailing economies and social ills. No one economic or social situation is akin to the other and no social or political theory could be considered to be a panacea for all the economic ills ailing all the societies in all times. What works in one age and time may not do so in other. In that context, the economic and political theorists, right from the times of Classists like Adam Smith right to Neo-Classists like Thatcher do deserve the time and attention of informed academic research and endeavour. Reference List Evans, Eric J 1997, Thatcher and Thatcherism, Routledge, London. Kriesler, Peter & Sardoni, Claudio 1999. Keynes, Post-Keynesianism and Political Economy, Routledge, London. Read More