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Britain Section 2
o Economy has moved away from laissez-faire
o Neoliberalism: government policies promote free competition
and interfere as little as
possible with companies y State and Economy
o Intro (the blurb before the subsection)
1976: Britain receives a bailout from the International Monetary
Fund y IMF was created for third world countries (very, very bad
sign)
y sick man of Europe
UK economy exhibits overall strength
Competitive in financial services
Weak in industrial sector y Productivity gap between UK and
competitors
y Persistant deficit in the UK balance of trade
y Low rates of domestic investment and spending on research
and
development y Production system generates nonstandard and
insecure jobs
o More women and ethnic minorities working in this area
y Products are low tech, low value added
The Labour Party
y 1993: sustained economic growth starting with John Major
y Insists that third way can blend dynamics of market forces
with the
traditional concerns for social justice
o Economic Management
Intro y Macroeconomic policy: the use of broad policy
instruments designed to
influence the economy by adjusting state revenues and
expenditures to
achieve short term goals y Economy is dominated by the Treasury
and the Bank
The Consensus Era (1945-1979) y Post World War I effect
o During WWI the government took control of several sectors
in
order to produce weaponry effectively
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o Interventionist role
y Post World War II effect
o High sense of unity
o Collectivist consensus is crystallized
y Keynesianism: the government nationalizes some industries,
and
assumes direct ownership (basically the government runs a
company)
and in return has the responsibility of economic stability and
growth
(This is the one formed by John Maynard Keynes) y Keynesian
Welfare State (this is what the government policy was)
o State budget deficits are used to expand demand (more demand
=
more consumption and investment)
o Cuts in government spending and tightening of credit and
finance
used to cool demand (too much demand = high inflation =
deficit
in balance)
o Result: expanded economics manage and welfare provision
y 1970s: no economic growth and growing political discontent
y 1970-1964: Edward Heath
o First PM to suffer full burden of recession
o Political opposition from both allies and adversaries
y 1974-1979: Harold Wilson and James Callaghan
o Reinforce impression that government is out of control
o 1978-1979: winter of discontent
1978: Unions break with the government y Unofficial work
stoppages
y Strikes
Weakens Labour party
Discredits Keynesiam welfare state
y 1975: Thatcher becomes Conservative Party leader o
Collectivism is accepted by conservative leaders
Thatcherite Policy Organization y Growing disillusionment with
Keynesianism
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y Monetarism: there is a natural rate of unemployment which
is
determined by the labor market, and monetary policy should be
passive
with limited intervention y No government spending to run up
deficits
y Government contributes by reducing social expenditure and
downsizing
public sector
o Privatize national industries
New Labours Economic Policy Approach y Alternative to monetarism
and Keynesianism
y Blend of elements of Thatcherism and collectivism (the Third
Way)
y 1997: Bank of England is given operational independence in
maintaining low inflation and setting of monetary policy y
Concern is macroeconomic stability
y Focused on designing and implementing job policies to create
new jobs
and get people into the work force
Political Implications of Economic Policy y British government
has never consistantly followed any economic
policy y Economic policy = pragmatic and eclectic
o
Follows a broad moral and cultural vision of society y Economic
management policies are closely linked to social or welfare
policy
o Social Policy
Intro y Social security: system of contributory and
noncontributory benefits to
provide financial assistance to those in needed of
assistance
The Welfare State
y Encouraged private alongside public provision in education,
health care,and pensions
y Increased efficiency in social services
y Reduced values of some benefits
y Collective provision for basic needs --> limited government
ability to
reduce social spending or change institutional behavior
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New Labour Social Policy y Between Thatcherism and
collectivism
y Broader social investment
y Working to break welfare dependency (does give pathways out
of
dependence) y 1999: Bridging the Gap giving young adults various
pathways
(academic, vocational, occupational) y 1998: Better Government
for Older People
y 2000: All Our Futures recommendations to improve daily
life
y Improved NHS quality and performance
y Gains credibility for health care and education
y Society and Economy
Significant disadvantage in minorities and women
o Inequality and Ethnic Minorities
Ethnic minorities are generally are characterized by poverty and
diminished
opportunities
About 7.9% of the UK population (as of 2003) y Indians 21.7
y Pakistanis 16.7
y
Bangladeshis 6.1 y Afro-Caribbeans and other blacks 27.1
Gradual erosion of racial, religious and ethnic tolerance
Ethnic men = poorer treatment by authorities y Police are slowly
recruiting ethnic minority police officers
Race Relations Act of 2000: outlaws direct and indirect
discrimination of all public
bodies
Women get limited employment opportunities
Overrepresented in low-income households o Inequality and
Women
More women than men have part time jobs, but most of them arent
planning on
getting a full-time job; more women then men have multiple
part-time jobs
Gender gap in payment: 85.7% of mens payment
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Blairs government: gender equality in workplace, family friendly
goal (parental
leave, ect), flexibility of work times y These are the minimums
required under the Maastrict Treaty (so it was a
must do to enter the EU)
Still have a high gap between child-care supply and demand y
Britain in the Global Economy
o Foreign direct investment: ownership of or investment in
cross-border enterprises in which
the investor plays a direct managerial role
Favors national systems which relies on private contractual and
market-driven
arrangements
UK=Low costs, political climate, reduced trade union power, many
non-unionized
recruits, government-sponsored financial incentives
Thatcher and Major: FDI is a market-driven alternative to state
intervention to
improve competitiveness y Continued in the Third Way
o Growth in competitiveness
Quality-competitive high technology industries
o Weak industrial performance
