Postwar Welfare State to Thatcher and Reagan

Britain and the Labour Government, to 1951

During World War Two, voices against government involvement in the economy were weak to say the least. During the war, Britain's government fixed prices, rationed what people could consume and nationalized some industry. It also ordered the manufacture of military supplies and paid the salaries of people in the military. The government was seen as capable of organizing the resources of the nation as the defense of the homeland.

The government was a political coalition led by Prime Minister Winston Churchill – a conservative aristocrat – joined by the Labour Party and the Liberal Party. In the July 1945 general election, Churchill lost. The Labour Party won in a landslide. War in Europe had ended and the average Briton wanted a continuation of government as a responsible agent for their well being. With the experience of the Great Depression and World War II behind them, many believed that it was the state that could best supply the leadership and capital for postwar reconstruction. And it was believed that common people deserved as good of a life as possible as their reward for endurance and for their contributions in defending the homeland. The Labour Party won the elections of 1945 under the banner of eradicating the evils of want, squalor, disease, ignorance and unemployment.

The Labour government, led by Clement Attlee, nationalized the railroads, utilities, the Bank of England, coal mines and the steel industry. The government gave the nation "cradle to grave" health coverage and it invested in public housing. It was Britain's new beginning with what would be called its welfare state, much of it inspired by moderate socialists – the Fabians – who can also be described as Social Democrats.

Labour was enacting a lot of government spending while the government was burdened by a debt of around 220 percent of the Gross Domestic Product (GDP) at the end of the war – more than twice as much as that run up by the U.S. government during the war and much higher than the 70 and 60 percent for Britain and the U.S. in 2010.

Britain's astronomical debt can be blamed on Hitler. Britain had been in the war since 1939. It had suffered aerial bombardments, and its industries had not prospered during the war. And British trade had declined, with Britain losing the income previously enjoyed from overseas investments.

With all the government spending, the Labour government managed to begin paying down the national debt – as was the United States in these same years. Britain's national debt was flat at 230 percent of GDP through 1946 and 1947 and was to decline to around 190 by 1950. (See http://www.ukpublicspending.co.uk). Labour did this with a program of austerity.

Britain began its postwar years in economic hardship. During the war, American Lend-Lease had propped up the standard of living in Britain. But that ended with the end of the war. Britain still needed U.S. dollars, but it suffered from a decline in exports. To compensate for that decline, austerity measures cut the purchases of goods from abroad. Under the Labour government the rationing of food and other essential goods had to be continued. The government faced its challenge regarding the economy with Keynesian strategies: getting money to the common people for what little spending there was. There was a spirit of equality about it – the spirit of "we're in this together" continued from the war.

Unemployment stayed around 2 percent, and inflation remained low. But housing was ugly, with overcrowding and dilapidation accompanying subsidies. Regarding housing, an exchange between a Swede and a Briton Godfrey Winn, described by David Kynaston in Austerity Britain, is indicative. Winn was visiting Stockholm in 1946, where a welfare state was also developing. He was shown "wonderful modern buildings" and "blocks of worker's flats, with every amenity one could imagine." His guide was prideful and spoke of the slums that still existed in Britain. Winn asked when all this was built, and the reply was 1940. "Ah," said Winn, "In 1940 we had other things on our mind."

Life continued to be rough on people during the unusually severe winter of 1946-47. Coal supplies were limited and often power stations were forced to shut down. The government introduced measures to cut power consumption to homes to 19 hours per day. Radio broadcasting was limited and the size of newspapers cut. Toward the end of February, 1947, a fear of food shortages arose as supplies were cut and vegetables frozen into the ground. Morale declined and government ministers scapegoated.

The suffering caused by the winter of 1946-47 and the government's austerity program produced a decline in the popularity of the Labour Party. Meanwhile there were ideological conflicts among supporters of the welfare state. Labour Party leaders favored consolidating gains in welfarism rather than engaging in further experimentation. They were also conservative on social issues. A report submitted to the Labour Party with proposals for abolishing the "crime" of homosexuality and for modernizing divorce laws was received by the Labour Party with embarrassment and a determination that word should not be leaked that such proposals had been received.

There were conflicts too in the form of labor union strikes. Coal miners were especially unenthusiastic about playing at sacrificing for the sake of prestige for the Labour government. Some among them looked upon intellectual sympathizers with easier jobs as dandies. And there were wealthy sympathizers with welfarism and socialism who were disappointed by the attitudes of workers.

Going into the general election of 1950 attitudes toward the National Health Service (NHS) were generally upbeat. It was costing more than what had been expected by its creators, and bitterness between the health bureaucracy and doctors had diminished.

There was the poor performance by Britain's industrialists, who were slow in investing in new machinery while facing a rising competition from German and Japanese manufacturers who had been forced into renewal projects and greater productivity thanks to Allied bombing.

Life was harder for the average Britain than it was for his American cousin. Few Britons had washing machines. And holidays were usually spent at home.

Conservatives campaigned in 1950 for more free enterprise, the freedom to build houses, freedom of doctors to practice where they liked and an end to rationing as soon as possible. In the general election of 1950 Labour failed to maintain the support of the white collar workers and middle class that they received in 1945. Rather than the landslide that Labour enjoyed in 1945, Labour's majority in parliament was reduced to only 5 seats.

Labour called for elections again in 1951, hoping to enlarge its majority. It was an election impacted by Britain's participation in the Korean War and questions of defense spending, national security and the Cold War. The Conservative Party promised to create a country that was "strong and free." In the election, Labour increased its vote slightly and won more votes than the Conservatives: 13,948,385 to 13,724,418. But the Conservative Party won more seats, and with the National Liberal Party a coalition government was formed by Winston Churchill.

Churchill disappointed those conservatives who were hoping for a great reduction of government involvement in the economic life of the country. Churchill continued with the "we're in this together" spirit that had prevailed from the war. Following his victory he said: "We have all, I feel, a great deal in common." He appointed a cabinet that he described as having the widest representation possible. Government restrictions on the economy were eased slightly and a few nationalization programs were ended, but Churchill's government largely maintained the Labour Party's Welfare State, including the National Health Service and rationing.