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Economics and Politics in Britain and the US, from 1945 to the 1980s.

Britain and the Labour Government, to 1951 | Truman and his Republican Opponents | Britain's Welfare State, 1951-79 | The US economy from Eisenhower to Carter | Prime Minister Thatcher's Policies | President Reagan and his Inaugural Address | Reagan's Economic Policies

Britain and the Labour Government, to 1951

During World War II in Britain those normally opposed to government involvement in the economy were by necessity quiet on the issue. Britain's government fixed prices, rationed what people could consume and nationalized some industries. Also, of course, government 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.

The government was a coalition led by Winston Churchill – a conservative aristocrat – joined by the Labour and Liberal parties. In the July 1945, with the war having ended, the Labour Party won in a landslide. 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. Much of this had been advocated by Britain's moderate socialists. They wanted to maintain some of capitalism and free enterprise and were beyond the either-socialism-or-capitalism that marked Lenin's Marxism.

The Labour Party 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) – more than twice as much as that run up by the US government during the war. Britain had been in the war since 1939. It had suffered aerial bombardments. Its industries had not prospered during the war as had US industries. British trade had declined and income had been lost that had been derived from overseas investments.

With all of the Labour government's spending, it managed to begin paying down the national debt. Britain's national debt was flat at 230 percent of GDP through 1946 and 1947 and was to decline to around 190 percent by 1950 ( The Labour government did this with a program of austerity. Its austerity measures included a continuation of wartime rationing of food and other essential goods, and it put restrictions on the buying of imports.

The government faced its challenge regarding the economy with a Keynesian strategy: 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" that existed during 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 Britain's Godfrey Winn, described by David Kynaston in Austerity Britain, is indicative. Winn was visiting Stockholm in 1946. 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."

The British suffered 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 froze into the ground. Morale declined and government ministers were scapegoated.

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 within the Labour Party. Party leaders favored consolidating gains in welfarism rather than engaging in further socialist experimentation. Also they were 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 Labour Party leaders 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 making sacrifices, and they were not very concerned about the Labour government's prestige. Some among them looked upon the Labour Party's intellectual sympathizers with easier jobs as dandies. Their attitudes disappointed wealthy supporters of the Labor Party's welfarism and socialism.

Life remained harder for the average Briton than it was for the average US citizen. Few Britons had washing machines. Their holidays were usually spent at home. Going into the general election of 1950 there was one bright spot. Attitudes toward the National Health Service (NHS) were generally upbeat. It was costing more than its creators had expected, but bitterness between the health bureaucracy and doctors had diminished. The Labour Party went into the elections of 1950 burdened by the poor performance by Britain's industrialists, who were slow in investing in new machinery and raising productivity – during rising competition from German and Japanese manufacturers.

Britain's 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. In the elections, Labour failed to maintain the support of white collar workers and the middle class that they had received in their 1945 landslide victory. In 1950 Labour retained its majority in parliament but only by 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." Labour in the 1951 elections won more votes than the Conservatives: 13,948,385 to 13,724,418. But the Conservative Party won more seats. Winston Churchill formed a coalition government with the conservative National Liberal Party.

But Churchill disappointed those who were hoping for a great reduction of government involvement in the economic life of the country. He continued the "we're in this together" spirit. Following his victory he said: "We have all, I feel, a great deal in common."  Churchill 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.

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