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Post-war consensus

The post-war consensus was an era in British political history which lasted from the end of World War II to the election of Margaret Thatcher as Prime Minister of the United Kingdom in 1979.

The foundations of the post-war consensus can be traced to the reports of William Beveridge, who in 1942 formulated the concept of a more comprehensive welfare state in the United Kingdom. Shortly after the surrender of Germany in May 1945, a general election was held in the UK. The result was a landslide victory for the Labour Party, whose leader was Clement Attlee. The policies undertaken and implemented by this Labour government laid the base of the consensus. The Conservative Party accepted many of these changes and promised not to reverse them in its 1947 Industrial Charter.

The post-war consensus can be characterised as a belief in Keynesian economics, a mixed economy with the nationalisation of major industries, the establishment of the National Health Service and the creation of the modern welfare state in Britain. Such policies were instituted by all governments (both Labour and Conservative) in the post-war period. However, in early 1976 expectations that inflation and the double deficit would get worse precipitated a Sterling crisis, and by October the pound had fallen by almost 25% against the U.S. dollar. At this point the Bank of England had exhausted its foreign reserves trying to prop up the currency, and as a result the Callaghan government felt forced to ask the IMF for a £2.3 billion loan, then the largest that the IMF had ever made. In return the IMF demanded massive spending cuts and a tightening of the money supply, signalling the end of Keynesian economics in Britain. Callaghan reinforced this message in his speech to the Labour Party Conference at the height of the crisis, saying:

We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.
Yet despite this, some elements of the post-war consensus continued.

However, in the 1970s the consensus was increasingly seen by those on the right wing as being the cause of the UK's relative economic decline. Believers in New Right political beliefs saw their ideology as the solution to Britain's economic dilemmas in the 1970s. As a consequence, the Conservative Party won the 1979 general election, thus bringing to an end the post-war consensus.

New Zealand

The 'post-war consensus' is also regarded as an era of New Zealand political history, from the first New Zealand Labour Party government of the 1930s until the election of a fundamentally changed Labour party in 1984, following years of mostly New Zealand National Party rule. Like in the UK, it was built around a 'historic compromise' between the different classes in society: the rights, health and security of employment for all workers would be guaranteed, in return for co-operation between unions and employers and a very potent form of continuously conservative governments. The key ideological tenets of governments of the period were Keynesian economic policy, heavy interventionism, economic regulation and a very powerful welfare state.

See also: Butskellism.

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