I. The Welfare State, 1945-79
 
 

A. The Core Idea: after political democracy comes economic democracy

 
1. Nationalize the core of the economy.
    steel, coal, railroads, airlines, petroleum, banks, telephone
    logic: the core of an economy is too important to be left to the marketplace;
        It needs social planning and social control

2. National Health Service
    doctors are salaried, paid from taxes, no fee for service

3. Unemployment insurance
    unemployment is the fault of bad management, not the workers,
        so why should workers pay the price?

4. public housing

5. expanded public education
 

B. Problems with the Welfare State:
 

1. Economic stagnation, low growth rate, Great Britain passed by Spain

2. strikes, disruptions, e.g. coal strike, 1972

3. Inflation
    stagnation + inflation = stagflation (the British disease)

C.  Reasons for the British Diseases

 
1. Weak incentives
        high taxes, why work?
        high benefits, why work?

2. Poor management in public sector industry,
        maintain high employment, not efficiency

3. Historic antagonism between upper and working classes

4. Loss of empire

II. Partially Undoing the Welfare State
 

A. Margaret Thatcher/Conservative Party elected in 1979

B. Tried to undo the welfare state
        weakened labor unions
        lowered taxes
        privatization of state owned enterprises
        tried to reduce National Health Service (much resistance)

C. generated anger over new taxes, reduced services.
ultimately, Conservative Party decided to elect John Major to replace  Margaret Thatcher as leader

 III. Limits to change
        Labor won in 1998 (Tony Blair)
            helped poor people, made income more eqalitarian article
 
 

Sketch of Changes in Economic Policy

Note: Sept 2006 election in Sweden, with 7 parties debating economic policy   1  | 2
 
 
 

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