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January 11, 2012


Thomas Neumark

I'm very sceptical that people had more faith in the state in 1945.

I might be convinced that there was more deference but faith seems quite a push.

I agree that Labour politicians had more faith in the state, but that's quite different to people.

Liam Murray

The fact that in 1945 welfare recipients were "regarded as deserving" wasn't a function of advocacy for them on the part of the Labour government; it was just the sense people had about social need and probably also explains the electorates readiness to eject Churchill so soon.

I'd suggest the current perception is similarly broad (and vague) in origin; in other words it's not people being taken in by nonsense from Murdoch/Dacre or Labour's reluctance to challenge it but just their personal experience & observation.


There was the little matter of Marshall Aid - $3.3bn in cash shovelled the way of Attlee's government from 1948-51, 85% of which was pure gift, not lending. There was another $4.6bn lent by the States to the UK.

The country was bankrupt by 47/48. Marshall aid saved Attlee's government from total disaster. Shame we didn't go bust then. Would have killed socialism stone dead in the UK, and saved us from 65 years and counting of idiots telling us that we can increase our wealth by spending other peoples money.


Don't forget the extent to which the BW system and Keynesian monetary policy precipitated growth, allowing for high growth and full employment.


That full employment was caused, in part, by sending the women who had been working in the mills and other areas back home so that the returning men could have their jobs.


Marshall Aid was paid back - with interest - in 2006 :- http://news.bbc.co.uk/1/hi/6215847.stm

Interesting that you wish for economic collapse to validate your political ideology.


"Rising costs. Baumol’s cost disease means that the relative cost of state services such as health and education has risen."

Chris: you often refer to the Baumol effect as a "disease". I'm not sure this is an accurate label.

The Baumol effect is just the inevitable consequence of efficiency gains in manufacturing and agriculture meaning that, as a society, we can spend more on healthcare and education. Yes, productivity grows more slowly in these areas, but so what? You can't have everything.

I suspect the "disease" label has arisen because healthcare and education are largely paid for through the public sector. Therefore higher healthcare spending and education spending means that state spending will rise as a proportion of GDP. Some people don't like this, but I'm pretty ambivalent about it.

But this rise in the proportion of our income we spend on health'n'education isn't a "disease."

Philip Walker

"support for stronger trades unions - an efficient alternative to laws - and more worker power on boards would be a start."

Just don't combine the two! If putting Bob Crow on a corporate board is the answer, you have to be asking the wrong question.

TACJ: Everyone calls it Baumol's cost disease; it's its name, in the same way as Say's Law is so called even though many dispute that it is any sort of law at all.

john b

Hmm. I wonder, was there some kind of event which happened in the 1940s and cost a vast amount of money? Nah, can't think of anything - it must just be that the country was bankrupted by socialism.


"But support for stronger trades unions - an efficient alternative to laws - and more worker power on boards would be a start."

This is absolutely vital. And it's the one thing that Thatcherite parties won't do.


You forgot demographics. Perhaps the most important difference?

 Luis Enrique

some egalitarian policies (redistribution) put a strain on public finances - so are harder in times of austerity - and others don't (strengthening workers' bargaining power?).

The big question imho is what determines the pre-tax distribution of income - it may be that income was more evenly distributed in 1940s because these mysterious forces were favourably aligned (your point 4. being one of them, perhaps) rather than having anything to do with your other points.

I can't say I understand how you they did things that involved large public expenditures (like establish NHS, start paying out unemployment benefits etc.) and run a budget surplus (and service a big stock of debt) if the public finances are "poor" - how does that add up? How did they finance the welfare state, NHS etc. and still run a surplus if not with booming tax revenues? If they used seigniorage, isn't that accounted for as a deficit? If tax revenues were booming, how was (government) money scarce?

you mention that redistribution via benefits in kind (education, health) is an example of an egalitarian policy (which might be getting harder to do because of changes in relative prices) but I think it's worth noting that when people complain about growing income inequality they are not adjusting for benefits in kind. I wonder, if you do account for benefits in kind, whether the degree to which society redistributes might be greater today than it was in 1940? If so, status of your points 1 2 3 is questionable.

 Luis Enrique

[if they could afford to do it all because tax revenues were high, previously funding military, and they were able to cut that and spend the money instead on NHS etc., I'm not sure you can claim that was a time when public finances were under pressure (austerity) - if we had some massive item of expenditure we could just stop, we'd have plenty of lolly left over too.]

Frank H Little

There *was* a consensus. I would point Thomas Neumark at the actions of Conservative politicians in the 1950s. They accepted much of the welfare state, while admittedly dismantling most of the industrial nationalisation.

Earlier, of course, it was a Conservative who saw the 1944 Education Act onto the statute book.

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