The postwar consensus

For about three decades after the Second World War, British governments of both main parties seemed to pull in roughly the same direction. Conservatives and Labour alternated in power, fought hard elections and traded fierce insults — yet once in office, each broadly accepted the same fundamentals: a mixed economy, a welfare state, a commitment to full employment, and a working relationship with the trade unions. Historians have given this apparent agreement a name: the postwar consensus. Whether it truly existed, and how it ended, is one of the liveliest debates in modern British history.

The pillars of the settlement

The consensus rested on several pillars, most of them inherited from the Attlee government of 1945-51.

The first was the mixed economy: large parts of industry remained in private hands, but key utilities and services — coal, rail, electricity, gas, the Bank of England — were taken into public ownership. Strikingly, the Conservative governments of the 1950s largely left these nationalised industries in place rather than reversing them, a powerful sign of shared assumptions. The second pillar was the welfare state, above all the National Health Service and the system of national insurance. The third was a commitment to full employment, sustained through Keynesian demand management: the belief that government could use spending and taxation to smooth the economic cycle and keep unemployment low. The fourth was a settled, consultative relationship with the trade unions, which were treated as partners in running the economy.

So similar did the two parties’ economic policies appear that in 1954 The Economist coined the word “Butskellism,” fusing the names of the Conservative Chancellor R. A. Butler and his Labour counterpart Hugh Gaitskell to suggest their approaches were almost interchangeable.

The age of affluence

For much of this period, the settlement seemed to be delivering. The 1950s and early 1960s brought rising living standards, full employment and a boom in consumer spending — televisions, cars and washing machines spreading into ordinary homes. The mood was captured by the Conservative Prime Minister Harold Macmillan, who told a crowd in 1957 that most people “have never had it so good.” For many Britons, the consensus years were a time of growing prosperity and security, a marked contrast to the poverty and unemployment of the 1930s.

Did the consensus really exist?

Here the historians divide, and a balanced account must present both sides. The traditional view holds that, whatever their rhetoric, both parties in office maintained the welfare state, the mixed economy and full-employment policies for some thirty years — a continuity of policy too strong to be coincidence.

Revisionist historians are sceptical. They point out that the parties fought bitter elections, disagreed sharply over the pace of nationalisation, taxation and social policy, and that politicians at the time did not think of themselves as sharing any “consensus” — the word was applied later. On this view, the idea is partly a myth that smooths over real and continuous conflict. Defenders of the concept reply that disagreement over details is compatible with agreement on fundamentals: the point is not that the parties were identical, but that neither, in power, tried to dismantle the postwar settlement. Both readings contain truth, and the honest answer is that the consensus was real at the level of broad policy while being overstated if taken to mean genuine harmony.

Strains and breakdown

Whatever its exact nature, the settlement came under mounting strain in the 1970s. Britain’s economy grew more slowly than those of competitors such as West Germany and Japan, prompting talk of national “decline.” Recurring crises over sterling and the balance of payments, high inflation, and the oil shock of 1973 battered the economy. Most troubling for the consensus, the country experienced “stagflation” — high inflation combined with high unemployment — a combination the Keynesian framework struggled to explain or cure, since the standard remedies for one tended to worsen the other.

Industrial conflict added to the sense of crisis. The climax came in the “Winter of Discontent” of 1978-79, when widespread public-sector strikes over pay disrupted services across the country, leaving rubbish uncollected in the streets and, in some places, the dead unburied. The images did enormous damage to James Callaghan’s Labour government and seemed to symbolise the collapse of the consensus’s cooperative relationship with the unions.

The end of an era

The usual marker for the end of the consensus is the general election of 1979, which brought Margaret Thatcher to power. Her government consciously rejected the postwar approach. In place of Keynesian demand management it adopted monetarism; in place of the mixed economy it pursued privatisation; and in place of partnership with the unions it set out to curb their power. The assumptions that had guided British policy since 1945 were, for the first time, deliberately broken.

The debate over the consensus still matters because it shapes how we judge both eras. If 1945-79 was a stable, broadly fair settlement, Thatcherism looks like a rupture; if it was a period of relative decline and union overreach, Thatcherism looks more like a necessary correction. How one tells the story of the consensus largely determines how one tells the story of what came next.