Dries. Wets. You can see some of these people s faces on page

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2 Wets One Nation, Keynesian (previous PMs Macmillan, Home and Heath). More consensus. Not prepared for tough measures if it would lead to unemployment. E.g. Carr and Walker (who had left the Shadow Cabinet on Thatcher s election). Willie Whitelaw, Ian Gilmour, Lord Carrington, Francis Pym, Jim Prior. Dries Uncompromising measures necessary before Britain recovered its economic position. Monetarism. Sacrifice unemployment for lowering inflation. E.g. Thatcher, Keith Joseph, Geoffrey Howe, Angus Maude and John Biffen. You can see some of these people s faces on page

3 Consensus Governments agreeing to: Commitment to Keynesianismtax cuts and boost state spending. Acceptance and some encouragement of the role of the trade unions. Mixed economy- place for state ownership of utilities, intervention and planning in the economy. Welfare state. Promotion of greater equality through social engineering. Conviction Quite different.

4 John Maynard Keynes: Economist, effectively ended laissez-faire economics with his belief that government intervention could solve struggling economies. Named one of the 100 most influential people of the 20 th Century by Time Magazine.

5 People buy stuff People want to spend wages. Increases demand for stuff. Jobs/ wages rise. Increases jobs making and supplying stuff.

6 People save money People don t want to spend wages if they have them. Demand for stuff is lessened. Unemployment rises, wages lower. Jobs making and supplying stuff decrease.

7 Keynes recommends... People save money People don t want to spend wages if they have them. Demand for stuff is lessened. Injection of government funds Jobs in public Unemployment sector/ welfare rises, wages lower. increase. Jobs making and supplying stuff decrease.

8 People buy People save money stuff People don t People want want to to spend spend wages if wages. they have them. Demand Increases for demand stuff is for lessened. stuff. Injection of government funds Jobs in public Unemployment wages rises, Jobs/ sector/ wages rise. welfare lower. increase. Jobs Increases making and jobs supplying making and supplying stuff decrease. stuff.

9 This was the view that the reason for inflation was the willingness of government to create an excessive money supply- NOT wage increases. Therefore wage increases should be controlled (never popular with voters). Wage increases were seen as happening due to excessive trade union power- the trade unions need squishing. This would mean that their agreement would not be required in economic policy and power would return to managers and governments. Conservatives liked this- especially traditional Conservatives who wanted Britain as head of a great empire run by all-knowing Tories.

10 People save money More people People return don t to work (increased want to spend wages profits if can they be have reinvested) them. Public sector spending controlled, cutting taxes. Profit motive returns Unemployment rises, wages lower. Welfare state dependency reducedincentives to work increased Jobs making and supplying stuff decrease. Demand for stuff is lessened.

11 People buy save money stuff More people People return don t to work People (increased want want to spend to spend wages profits if can wages. they be have reinvested) them. Public sector spending controlled, cutting taxes. Profit motive returns Unemployment rises, Jobs/ wages rise. wages lower. Welfare state dependency reducedincentives to work increased Jobs making Increases jobs and making and supplying supplying stuff stuff. decrease. Demand Increases for demand stuff is for lessened. stuff.

12 The new thinking meant that public spending would be controlled, which would mean cuts in taxes and more profits and incentives to enterprise. Inefficient state monopolies in nationalised industries would be sold into the private sector and opened up to private sector disciplines- reducing state subsidies and eventually generating tax revenue. Welfare state would be reformed- increasing incentives to work and removing or reducing dependencycontaining public spending. Radical- and Heath and other one nation Tories didn t like it. Neither did the old style Tories.