The Collapse of Corporate State Keynesianism

Abstract

By the end of the 1970s Britain’s mixed economy had long since come to resemble a corporate state, jointly administered by the government of the day and the trade union leaders. The intellectual rationale for such an economy was derived from Keynesianism, although Keynes himself would have found repellent subsequent high levels of inflation. Nevertheless it surely owed its justification to Keynesian notions of government intervention, demand management, and full employment planning through an enlarged public sector. To be sure there had been dry runs for what was later to be called Thatcherism — the 1958 resignation of the Treasury team, the Selsdon period 1970–1, and Denis Healey’s reluctant IMF-inspired monetarism — but the overwhelming majority of consensus politicans, civil servants and academic economists all expected the Keynesian corporate state to survive any return to free-market-based economic theory. The celebrated appeal for a change of strategy by the 364 economists, who after the 1981 budget urged a reflationary policy, was testimony to the expectation of a re-emergence of Keynesian macroeconomic management. Instead what has proved so remarkable about the economic changes introduced since 1979 has been the total intellectual collapse of the corporate state and the notions of governmental regulation which had sustained it.