Tale of a death exaggerated: how Keynesian policies survived the 1970s

"Almost all accounts of the history of post-war Britain assume that the decade of the 1970s was the great watershed in the economy, and usually in politics and society more generally. Central to the underpinning of that notion of the watershed is the belief that the 1970s saw the death of ‘Keynesian’ economic policies. Contemporary historians and political scientists have argued about the precise dating and the reasons for its demise, as well as its significance, but that Keynesianism ceased to be significant in British policy-making is agreed unanimously. This paper disputes that assumption, arguing that while Keynesian policies were indeed challenged and temporarily eclipsed, they later made a comeback. Their long-run staying power was much greater than the conventional wisdom would allow. This argument is then deployed to suggest that the underpinnings of Keynesian policies have commonly been misunderstood, and likewise the constraints on such policies; and, further, that the 1970s was less of a turning point in the long-run development of the British economy or British economic policy than commonly believed. The focus, it should be noted is on policy; questions of economic doctrine are not addressed in detail. Part of the argument of the paper is that the ‘fit’ between the respective developments of doctrine and policy is always a poor one, and we should not confuse the trajectory of policy with that of doctrine. The first part of the paper offers a definition of ‘Keynesian policy’ which is then used to suggest that, despite significant changes in the economic and political environment, recognisably Keynesian policies were being deployed at the end of the twentieth century, and therefore did not ‘die’ in the 1970s. The second part suggests how this survival was possible, and what this tells us about the underpinnings and constraints on Keynesianism. The final part looks at the British economy in the 1970s in the light of this re-assessment, suggesting that events of that era were the result of a quite specific conjuncture, and should not be used to support over-generalised accounts of the nature and determinants of long-run economic policy or performance in Britain. The key purpose of the paper is to contribute to a rather more ‘distanced’ understanding of developments in the British economy in the second half of the twentieth century, in the belief that too much of our current understanding is related to the excitement of short-run controversies, which from the viewpoint of today appear exaggerated in their long-run significance."