United Kingdom

The social state gave way to a state that was regarded as “enabling,” permitting not only the citizen but also the firm, the locality, and so on to freely choose. This politics of choice was in fact shared by the Thatcher’s Conservative administration and Blair’s Labour one. In both the state was seen as a partner. In the so-called “Third Way” of Blair, one between socialism and the market, the partnership evolved much more in terms of community than in the Conservative case. In Blair’s Labour vision there was a more active concern with creating ethical citizens who would exchange obligations for rights in a new realization of marketized communities. This new relation of state and society involved the decentralization of rule upon the citizen himself and herself, which was reflected in the host of self-help activities to be found in the Britain of the 1990s and 2000s, from the new concern with alternative health therapies to the self-management of schools. Reflecting this decentralization (in which the state itself made the citizen a consumer, for instance, of education and health) was the increasingly important role of the consumption of goods in constructing lifestyles through which individual choice could realize self-expression and self-fulfilment.

Economy and society

Economically, Britain had been hurt severely by World War I. The huge balances of credit in foreign currencies that had provided the capital for the City of London’s financial operations for a century were spent. Britain had moved from the position of a creditor to that of a debtor country. Moreover, its industrial infrastructure, already out of date at the start of the war, had been allowed to depreciate and decay further. The industries of the Industrial Revolution, such as coal mining, textile production, and shipbuilding, upon which British prosperity had been built, were now either weakened or redundant. The Japanese had usurped the textile export market. Coal was superseded by other forms of energy. Shipping lost during the war had to be almost fully replaced with more-modern and more-efficient vessels.

Finally, the Treaty of Versailles, particularly its harsh demands on Germany for financial reparations, ensured that foreign markets would remain depressed. Germany had been Britain’s largest foreign customer. The export of German coal to France, as stipulated by the treaty, upset world coal markets for nearly a decade. Depression and unemployment, not prosperity and a better Britain, characterized the interwar years.

The British economy, as well as that of the rest of the world, was devastated by the Great Depression. The post-World War I world of reconstruction became a prewar world of deep depression, radicalism, racism, and violence. Although MacDonald was well-meaning and highly intelligent, he was badly equipped to handle the science of economics and the depression. By the end of 1930, unemployment was nearly double the figure of 1928 and would reach 25 percent of the workforce by the spring of 1931. It was accompanied, after the closing of banks in Germany in May, by a devastating run on gold in British banks that threatened the stability of the pound.

Ramsay MacDonald.Central Press Photos Ltd.

MacDonald’s government fell in August over the protection of the pound; Britain needed to borrow gold, but foreign bankers would lend gold only on the condition that domestic expenditures would be cut, and this meant, among other things, reducing unemployment insurance payments. However, a Labour Party whose central commitment was to the welfare of the working people could not mandate such a course of action even in an economic crisis. Thus, the Labour cabinet resigned. MacDonald with a few colleagues formed a coalition with the Conservative and Liberal opposition on August 24, 1931. This new “national” government, which allowed Britain to go off the gold standard on September 21, was confirmed in office by a general election on October 27, in which 473 Conservatives were returned while the Labour Party in the House of Commons was nearly destroyed, capturing only 52 seats. MacDonald, who was returned to the House of Commons along with 13 so-called National Labour colleagues, remained prime minister nonetheless. The new government was in fact a conservative government, and MacDonald, by consenting to remain prime minister, became and remains in Labour histories a traitor.