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Interventionism – a political and economic philosophy that envisages an active role for the state in economic management. The state acts as a significant force in determining economic policy primarily through taxation and expenditure, to flatten out the effects of the economic cycle in order to produce conditions of stability for investment and economic growth. The scale of intervention is a matter of political choice with socialists favouring greater state intervention through more state ownership of industries, assets and services and tighter regulation and conservatives and liberals to greater or lesser degrees favouring de-regulation, privatisation and overall less government intervention. At the highest level of intervention the government would be running something leaning towards a ‘command economy’, in which ‘resources are allocated by the government’. The post-war Attlee government represents the high watermark of government intervention in the United Kingdom through a programme of nationalisation of the “commanding heights” of the economy and a commitment to fulfill the 1944 White Paper on Employment demand for full employment. It also created a national education service (1944), the National Health Service (1948), implemented the Beveridge Report on Social Insurance which has remained the bedrock of the welfare state and embarked on a massive house building program. The case for greater intervention is sometimes made when an industry such as the BAE shipyards in Portsmouth or Tata Steel in Port Talbot are on the brink of going bust. Note recently that the Government recently held talks on a deal (the details of the deal remain undisclosed) for keeping the Nissan car plants in Sunderland open following the Brexit vote on 23rd June. On a scale of a wholly different order of magnitude massive intervention has been required since 2008 to purchase assets from the private banking system totalling thus far in the UK alone £425,000,000,000 (or £425bn of so called quantitative easing). Intervention is a matter of degrees or scale and all governments will seek to manage the levers of economic governance such as inflation, national debts, trading deficits or surpluses, employment, interest rates and personal and business taxation rates.
Free Market – a belief in private enterprise and competition as the foundations of a successful enterprise economy. Economic management should be strictly minimal to allows firms and enterprises to operate under conditions of deregulation and privatisation. It is often stated that the market is guided by an ‘invisible hand’ and is self regulating and naturally efficient at self correction. The government therefore should resist temptations to intervene when faced with an economic problem as, given time, the market will auto correct. Free market economics were out of fashion in the first three decades after the second world war where there had been greater emphasis upon creating a mixed economy with high levels of state intervention. However under Margaret Thatcher, and her attachment to the ideas of Hayek and Friedman, there was a sustained attempt to roll back the frontiers of the state through privatisation and deregulation. In purely political terms Thatcher’s policies embodied Hayek’s notion that state intervention was the Enemy of freedom and constituted The Road the Serfdom.
Keynesianism – the name given to the economic ideas of John Maynard Keynes whose central idea was that governments should manage the economic cycle by investing to stimulate growth at times of economic downturn so as not to exacerbate the length and depth of recessions. Concurrently governments should be more fiscally prudent when the economy is growing so as not to overheat the economy.