AP® European History review sheet from Aim for Five (aimforfive.com/euro/units/9/9-6)
Unit 9 · Topic 9.6
9.6 Contemporary Western Democracies
After 1945 Western European democracies built welfare states that protected citizens from birth to old age, paid for by strong growth and high taxes. When growth stalled in the 1970s, leaders such as Margaret Thatcher cut back the state and sold off state-owned industries, and Europeans still debate how much government should provide.
Key terms
- welfare state
- National Health Service
- stagflation
- Margaret Thatcher
- privatization
See it on a map: 2020: Brexit
Building the welfare state
A welfare state is a government that takes responsibility for its citizens' basic well-being through programs such as health care, pensions, unemployment insurance and family allowances. The roots go back to Bismarck's insurance laws and Britain's pre-1914 reforms (6.9), but the full system came after World War II. People who had sacrificed in two world wars and suffered through the Depression expected security in return, and governments of the left and center agreed.
In Britain, the Beveridge Report (1942) proposed protection against want, disease, ignorance, squalor and idleness. The Labour government of Clement Attlee (1945–1951) put it into practice: national insurance for unemployment, sickness and old age (1946), and the National Health Service (1948), which gave every resident medical care free at the point of use. Labour also nationalized, or took into state ownership, coal, railways, electricity, steel and the Bank of England.
Different routes, similar goals
In West Germany and Italy, Christian Democratic parties, center-right parties drawing on Catholic and Protestant social teaching, dominated the postwar decades. Under Konrad Adenauer, West Germany built a social market economy: free markets combined with strong pensions, health insurance and worker representation on company boards. Scandinavian social democrats, especially in Sweden, built the most generous systems, with high taxes funding universal benefits. France combined state economic planning with family allowances and social security.
From about 1950 to 1973, a broad consensus held across much of Western Europe: the state should manage the economy to keep employment high and provide a social safety net. Rapid growth (9.2) made this affordable.
Southern Europe joined the democratic West later. Portugal's dictatorship fell in the Carnation Revolution of 1974, Greece's military junta collapsed the same year, and after Franco's death in 1975 Spain became a democracy with a new constitution in 1978. All three later joined the European Community (9.10).
The crisis of the 1970s
The long boom ended in the 1970s. In 1971 the United States stopped exchanging dollars for gold, which broke the Bretton Woods currency system (9.4). In 1973 Arab oil producers cut supplies and the price of oil roughly quadrupled, and a second oil shock followed in 1979. Western Europe suffered stagflation, a combination of high inflation and high unemployment that the usual tools could not fix, since spending to create jobs pushed prices up further. Old industries like coal, steel and shipbuilding declined, strikes multiplied, and governments struggled to pay for welfare programs as tax revenues fell and claims rose.
Thatcher and the turn to markets
Margaret Thatcher, Conservative prime minister of Britain from 1979 to 1990, argued that the state had grown too large, taxes too high and unions too powerful. Her government emphasized controlling inflation, cut income tax rates, reduced union power with new laws and defeated a year-long miners' strike (1984–1985), and let council (public) housing tenants buy their homes. It pursued privatization, selling state-owned companies such as British Telecom, British Gas and British Airways to private investors, and deregulated financial markets in London.
Supporters credit these policies with taming inflation, reviving business and spreading home and share ownership. Critics point to high unemployment in the early 1980s, the decline of industrial regions in northern England, Scotland and Wales, and growing inequality. Similar market-oriented reforms, often called neoliberalism, spread elsewhere: even France's socialist president François Mitterrand, who nationalized banks and industries in 1981, reversed course toward austerity in 1983.
A continuing debate
The welfare state was cut back but not abolished. Britain's NHS survived Thatcher, and public spending on health and pensions kept rising across Europe as populations aged (9.14). Since the 1990s, governments of the center-left and center-right have argued over how to balance generous benefits against competitiveness, debt and the costs of an older population. This is a good place to show complexity: the welfare state was both a major postwar change and a continuation of earlier reforms.
Worked examples
Try each one yourself first, then open the solution.
- Example 1
Explaining a policy shift
Explain ONE reason some Western European governments reduced the role of the state in the economy in the 1980s.
Show the solutionHide the solution
- Step 1: Name the economic cause: stagflation and slow growth after the oil shocks of 1973 and 1979.
- Step 2: Explain why it hurt the welfare state model: falling tax revenues and rising costs made programs harder to pay for, and government spending seemed to fuel inflation.
- Step 3: Give a specific example of the response: Thatcher's privatization of British Telecom and British Gas.
Answer: After the oil shocks of 1973 and 1979, Western Europe suffered stagflation, with high inflation and unemployment at the same time, which made welfare programs harder to fund and made heavy state spending look like part of the problem. In Britain, Margaret Thatcher responded by cutting taxes, weakening unions and privatizing state-owned companies such as British Telecom and British Gas, arguing that markets would revive growth.
Common mistakes
- Saying Thatcher abolished the welfare state. She cut and reshaped parts of it, but the NHS and pensions survived.
- Treating the welfare state as only a left-wing project. Christian Democrats and many conservatives supported it in the postwar decades.
- Defining stagflation as just a recession. It is the unusual combination of high inflation with high unemployment and slow growth.
On the exam
- Questions may ask how governments responded to economic change after 1945. Contrast the postwar consensus with the market reforms of the 1980s.
- Connect the postwar welfare state to 19th-century social insurance (6.9) to show continuity.
Connected topics
Videos
Check yourself
5 questions on 9.6 Contemporary Western Democracies. Pick an answer to see if you got it, and why.
Western European governments built extensive welfare states after 1945 mainly because
Margaret Thatcher's policies in the 1980s are best understood as a response to
Social insurance fully developed may provide income security; it is an attack upon Want. But Want is one only of five giants on the road of reconstruction and in some ways the easiest to attack. The others are Disease, Ignorance, Squalor and Idleness.
Source: Sir William Beveridge, British economist, Social Insurance and Allied Services (the Beveridge Report), a report to the British government, 1942.
The report most directly led to which development after 1945?
The report's great popularity when it appeared in 1942 is best explained by
Critics of the welfare state in the 1970s and 1980s, such as Margaret Thatcher, most often argued that
0 of 5 answered