How did we get here?

Core idea

Capitalism is not a fixed thing. It is a system whose institutional shape — how labour is organised, how firms compete, what the state owns and regulates, who bears the risk of unemployment or illness — has been rebuilt twice since the early 19th century. Fulcher organises British history into three phases and treats the transitions between them as the real subject of the topic. The present is not a continuation of "capitalism as usual"; it is a deliberate, ideologically driven reversal of the previous phase.

Author's argument: Thatcherism set out to undo a century of accumulated regulation, public ownership, and union power. To understand where we are, treat the last forty years as a project to restore the values of Victorian capitalism, not as a neutral evolution.

Phase 1 — Anarchic capitalism (c. 1780s–1860s)

In the first phase, capitalist activity was relatively unchecked by either organised labour or the state. Small factories competed intensely, labour poured into industrial cities, and the institutions that would later restrain markets did not yet exist. Workers tried to combine but rarely succeeded outside the skilled crafts. The 16th-century state machinery for regulating apprenticeships, wages, and food prices was dismantled by 1815. Import duties on corn ended in 1846. Free trade was largely complete by the 1860s.

Crucially, "anarchic" does not mean "small state". The state was strong — it just confined itself to order rather than welfare. Troops put down riots, the 1834 Poor Law forced the destitute into workhouses designed to be worse than the worst paid job, and the legal apparatus protected property. Markets were deregulated; people were not.

Phase 2 — Managed capitalism (c. 1870s–1970s)

In the second phase, both sides of industry organised, firms concentrated through mergers, and the state moved from repressing the working class to incorporating it. The 1867 franchise extension brought working men into electoral politics; the 1906 Trade Disputes Act gave unions legal immunity; and by the 1940s a universal welfare state covered pensions, unemployment, disability, secondary education, and the National Health Service. Industries previously run for profit — gas, water, electricity, railways, telephones, coal — were taken into public ownership, often for nationalist or efficiency reasons rather than socialist conviction. After the 1930s, full employment became the central commitment of macroeconomic policy.

Managed capitalism's logic was that markets are too volatile and class conflict too costly to leave alone. Competition was muted by cartels, mergers, and regulation; risk was pooled by the state; labour and capital negotiated rather than fought.

Phase 3 — Remarketised, financialised capitalism (c. 1980s onward)

In the third phase, the managed settlement was unwound. Public industries were privatised, unions were legally weakened, state ownership shrank, capital flowed across borders with unprecedented freedom, and finance moved from the periphery to the centre of the economy. Inflation rather than unemployment became the priority enemy; Keynesian demand management was replaced with monetarist orthodoxy. The state did not become smaller — its share of GDP barely fell — but its role changed from owner and employer to regulator, contracter, and underwriter of markets.

Fulcher's point is that this third phase is not an inevitable response to globalisation or technology. It is a political project, articulated most clearly by Thatcher and Reagan, that took the liberal beliefs of the anarchic phase out of the museum and re-installed them as policy.

Why it matters

If you treat the current shape of the economy as natural, you cannot reason about it. You inherit assumptions — that markets are universal, that the state's job is to step back, that financial services drive growth — without seeing them as answers to specific historical questions that had different answers within living memory.

It explains why political debates feel circular

Arguments about privatisation, council housing, NHS funding, union law, and the role of finance are not new arguments. They are debates between the second-phase settlement and the third-phase project. Each side is defending or attacking a specific institutional arrangement, even when they talk in abstract terms about freedom or fairness.

It clarifies what is at stake in a "crisis"

The transitions between phases were not gentle. The first transition was driven by depression, mass unemployment, war, and the threat of revolution; the second by stagflation, oil shocks, and ungovernable industrial conflict in the 1970s. Each crisis discredited the dominant institutional model and made the alternative thinkable. The topic equips you to read current crises — financial, ecological, geopolitical — as candidates for a similar transition rather than as problems to be patched within the present model.

Key takeaways

Mental model

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Practical application

Read any economic policy as a phase-fingerprint

Whenever a politician, economist, or commentator proposes a policy, ask which phase's logic it belongs to. Demands for cheaper food via free trade, looser hiring rules, conditional welfare ("workfare"), and tougher policing of property crime all share the anarchic fingerprint. Demands for nationalisation, sectoral wage bargaining, full-employment macro policy, and universal public services all share the managed fingerprint. The third-phase fingerprint is the most camouflaged because it is the status quo — it looks like "how things are" rather than a choice.

Distinguish "the state shrank" from "the state changed jobs"

A common mistake is to treat the move from managed to remarketised capitalism as a story of state retreat. The empirical record is different — state spending as a share of GDP barely moved in most developed economies after 1980. What changed is what the state does with the money: less direct production, more procurement; less universal welfare, more targeted transfers; less industrial planning, more financial regulation and bailout capacity. When you hear "shrink the state", check whether the proposal really shrinks it or just shifts it.

Watch for which crisis is being framed as transitional

Phases end when a crisis discredits the dominant model. The 1930s discredited anarchic capitalism. The 1970s stagflation discredited managed capitalism. The 2008 financial crisis was treated as a technical malfunction within remarketised capitalism rather than as evidence against it, which is why the third phase survived. Pay attention to whether current crises (climate, AI, supply-chain fragility, demographic ageing) are being framed as adjustments to the present model or as terminal evidence against it — the framing precedes the transition.

Example

Consider the trajectory of a single sector: British railways.

In the anarchic phase, railways were built by private companies competing for routes. Hundreds of small operators raced each other, frequently went bankrupt, and built track to incompatible gauges. The state intervened only to grant the rights of way and adjudicate disputes.

In the managed phase, the chaos was resolved through concentration and then nationalisation. Mergers in 1923 reduced more than a hundred companies to four. After the 1948 nationalisation, British Railways became a single state-owned operator, with a uniform fare structure, cross-subsidised regional services, and employment guarantees for its workers. The logic was that a national rail network was a public good whose value to the economy exceeded any single firm's ability to capture it.

In the remarketised phase, privatisation in the mid-1990s split the system into a track operator, regional franchises, and rolling-stock leasing companies. Competitive tendering replaced direct provision; subsidy continued, but as contractual payments to private firms rather than as direct funding for a public service. When franchises failed or accidents revealed under-investment, the state stepped back in as regulator and underwriter — not as owner. Each rescue was framed as a technical fix rather than as evidence that the third-phase model was wrong.

The same five-question audit works across the three eras: firm structure went from many-small to one-large to many-private-with-public-oversight; labour from unorganised to nationally-bargained to fragmented-by-franchise; capital from private to public to private-again; the state from absent to owner to contracter. A century-and-a-half of British rail is a microcosm of the whole topic.

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