1:2 Economic developments - Content Flashcards
In what way was the Conservative party lucky?
They were elected into power just as the beginnings of the post-war economic recovery were showing through
When did food rationing end?
July 1954
At the end of the war, there was a swift acceleration in…
the birth rate leading to a fast-growing population
What was Britain’s population in 1951?
49 million
What was Britain’s population in 1961?
51 million (a 5% increase)
Why was the global economy improving?
Many countries were rebuilding after the economic ruins of the Second World War
A sustained increase in overseas trade brought…
high earnings from exports and investments
By what year was it estimated that full employment had been achieved?
1955
How many were unemployed in 1955?
Only 200,000 (less than 1% of the workforce)
However, employment fell in traditional occupations such as… (2 things)
> Agriculture
Coal mining
There was a huge expansion in what type of work?
Electrical and engineering work, and industries relating to cars, steel and other metals
By 1960, how many people were employed in service industries?
Nearly 5 million (1 in 5 people)
What did Chancellor Rab Butler do in the run-up to the 1955 election?
Introduced a ‘give-away’ budget which provided the middle classes with £134 million in tax cuts
In the later 1950s, Britain was able to export…
about 29% more goods than it had in 1951 for the same number of imports
The low unemployment and overall economic growth led to…
rising wages and most people experienced a notable rise in income
Thanks to the increased employment, higher wages and tax cuts, people felt…
more affluent and there was a growth in consumerism
Overall, in the late 1950s, the British enjoyed more…
jobs, money, goods, better housing and the provisions of the new welfare state
The adults of this period had been used to…
wartime depression
The adults now had money to spend on…
cars, new appliances, luxuries and entertainment
The younger generation grew up with…
abundance, and could enjoy life to the full
However, the growth in wages was outgrowing…
the rate of increase in production
As a result, this caused…
inflation
So, the Conservative government’s main task was to maintain growth and employment whilst…
keeping prices steady
What did Macmillan say to the public about this matter?
“What we need is restraint and common sense - restraint in the demands we make and common sense in how we spend our income.”
It was difficult to persuade trade unions that…
their members should not have high wages increases
In which industry did workers feel they were not earning as much as other workers?
The coal industry
Why did the government have to enforce high taxation? (2 reasons)
> To prevent excessive spending that would lead to an unwanted increase in imports
To pay for the rising costs of public services
What was the government’s use of ‘stop-go’ economics?
Where the government attempted to limit growth when the economy was in danger, i.e. when imports exceeded exports and there was a balance of payments crisis.
balance of payments: the difference between all money flowing into the country in a particular period of time and the outflow of money to the rest of the world.
What was the ‘stop’ aspect of stop-go economics?
The government would respond to potential economic danger by increasing taxes and freezing wages. As a result, demand falls and output decreases.
What was the ‘go’ aspect of stop-go economics?
The government controls on taxes and wages were lifted, leading to an increase in demand. This causes rising imports, which leads to another economic danger.
What started a run on the pound (rapid fall in the value of the pound in international markets)?
Pressure from the United States over the Suez crisis
What did Thorneycroft (Macmillan’s Chancellor) want to do to tackle this problem?
He wanted to limit wage increases and cut the money supply.
Why were many one-nation Conservative cabinet ministers opposed to this?
It would lead to increased unemployment and cutbacks in housing
After the ongoing divisions in the cabinet over ‘stop-go’ economics, who did Macmillan side with?
He sided with those who wanted to keep up an expansionist economic policy. He also overruled Thorneycroft’s proposal of drastic spending cuts in 1958
When Thorneycroft resigned, who else resigned with him?
His junior ministers, Powell and Birch
How did the economic situation improve dramatically by 1959?
> Sterling regained its value against the dollar
> The budget of April 1959 was able to provide tax cuts of £370 million
> This led to a general feeling of consumer affluence
In what period was the British economy at its peak?
1960-64
However, what economic issue was the government still facing?
They were trapped in a cycle of ‘stop-go’ policies in an attempt to maintain economic stability
What did the government do in 1961 in response to worries about the economy overheating?
They introduced a ‘pay pause’ to hold down wage inflation, and to ask for a loan from the IMF (International Monetary Fund)
It was also becoming clear that Britain and its trade with the Empire and the Commonwealth was not…
sufficient to keep up with the economic growth in Europe, especially in West Germany
Therefore, Macmillan decided to… (2 things)
Reverse the Conservative Party’s previous policy
Join Britain’s economy with that of Europe, by applying to join the EEC
What did Lloyd (Chancellor of the Exchequer) set up?
The National Economic Development Council (NEDC)
What was the NEDC?
A council made up of government representatives, academics, employers and trade unionists. It was responsible for long-term planning.
When was the National Incomes Commission created?
1962
What was the purpose of the National Incomes Commission?
To monitor wages and prices
When was Britain’s application to join the EEC rejected?
1963
This rejection was a serious setback for…
Macmillan’s economic policies
When was the Beeching Report published?
1963
What did the Beeching Report recommend?
Massive cuts in Britain’s rail network, including the closure of more than 30% of the rail network
What was the impact of these recommendations?
Hundreds of branch lines and thousands of stations were axed, causing fundamental social change, provoking public outrage and leaving many rural areas isolated. The government was no longer experiencing prosperity and economic success
Who then replaced Lloyd as Chancellor of the Exchequer?
Maudling
What did Maudling do?
He pushed the economy into a ‘go’ phase by lowering the bank rate to encourage consumer spending - otherwise known as the ‘Maudling Dash’
What was the impact of Maudling’s policy?
Britain’s growth rate increased from 4% in 1963 to nearly 6% in 1964
However, what remained the same?
Exports rose just over 10% between 1961-64, while imports remained nearly 20% higher
- Still a balance of payments crisis
In conclusion…
the cycle of ‘stop-go’ economics had not been broken: economic growth would still lead to the overheating of the economy through excessive, expensive imports and rising wage demands. The economic problems apparent in the 1950s had still not been solved.
Britain continued to slip behind foreign competitors, such as… (3 countries)
West Germany, the United States and Japan
What was the deficit at the time of the general election in 1964?
A deficit of £800 million
