1 Responding to economic challenges 1951-1979 Flashcards
global boom: how long did it last, why did it occur?
2 main reasons
- boom that would last until the 1970s
- huge expansion in the world economy during the 1950s and 1960s
- global recovery from the war meant new technologies
relative economic decline: what did it mean?
- personal spending rose and consumer demand fuelled economy
- Britain was spendign more than it earned
recurring economic problems
5 problems
- balance of payments
- devaluation
- inflation
- union disputes
- unemployment in the 1970s
the conservatives and the post-war economy, 1951-1964
1951 conservatives: what did they oppose? what did they want to end?
- opposed further nationalisation
- wanted to end wartime rationing and controls over the economy
the conservatives and the post-war economy, 1951-1964
what did the conservatives prioritise in 1954
- commitment to full employment: keynesian style public work schemes. unemployment averaged 500,000, no return to mass unemployment in 1930s
- mixed economy: not increasing or reducing the level of nationalisation
the conservatives and the post-war economy, 1951-1964
What did Decolonialisation mean for conservative rule?
- the end of the british empire in Asia and Africa reduced spending
- influx of hundreds of thousands of new workers from the Caribbean and South Asia
the end of empire
indian independence + other colonies in africa and asia
- India 1947
- Ghana 1957
- Malaysia 1957
- Jamaica 1962
- Uganda 1962
- Kenya 1963
the conservatives and the post-war economy, 1951-1964
why did Britain abandon the colonies?
- they cost far more to govern than they were worth in trade
‘stop-go’ economics
consumer spending, credit, and borrowing results
- meant ability of people to borrow and spend more on consumer goods was more than ever
- govenrment encouraged this but struggled to deal with its consequences
- relaxed laws around consumer credit and borrowing
‘stop-go’ economics
why was ‘stop-go’ economics necessary?
- allowed the consumer economy to grow
- excessive spending tended to reuslt in inflation and balance of payments due to increased imports
‘stop-go’ economics
What did Macmillan (under EDEN) do to counter this?
- deliberately slowing the economy by raising interest rates and taxes
- exports then became less competitive and taxpayers resented
- demonstrated controlling unemployment and inflation at the same time was impossible.
‘stop-go’ economics
what did it reflct?
- a failure of the government to develop consistent policies to ensure growth
- government increased taxes and raised interest rates to make it difficult to borrow money for investment in order to slow things down when the economy grew too quickly
- then they would introduce them again to make money easier to borrow and facilitate an acceleration
Managing the economy, 1957-1964
West Germany and Japan vs Britain worrying economic trends?
- Japan and West Germany had recovered from the devastation of the war
- Japan experienced growth of 12% in 1960
- Britain managed just over 4% the same year
Managing the economy, 1957-1964
Macmillan, one-nationism? what was his belief about the economy?
- he believed in ‘one nation’ that could work together to solve problems irrespective of class.
- he decided to experiement with corporatism to arrest economic decline
Managing the economy, 1957-1964
what was corporatism?
- uniting labour, management, and government led to economic achievement
Managing the economy, 1957-1964
NEDDY: what did it stand for
The National Development Council and Office.
Managing the economy, 1957-1964
NICKY: What did it stand for
the National Incomes Commission
Managing the economy, 1957-1964
NEDDY: what was it? Which groups did it involve? what did it assume?
- management and unions could discuss the economy and co-operate witch eachother
- it was assumed they would want to work together because both would benefit from economic growth
- NEDDY was unable to enforce legal control over either the industry or the unions. The governmetn hoped they would come to voluntary agreements.
Managing the economy, 1957-1964
background context: what was the economic situation involving working days throughout the 1950s?
- working days lost to striking gradually increased
- level of pay rises demanded by workers grew
- some ministers thought unemployment was the most important concern, but others believed inflation was the largest issue.
Managing the economy, 1957-1964
what was NICKY? what was its role?
- an advisory council assembled by economic/industry experts
- role was to give guidance to employers and unions on what the govenrment considered ‘reasonable’ pay increases
- could not enforce decisions
Managing the economy, 1957-1964
was NICKY successful?
3 points
- unions ignored NICKYs calls for wage restrainy
- union bosses mindful their members wanted improving living standards and greater spending power
- consumerism of the 1960s was attractive to union members
economic problems by 1964
economic problems: what were they?
- unemployment
- balance of payments problem
- refusal to devalue
economic problems by 1964
unemployment by 1963
878,000
economic problems by 1964
balance of payments
- consumer spending and more demand for foreign goods
- balance of payments
- threat to the pound
economic problems by 1964
August 1961 refusal to devalue
- instead, borrowing £714m from the IMF to support the pound
Wilson government and the Economy, 1964-1970
what did he believe about growing the economy?
- egalitarian
- growth would come from the most talented people irrespective of class would have opportunities
- the economy could also be transformed by technology and modernisation
Price and Incomes Act
wilsons problems (similiar to previous governments)
- recurring balance of payments deficits
- increasing inflation
- failure of voluntary wage restraint
Price and Incomes Act
NBPI: what did it stand for
National Board on Prices and Incomes
Price and Incomes Act
why was NBPI created?-
- to regulate pay settlements
Price and Incomes Act
Prices and Incomes Act 1966
- staturoy wage freeze for 6 months to curb inflaition
Price and Incomes Act
Prices and Incomes Act 1967
- allowed wage increases in companies that could prove they were increasing productivity
technology
Ministry of Technology: creation head achievement
- 1964
- headed by Tony Benn
- creation of the Concorde
The IRC
IRC
what did it stand for
Industrial Reorganisation Corporation
The IRC
what did the IRC promote?
- efficient practices (offered loans to companies who wanted to implement efficiency measures)
- mergers between buisiness where it was thought there could be greater economic efficiency through combining them
The IRC
failed merger
BL
- British Leyland
- formed in 1968 by Leyland Motors and British Motor Corporation
- car company was not able to compete with European and Japanese imports
- British Leyland cars were synonymous with poor quality and the company operated at a loss.
devaluation
1967 and devaluation. How much was the pound devalued and what happened as a result?
- $2.80-$2.40
- decrease of 14%
- Callaghan (chancellor) resigned in protest.
The Heath Government and the economy, 1970-1974
what were Heath’s intentions?
- reject corporatism of Wilson
- embrace free market ideas
The Heath government and the economy, 1970-1974
what did Heath axe immediately?
the IRC
The Heath government and the economy, 1970-1974
what did Heath argue about modernisation?
private buisinesses had to impose it, not the state
The Heath government and the economy, 1970-1974
cuts in state spending. 3 areas
- cuts to subsidies to council houses
- cuts to free school milk for children
- raising charges on prescriptions
The Heath government and the economy, 1970-1974
what was his first budgets cuts in total?
- £330m
The Heath government and the economy, 1970-1974
what did he asume? what did he abolish?
- cuts in spending would stimulate economic growth along with reducing the tax burdern
- a natural spirit of entrepreneurship would result from the cuts
- abolished the NBPI, ending the govenrmetns ability to control or influence prices or incomes
The Heath government and the economy, 1970-1974
which problems did Heath not count on?
3 problems
- mounting infaltion across the world as the global boom slowed
- Britains inflation at 15% after 18 months of Heaths leadership
- unemployment had risen to 6% in the 1970s
The Heath government and the economy, 1970-1974
Barbers ‘dash for growth’… what did he do?
- massive tax cuts and forecasts of low borrowing
- result was huge inflation
- followed soon after the price rises after the oil crisis
- then public sector pay cuts which led to union unrest and confrontation with the NUM
New Economic Thinking
most significant problem dominating Labour 1974-1979
inflation
- mid 1970s prices were rising faster than wages
- 30% by 1975
New Economic Thinking
how were the unions involved
- appeals by the gov for wage restraint were ignored by the unions
New Economic Thinking
1975 Chancellor Healey challenged what?
- Labours commitment to full employment
- this was pointless because it simply led to greater levels of inflation
IMF Loan
What did Britain once again have to do? why?
- the value of the £ slumped and the government again was forced to accept a loan from the IMF
IMF Loan
By September 1976 what was the value of the £?
- 20% decline
- $2-$1.63
IMF Loan
IMF Loan and conditions
- just under £4b
- but, Britain had to agree to £3b spending cuts.
IMF Loan
Reaction to Healey announcing the deal
- he was denounced a ‘traitor’ by the left. who accused him of selling out to international finance.
IMF Loan
Tony Benn (left) Alternative Economic Strategy. What did it involve?
3 points
- trade barriers to keep out foreign imports
- making Britain self-sufficient by government investment in industry and increased nationalisation
- withdrawal from the EEC.
IMF Loan
reactions to Benn’s proposals
- Callaghan dismissed them
Monetarism
what was the philosophy?
- tight rein on money supply (spending cuts) would eventually prevent inflation, even though it may cause unemployment it would be worth it because inflation led to unemployment anyway
- free market and free trade
- privatisation
