1.2 Economic developments

Question 1

Post war boom

Answer 1

. Food rationing stopped in July 1954
. Birth rate: 51mil in UK by 1961, 2 mil more than 1951
. 1955: full employment achieved
. More jobs in metal, car, steel industries
. Growth in consumerism
. Import 29% more goods than in 1951
. Higher income per head than any other major country bar the US

Question 2

‘Stop - go’ economics

Answer 2

. Imports exceed exports. Balance of payment crisis
. Govn controls: high interest rates + wage freezes
. Demand falls
. Output decreases
. Controls removed
. Increase in demand
. Rising imports
loop

Question 3

Crisis of stop - go economics

Answer 3

. Peter Thorneycroft believed in monetarism, wanted to limit wage increases and cut money supply
. Ministers opposed policy: may lead to unemployment
. Crisis carried on through summer of 1957
. Macmillan sided with those who wanted to keep expansionist economic policy
. When Thorneycroft proposed drastic spending cuts in 1958, Macmillan overruled him.
. Thorneycroft resigned, post war consensus remained

Question 4

The economy in 1959

Answer 4

. Lead to Conservative election victory that year
. Sterling had regained value against dollar
. Macmillan shrugged off resignations of Thorneycroft and Powell as ‘a little local difficulty’
. Budget of April 1959 provided tax cuts of £370mil - even more than the Butler election give away budget of 1955

Question 5

Why did the economy decline after 1961?

Answer 5

. ‘pay pause’ intro’d to hold down wage inflation
. Govn asked for a loan from the IMF
. The balance of payments problem
. The economics of ‘stop go’
. Economic growth in Europe was leaving UK behind
. Failed to make the economy modern