1979-1987 Flashcards

1
Q

define Keynesian economics

A

-a fall in demand for products causes industrial economies to slip into recession
-gov should borrow money and raise revenue streams
-boost will lead to genuine recovery and growth
-companies and firms have money to keep producing
-workers have money in their pockets to spend on goods and services
-gov then taxes companies and workers to recoup initial debt outlay

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2
Q

define interest rates

A

-high interest rates encourage saving and discourage irresponsible borrowing and spending
-low interest rates encourage spending and borrowing- increase demand

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3
Q

define public spending

A

gov spending money on services

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4
Q

what did thatcher think post war consensus policies contributed to

A

-inefficiency and low growth
-undermining of personal responsibility and creation of dependancy culture
-hard working members of society subsiding the work shy
-stifled initiative

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5
Q

what did thatcher want to do

A

-cut public spending
-reduce gov interference
-reduce gov bureaucracy
-reduce the power of the unions

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6
Q

define free market economics

A

let the natural economic forces of supply and demand operate with no gov control

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7
Q

what was built on the ideology of monetarism

A

-economic theory promoted by Milton Friedman
-root cause of inflation is gov spending
-gov therefore need to reduce public expenditure and restrict amount of money in circulation keeping currency value up to avoid prices rising

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8
Q

when were the two monetarist budgets introduced

A

1979 and 1981

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9
Q

what would controlling the money supply lead to

A

reduced inflation and economic growth

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10
Q

what happened to the economy by 1980

A

it plunged into recession
-inflation above 15%
-rising unemployment going above 2mil
-stagflation was back

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11
Q

what saved britain from a severe balance of payments crisis

A

the flow of the North Sea oil and gas

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12
Q

what did thatcherites believe about gov spending and what did it lead to

A

that individuals spent their money better than the gov
this led to to shift from direct taxation to indirect taxation
1988, top rate of income ta fell from 83% to 40%
standard rate fell from 33% to 25%
1979, VAT went from 8% to 15%

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13
Q

what were the view point on reducing direct taxation

A

supporters: it would incentivise wealth creation and allow ppl to keep more of what they earnt
critics: it was less progressive and would hit poor ppl harder

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14
Q

what was the loony left

A

the name given to the left wing councils that promoted liberal politically correct policies eg. promotion of multicultural initiatives

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15
Q

what was introduced to control overspending of labour local authorities

A

rate capping- limited the amount the money that the council was allowed to raise in local taxation

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16
Q

what were the reactions to the introduction of rate capping

A

1985, many authorities including Liverpool tried to rebel against it and refused to set budgets but they had to back down due to a threat of bankruptcy
1986, local gov act abolished the big metropolitan local authorities
Victory in short term against looney left but in long term it damaged local accountability

17
Q

why did thatcher never manage to cut public spending

A

bc of spending on social security went up due to high unemployment

18
Q

describe the demand side and the supply side in the economy

A

demand- keynesian (post war consensus): needs gov interference
supply- free market: allows market to control itself and individuals to take control

19
Q

describe companies which privatised

A

BP in 1979
British Aerospace in 1980
The drive for privatisation gained momentum with the sale of British telecom in 1984

20
Q

stats for privatisation

A

1979-1990 individuals owning stocks and shares went up from 3m to 9m

21
Q

describe beliefs about privatisation

A

-driven by anti-socialist ideology
-core belief that private sector was more dynamic and efficient than the public sector at running and delivering goods and services
-businesses competing in the marketplace encouraged improvements and innovation
-Outsourcing (where companies take on contracts to deliver goods and services) became increasingly widespread
-life for employees was insecure- some lost jobs- can no longer rely on long term job security
-thatcherites wanted to push further privatisations

22
Q

what was deregulation

A

-gov would interfere as little as possible
-removing ‘red tape’ made it easier for businesses to trade- encouraging entrepreneurship and wealth creation

23
Q

what measures were introduced to encourage start up companies?

A

loan guarantee scheme- easier to borrow money
allowance scheme- encouraged unemployed to start business by giving £40 a week for a year

24
Q

how did deregulation effect britain

A

-restored Londons position as a world financial centre- bigger risks taken led to bigger fortunes made
-financial services were UK’s most important export industries
-productivity didn’t increase much (2.2%) growth in GDP during 1980’s no better than in the 1970’s

25
what are the aims of interest rates
to control inflation
26
what actions were taken to control inflation
inflation at 17% in 1979 Increased the value of the pound
27
what were the effects of interest rates
-more expensive for businesses to borrow -more difficult for businesses to export -decline in output and demand -many businesses went bankrupt leading to unemployment -1980, inflation at22% 1986, inflations at 2.5%
28
what were the aims of unemployment
to no longer worry about it to make the british industry more competitive controlling inflation was more important than controlling unemployment
29
what actions were taken in relation to unemployment
many industrial plants closed permanently youth employment schemes (employers to take on young ppl) employer national insurance rates reduced for lower paid jobs
30
what were the effects of unemployment
-manufacturing output fell by 15% in 2yrs -steel production cut by 30% to less than 14m tons -1983, unemployment over 3m (13.5% of total workforce)- didn't fall until 1987 -areas dependant on heavy industry, the employment rate went up by 25% -workers found that traditional skills were not in demand as they were rendered out of date