3 The response to economic challenges, 1951-79 Flashcards
summarise britains economic status in the period between 1950-1979
there was a huge expansion in the world economy during the 50s and 60s in a global recovery led by new technologies
- although GB had a consumer boom it also had a decline
- personal expenditure grew and consumer demand fuelled the economy, GB spending more than it earned, led to: balance of payment issues, devaluation, inflation, union disputes, unemployment in the 70s
conservatives and the post-war economy, 1951-64
- 1951 conservatives returned to power and were opposed to any further nationalisation, rationing, and controlling the economy
- unemployment averaged 500000 with lows of 300000
- political consensus meant:
a commitment to full employment (using Keynesian style schemes) and a mixed economy ( would not nationalise further but would not reduce it either)
when was rationing over
- by 1954 all rationing was over
-stop go economics
1954-64 there was a growth in consumer affluence and the peoples ability to borrow and spend more on consumer goods
- the government encouraged the spending but struggled to deal with its consequences
consequences of growing consumer economy led to
- conservatives allowed the consumer economy to grow but with spending came inflation and an increase in imports (balance of payments issues)
-stop-go economics demonstrated what
Macmillan
- to counter this Macmillan (under Eden as chancellor of exchequer) deliberately slowed the economy by increasing interest rates and taxes;
- led to exports becoming less competitive and resentment from taxpayers
- demonstrated that you couldn’t control employment and inflation
economic growth in britain compared to japan in 1960
- despite rising living standards GB was falling behind compared to other countries: Japan had 12% growth in 1960 but GB only had 4%
what did Macmillan believe in
what 2 organisations did he set up
‘one nation’ where everyone, despite class, worked together for the benefit of the country
- experimented with corporatism; uniting labour, management and government to achieve goals
- set up 2 organisations to do this: NEDDY (national development council and office) and NICKY (the national incomes commision)
- NEDDY= where management and unions could discuss issues and co-operate with one another; assumed that they would want to work together but NEDDY was unable to enforce any legal control and so all agreement were voluntary
- NICKY= advisory council made up of economists and industry experts who gave guidance to employers and unions over ‘considerable’ pay increases but could not enforce its decision
unemployment in 1963
-grew to its highest level since WW2, 878000
- economic problems by 1964
imf loan in what year
increased consumer spending increased demand for foreign goods and GB experienced a balance of payments problem which threatened the pound
- Aug 1961 the government refused to devalue the pound and borrowed £714m from the IMF to support it
summarise The Wilson government and the economy, 1964-70
- aimed to modernise the economy
- prices and income tax
- there were recurring balance of payment deficits, gradually increasing inflation and failure of voluntary wage restraint
-The IRC
- Industrial Reorganisation Corporation; promoted efficient practices in industry and offered loans to companies who wanted to implement new efficieny measures
- promoted mergers between businesses where the economics wold be more efficient; many of them failed though e.g British Leyland made from Leyland Motors and the British Motor Corporation which we given a £25m loan to merge however they couldn’t keep up with other companies from Europe and Japan and were then known for poor quality as they operated at a loss and required subsidies
devaluation
in 1967
- 1967 pound was reduced from $2.80 to $2.40 (14%)
The heath government and the economy, 1970-4
- intended to reject corporatism and embrace free market ideas
- got rid of the IRC
- made cuts to council houses, free school milk and raised charges on prescriptions
- believed it was private businesses who should help the economy not the state; wanted to reduce tax pressure
what was - one of the biggest problems 1974-79
- one of the biggest problems 1974-79 was inflation
- by mid 70s prices were rising faster than wages reaching >30% by 1975
- unions ignored pleas from government to stop wage demands due to worsening living conditions and increased prices
- by 1975 Labour Chancellor Denis Healey argued against which of labours policys
began to challenge labours committment to full employment and felt that pumping money into the economy was pointless and the cause of inflation
-the IMF loan
- the IMF loaned GB £4b but there were conditions: had to prove it was capable of repaying it debts by agreeing to a £3b spending cuts
- when healey announced this he was called a traitor by the left of the party but he argued that GB was living beyond its means
what did Tony Benn, propose
- the left of the party, led by Tony Benn, proposed an alternative strategy
- the strategy was referred to as a siege economy and cllaghan dismissed Benn’s arguments and unworkable and unrealistic
what did Tony Benn, argue about the welfare state
and argued that the welfare state needed to be protected from cuts imposed by the IMF by: using trade barrier to keep out foreign imports; making GB economically self sufficient by investing in industry and nationalisation; withdrawal from the EEC
by supporting healey, Callaghan indicated a movement towards what kind of thinking
- by supporting heal, Callaghan indicated a move away from post war Keynesian consensus towards monetarist thinking (tight reign on money supply to prevent inflation, would cause some unemployment but inflation was already doing that)
