balance of payments issues and 'stop-go' economics

Question 1

what brought inflation?

Answer 1

growth in wages outstripping rate of increase in production

Question 2

conservative constantly faced with?

Answer 2

task of maintaining growth and employment at same time keeping prices steady

Question 3

what did Macmillian find difficult?

Answer 3

persuading trade unions that their members should not have high wage increases(e.g industries like coal)

Question 4

why did government controls have to be used?

Answer 4

-to curb excessive inflation + taxation remained high
-to control excessive spending result in unwanted increase in imports + to pay for rising costs of public services

Question 5

pattern where gov attempted to control growth when economy in danger of overheating called?

Answer 5

stop-go economics

Question 6

stop go economics

Answer 6

tensions between expanding economy, with low interest rates + rising consumer spending(go)
-and results of the economy overheating, with wages and imports exceeding productivity + exports - causes deliberate slowing down of economy (stop) through higher interest rates + spending cuts

Question 7

trade deficit caused problems with

Answer 7

balance of payments

Question 8

1956-50 trade balance overall

Answer 8

£-56m

Question 9

1951-55 overall trade balance

Answer 9

£-19

Question 10

1956-60 overall trade balance

Answer 10

£132

Question 11

run on the pound

Answer 11

a term describing a rapid fall in the value of the pound in international currency markets, especially in relation to the us dollars

Question 12

what started a run on the pound?

Answer 12

-pressure from the us over the Suez crisis exposed Britain’s financial weakness

Question 13

what did Macmillian’s chancellor (Pete Thorneycroft) believe in?

Answer 13

-‘monetarism’-> he wanted to limit wage increases and to cut the money supply

Question 14

one-nation conservatives such as Ian Mcleod strongly opposed the policy of monetarism, why?

Answer 14

it would lead to increased unemployment and cutbacks in housing

Question 15

Peter Thorneycroft(1909-94)

Answer 15

A consecutive mp from 1938
-resigned as Chancellor of the Exchequer in 1958, returned to the cabinet in 1960
-great supporter of Thatcher
-served as Chairman of the conservative party 1975-81

Question 16

the crisis and divisions in the cabinet carried on throughout the summer of 1957. It was a row that symbolised?

Answer 16

problems of ‘stop-go’ economics

Question 17

in the end who did Macmillian side with?

Answer 17

-those who wanted to keep an expansionist economic policy

Question 18

when Thorneycroft proposed drastic spending cuts in 1958, Macmillian did what and this caused Thorneycroft to?

Answer 18

-overruled him
-Thorneycroft resigned, together with his junior ministers Enoch Powell and Nigel Birch
-post-war consensus remained in place

Question 19

the financial crisis did not?

Answer 19

do lasting harm to the popularity of the conservative party which improved dramatically by 1959

Question 20

resignation of Thorneycroft and Powell shrugged of as

Answer 20

‘a little local difficulty

Question 21

what happened to the sterling(British currency)?

Answer 21

sterling regained its value against the dollar

Question 22

the economy expanded so much that the budget of April 1959 provided?

Answer 22

tax cuts of £370 million- even more than the Butler ‘election giveaway’ budget of 1955

Question 23

what acted as key factor in Macmillian’s comfortable re-election in October 1959?

Answer 23

general air of consumer affluence reflected in budget

Question 24

British economy continued to grow, it was at its peak between?

Answer 24

1960-64
-but the government became further trapped in ‘stop-go’ policies to maintain economic stability