chapter 14 Flashcards
(27 cards)
what were thatcher’s economic policies called?
monetarism
in which year did the economy reach a recession?
1980
inflation above 15% and rising unemployment
stagflation
what is monetarism?
the idea that the best way for a gov to control inflation is by restraining gov spending, borrowing and curbing money supply
what is rate capping?
limits the amount of money a council is allowed to raise in a local taxation
what’s a measure taken while enforcing monetaristic policies?
shift from direct taxation and instead things like VAT; indirect taxation
what was the logic behind reducing direct taxation?
people would be able to keep the mone they earn and would incentivise wealth creation
what are some examples of where VAT increased?
8% - 15% in 1979
taxes on cigs, petrol and alcohol went up in almost every budget between 1979-1987
what is supply side economics?
low taxation & deregulation for businesses encourages enterprise and entrepreneurship
flexible labour makes it easier to fire/hire employees
employees spend on goods n services (encourage by low tax on individual)
businesses profit
profits encourage expansion/further investment
what is denationalisation?
selling off publicy owned businesses to the private sector
which companies were privatised in the first term?
BP in 1979
British aesrospace in 1980
which company privatisations popularised the concept?
british telecom 1984
british gas 1986
how much did the number of individuals owning stocks increase through 1979-90?
3 million to 9 million
why did thatcher believe privatisation would be effective?
individuals will want to take care of something that they have a stake in
-more efficient at running/delivering goods & services
how did privatisation mark a significant shift in the british economy?
signals the end of the post war consensus of economic management
what is financial deregulation?
the loosening of controls of banks and financial markets.
leads to a boom of investment banking
how was inflatin controlled?
interest rates - raised to 17% in 1979
downside is it makes it more expensive for businesses to borrow
what are the effects of the high interest rates?
in early 1980s, led to a decline in output and demand
economy went into recessions with all the bankrupt businesses and unemployment raised
what was the peak inflation?
22% in may 1980
what wss the lowest inflation?
2.5% in 1986
why was unemployment allowed to rise so drastically?
as the key threat was seen as control of inflation, not low levels of unemployment
industry had to be more competitive so this was an accepted side effect
when were the highest unemployment rates?
april-june 1984, 3,300,000
did not fall below 3 mil until 1987
why was a north-south divide created?
move away from old fashioned labour industries and move to technological innovation
northern areas were focused on these industries which were being neglected
large areas of dereliction left behind
what did howe recommend thatcher do with liverpool?
leave it for a ‘managed decline’
where were there riots in response to this in 1981?
april- july
brixton, toxteth in liverpool, handsworth in birmingham
