(Economic challenges) Response to economic challenges, 1951-1979 Flashcards
What problems did Britain face after 1951?
6
Under-investment Industrial action Inflation Economic shocks Trade deficit Stop-go economics
Under-investment - what did it lead to?
Lower productivity
Under-investment - what did the economy look like in the 50s?
What happened to the manufacturing industry between the 50s & 70s?
Grew rapidly
Fell into decline compared to other nations, which experienced a post-war economic miracle.
Under-investment - what happened as a result of the manufacturing industry falling into decline?
It was difficult for the country to remain competitive.
Under-investment - what policy did government investment and nationalisation follow?
What did this do?
Essentially “picking winners”
Lowered overall productivity & helped fuel some problems growing in industrial relations.
Under-investment - what did the govt fail to embrace?
What did this lead to?
Supply-side economics
Lack of competition in production and labour markets
Under-investment - what does demand-side economics create?
How does this link to the post-war consensus?
Lack of incentive for wealth creation.
Commitment to supporting failing companies, nationalisation & tolerance of TU militancy created a culture of lack of competition.
Under-investment - what was there arguably a lack of?
How is this evident?
An overall coherent industrial strategy.
A number of initiatives (eg setting up a Department of Economic Affairs, 1964-1970) being dropped.
Under-investment - there was an overall lack of coherent industrial strategy.
What did this mean for the economy?
Only some areas of the economy benefited from long-term industrial plan, like aerospace & other industries based in the south.
Trade deficit - what was Britain not able to take advantage of?
Global demand for exports, instead becoming overly reliant on imports.
Trade deficit - Britain was not able to take advantage of global demand for exports, instead becoming overly reliant on imports.
What did this result in?
Give evidence
Relatively slow economic growth
By 1964, the balance of payments deficit was £800 million - more than the incoming Labour government was expecting.
Trade deficit - this _____ combined with _____ in the ______ _____, the closure of the _____ ____ and _____ ______ eventually led to Prime Minister Wilson ___________ the _______ in 19__.
a) deficit
b) unrest
c) Middle East
d) Suez Canal
e) dock strikes
f) devaluing the pound
g) 1967
Trade deficit - Harold Wilson was forced to devalue the pound in 1967. How did he justify this in a televised speech?
“We shall now be able to sell more goods abroad on a competitive basis”.
Trade deficit - with a policy of full employment, what was there more of a need to do?
What did this result in?
Import raw material to produce products & sell to the home market, booming due to full employment.
Pushed economy to full capacity due to labour & raw material shortage, pushing prices & import demand up.
Inflation - what was inflation ultimately worsened by?
Stop-go economics
Stop-go economics - what did Harold Macmillan’s team of Treasury Ministers chose to do in 1957?
Resign over the decision to follow the risky ‘stop-go’ economic policy.
Instead, they had wanted to reduce welfare spending.
Stop-go economics - what was the alternative option for stop-go economics?
Why didn’t Macmillan adopt this?
Reduce welfare spending
He was a one-nation conservative.
Stop-go economics - ‘stop-go’ was an ________ ________ that was _________ throughout the 19__s to appease ______ of ________ side economics and solve the problem of a ________ of _________.
a) economic strategy
b) repeated
c) 1950s
d) critics
e) demand
f) balance of payments
Stop-go economics - what was stop-go economics?
Stop = govt deliberately slows the growth of the economy when reaching full capacity by raising taxes and cutting govt spending as 2 main ways of reducing demand.
Go = when economic activity reduced and the balance of payments was more level, taxes were cut to stimulate demand.
Stop-go economics - what are the faults of stop-go economics?
(manufacturers, consumer market, inflation)
Short-termist & didn’t deal with the central problem that caused the balance of payments problems: British manufacturers weren’t being encouraged to boost import trade.
Only maintained and regulated the health of the domestic consumer market, so a cost-push inflationary pressure was created.
Combined with the failure of the National Economic Development Council and the National Incomes Commission set the scene for inflation to become overwhelming for the economy, reaching a high point in the 70s.
Stop-go economics - what was the National Economic Development Council?
What was the National Incomes Commission?
Were these, combined with stop-go economics, successful?
Representatives of employers, TUs and the govt would work together to plan for growth.
Set up to regulate wage demands.
No
Inflation - inflation _______ every year from 19__ to 19__.
a) inflation
b) 1967
c) 1975