Economic Developments Flashcards
Why was there a post-war boom
Economies grew after the effects of the war
An increase in global trade
Productivity increase
Tax cuts
What was the baby boom
An acceleration in brith rated at the end of WW2 leading to a fast growing population
Population by 1961
51 million, 2 million more than 1951
When was full employment estimated to have been achieved, and how many were unemployed.
By 1955
200,000 unemployed, less than 1% of the workforce
Which industries saw a growth and which saw a decline
Growth in service industries
Decline in traditional industries
Modernisation of Britain
Public feeling at the time
People felt more affluent
People enjoyed rising wages
Butler issued £134 million in tax cuts
What is the ‘go’ in ‘stop-go’ economics
With low interest rates and rising customer spending, the economy started overheating with wages and imports exceeding productivity and exports.
What is the ‘stop’ in ‘stop-go’ economics?
The government issues higher interest rates and wage freezes therefore leading to falling demand and a decreasing output.
Why was there a ‘stop-go’ cycle
After demand falls and output decreased, the government removed ‘stop’ controls leading to an increase in demand and rising imports causing the cycle to start again.
What is a balance of payments crisis?
When imports exceed exports
What is the balance of trade?
The difference between imported and exported physical goods
What is the balance of payments?
The difference between the visible trade of physical goods and invisible services such as shipping, banking and insurance.
Was the UK in a sustainable position in terms of balance of trade?
No, the UK was in a deficit of balance of trade throughout this whole period
Example: A deficit of £345 million between 1951-55
Suez crisis effect on Britains economy
US pressure over the crisis led them to start a run on the pound and expose the faults of ‘stop-go’ economics, leading to the financial crisis of 1957.
What was the division over the solution to this crisis?
Peter Thorneycroft believed in ‘monetarism’ - wanting to limit wage increases and cut the money supply.
One nation conservatives like Ian McLeod were strongly opposed to this as would lead to an increase in unemployment and cutbacks on housing.
Macmillans decision
Sided with those wanting an expansionist economic policy, overruled Thorneycrofts spending cut proposal in 1958 leading him to resign.
He stuck to the principals of the post-war consensus.
Developments in the late 1950s
Sterling regained its value against the dollar.
Tax cuts of £370 million were able to be employed in April 1959
A general air of consumerism led to Macmillans victory in October 1959
Economic difficulties in the 1960s
Stop go cycle
Balance of payments problem
EEC rejection 1963
What did the Beeching Report state and lead to in 1963.
Recommended massive cuts in Britains rail network
Closure of more than 30% of rail network
Hundreds of branch lines and stations were axed —-> public outrage, isolated rural areas.
Overview of period
Trapped in the cycle of ‘stop-go’ economics under the guise of prosperity and luxury
Instability throughout with suez crisis and 1957 financial crisis, balance of payments issues.
HOWEVER
Much affluence and rising living standards, expansion of the economy.
