Economic Developments: Economic Issue, IMF Loan Flashcards
What was Callaghan’s initial economic aim when he became PM?
To end stop-go Economics
Why was the pound at risk of devaluation when Callaghan became PM?
BoP deficit could not be supported by the countrys reserves
When did Callaghan make a speech about difficulties of maintaining full employment?
September 1976
What were the ‘Twin evils’ mentioned in the speech?
The combination of unemployment and inflation
How much had government spending gone up from 1974-76 in proportion of the GDP?
6%
How many people unemployed in 1974 compared to 1976?
600,000 in 1974, 1.44 million in 1976
What was the countrys BoP deficit in 1976?
£1 Billion
What continued to happen to the pound even with interest rates? What were interest rates at?
Even at 15% interest rate, the pound continued to devalue
What was Callaghan preparing his government for with his ‘Twin evils’ speech?
Receiving an IMF loan
How much was the IMF loan which Healey negotiated?
£3 billion
What was an internal limitation of getting the government to accept the IMF loan?
They had to cut public spending back by £2 billion
Why is cutting public spending for Labour a limitation of their government?
Because they were meant to be improving peoples lives
What is significant about Britain taking a loan from the IMF?
The IMF was set up to help 3rd-world countries, not the third superpower
What did the IMF loan for Britain bring an end to?
Keynesian economics
How could the IMF loan possibly be seen as a success of Callaghan?
He fulfilled his initial promise of ending Keynesian Economics
What shares did Callaghan have to sell to make up for the IMF loan?
500 million British Petroleum Shares
How did the Cabinet react to the IMF loan
They had to be forced to accept it
How did the Unions react to the IMF loan?
They went on extreme and continuous strikes
When did Callaghan get the IMF loan?
1976
What was an advantage with the IMF loan amount?
Healey concluded that Britain did not need that much money
How much of the IMF loan did Britain use?
Half of it
When did Britain pay off the £3 Billion IMF loan?
Before the end of Labour being in office
Which recently nationalized company helped with the IMF loan crisis?
British National Oil Corporation
How did the British National Oil Corporation improve the IMF loan crisis?
It helped the BoP deficit, making terms of trade with oil balanced by 1980
What was a limitation of the public with the IMF loan being paid off?
They did not know it had been paid off so continued to criticise Labour
How much was the British National Oil Corporation worth a year by the end of the 1970’s?
£1 billion a year
