Economic Issues Flashcards
What policies during the post war consensus approach (1945-1979) affected inflation?
Keynesian policies. Governments prioritised full employment, often stimulating demand by public spending- sometimes led to inflation
Why was inflation high in the 1970s?
Oil shocks of 1973 and 1979 and rising wages, due to powerful trade unions
What approaches did the governments take to address inflation 1945-1979?
Labour governments (e.g. Wilson) implemented prices and incomes policies to curb wage-push inflation - with limited success
Conservative governments (e.g. Edward Heath) attempted monetary and incomes policies but struggled during the 1974-5 economic crisis.
What approaches to inflation between 1979-1997 (Thatcher and Major)?
Monetarist approach.
Tight monetary policy
Reducing public spending
Raising interest rates
Inflation peaked at 18% 1980
Fell to 5% by 1983 at cost of rising unemployment.
Impact: inflation under control, but industrial unrest and social inequality increased
What approaches were there to inflation 1997 to 2007 (new Labour)?
It was low inflation era
Global economic stability
Delegated monetary policy to Bank of England in 1997- maintained an interest target of 2%
Generally successful control of inflation
What were the approaches to control unemployment during post-war consensus 1945-1979
Full Employment Commitment
Post-war governments aimed to maintain low unemployment through Keynesian economic policies
What levels of inflation between 1945 and 1979?
1950s and 60s unemployment often below 2%
Problems emerged in 1970s due to structural changes in the economy- decline of heavy industry, led to rising unemployment.
Rising unemployment in regions reliant on heavy industry- coal, steel and manufacturing industries.
What happened to unemployment between 1979 and 1997?
Mass unemployment under Thatcher
Peaked at 3 million in 1984 (12%)
Came as a result of heavy industry decline, privatisation and shift to service based economy
Government created Enterprise zones and retraining schemes-limited effectiveness
Unemployment improved under Major, falling in the 1990s, as economic growth resumed
What happened to unemployment between 1997 and 2007?
Unemployment fell to record lows
Aided by GLOBAL economic growth
Government policies, such as NEW DEAL for young and long term unemployed helped
Some argued that underemployment and low paid jobs masked problems in the labour market
What happened to industry 1945-1979?
Britain’s traditional industries (coal, steel, textiles) started to decline, due to increased global competition
Government nationalised key industries in 1940s- but didn’t modernise them
Attempts to boost national output through policies such as National Plan (1965) failed due to lack of investment and management inefficiencies
Union Power - strong trade unions resisted reform- leading to increased number of strikes and lower productivity
How did conservative/Thatcher government tackle industrial decline 1979-1997?
Thatcher’s industrial policy:
Privatisations (British Coal and British steel)
Closure of unprofitable industries
Industrial output declined in traditional industries but service sector grew
Social costs severe - high unemployment and declining communities in industrial regions
Attempts to revive decking areas mixed success
How did New Labour deal with industrial decline 1997-2007?
Growth of service sector accelerated under Blair (inc finance and technology)
Challenges in manufacturing- continued decline - with limited government intervention to try and protect
Urban regeneration success -policies revitalised areas like the London Docklands - but regional differences remained
How effective were the economic policies from 1945 to 2007?
Effectiveness varied by era and issue, with successes often accompanied by significant trade offs
STRENGTHS
Governments post 1979 got to grips with inflation
Governments post 1979 modernised the economy towards finance and service sector
Policies in the late 1990s and 2000’s significantly reduced unemployment
WEAKNESSES
Industrial decline led to regional inequalities and long term unemployment in some areas
High inflation in the 1970s together with mass unemployment in the 1980s highlight policy failures in managing economic transitions
