economic policies and problems including devaluation Flashcards
what was one of the key priorities for the labour government
modernisation of the British economy
by 1964
widely accepted that Britain was lagging behind other countries such as West Germany + Japan
the affluence of the post-war boom
not reflected in the productivity or growth rates
britain’s economy seemed to be trapped in the cycle of ‘stop-go’ with:
-bursts of prosperity always lead to inflation
-run on the pound
-regular crisis over the balance of payments
what was the key aim of Wilson’s gov in 1964?
reorganising the economy to break out of this cycle of ‘stop=go’
labour inherited a deficit of?
£800 million
two classic economic solutions to this kind of problems were?
deflation or devaluation
who was wilsons chancellor of the exchequer?
james callaghan
james callaghan and wilson did not want to do
deflation or devaluation
devaluation
lowers the value of a currency in comparison to others in a fixed exchange system
what would deflation do?
-support the value of the pound
-prevent inflation
-but it was an old ‘stop-go’ approach that Labour Party determined to break away from
fear regarding deflation
it would stop the Labour Party from meeting its manifesto commitments of extra spending on welfare + technology
what would devaluation do?
make imports more expensive + help exports by making British goods cheaper in other countries = help balance of payments
problem with devaluation
-make Britain look weaker in the world + make it weaker
wilson fears about devaulation
feared that the Labour Party would gain reputation as the party of devaluation under Attle in 1949
what is the DEA
Department of Economic Affairs
- led by george brown in attempt to break out of the stop go cycle
- set growth targets, created economic planning councils
what was the problem with the DEA
the treasury resented the dea attempting to control economic policy
- chancellor callaghan was unhappy about browns influence
- brown balmed as he could be impulsive and inconsistent
what happens to Brown and the DEA
1966 brown moved to the foreign office
1967 DEA abandoned
prices and income policy
government intervention to set limits on price rises and to call for wage restraints in negotiations between unions + employers
increases in the aim of tackling inflation
what was the impact of the price and income policy
- long seamen’s strike in 1966
- frank cousins resigns from cabinet
- criticism of Wilson from the left
-relationship between the gov + unions starting to breakdown
why did wilson decide the devalue the pound
- deflationary policies were not working
- in 1967 oil supplies are affected due to the outbreak of war in the middle east
- major dock strikes in august affect export
- in economic crisis
who was roy jenkins
-under Harold Wilson served as home secretary 1965-67
-chancellor from 1967-70
what did Roy Jenkins use
deflationary methods
-raised taxes
-tightened up gov spending in all areas of the economy, priority to improving BOP
1969 Jenkins achieved
a balance of payments surplus
-1969-70 inflation was still running at 12%
improvement in the economic situation from 1969 was
key factor in making labour confident of victory in 1970 general election
