Economy Flashcards
Positives of the post-war boom
Consumers and businesses spent their savings which stimulated the economy as WW1 prevented this
Speculative boom as new shares were offered - £65 million 1918 which rose to £348 million in 1920
Negatives of the post-war boom
Investors bought coal mines and shipyards which were poor choices as the industries were rooted in Victorian Britain so were not competitive
Investors assumed global trade would be restored to pre-1914 levels quickly but wrong as there was a global surplus of ships
High demands for goods but short-supplies as the gov weren’t monitoring production levels led to rising cost resulting in a decline of demand
Post-war recession
Loss of trade export - lost 20% of merchant ships due to the war, couldn’t trade with countries we were at war with but opened up new markets with Japan and the US. Japan opened a silk and cotton trading route with India and East Asia which Britain couldn’t compete with
Underinvestment - steel output was lower compared to rivals, 1920 importing US steel as it was a higher quality and better price and produced 127,000 tonnes less
Industrial relations - 1919 TU’s negotiated generous hours of 13% less for the same wages meaning output and productivity declined but this was not equaled with a fall in wages
Successful solutions to the post-war recession 1921-24
Inflation under 1% in 1924 - result of little spending
Failed solutions to the post-war recession 1921-24
1922 Geddes Axe - saw £87 million cuts in public expenditure, income tax and inflation rose as a result deflating the economy - not the desired outcome
1924 Ramsey wanted to solve unemployment but lacked a majority gov, didn’t increase spending or tax as he was fearful of being called a socialist
Gold Standard - 1925 Churchill was the Exchequer argued rejoining would help the economy but it prolonged the economic slump. Churchill though a competitive economy could not be built by the gov but manufactures
Negatives of the Gold Standard
Harder to borrow money from banks and businesses couldn’t expand or take new employees resulting in high unemployment
Businesses wanted to leave for cheaper exports and compete with cheaper imports
The negative impact of the Great Depression
Unemployment rose by 1.5 million in 1930
American Banks 1931 - rumours of an unbalanced which meant a high taxing or high borrowing gov which would devalue the pound. America held large reserves so they began to panic selling the pound resulting in the depreciation of its value
Cut public sector wages by 10%
The positives that came from the Great Depression
May Committee 1931 - recommended severe spending cuts resulting in divisions. Resulted in Ramsey resigning and then the formation of the national gov - right idea but a failure
Keynes - recommended to the Exchequer public work scheme such as road building to increase the number of jobs meaning less gov money would be used for benefits but this was ignored
Special areas act 1934 - south wales & scotland needed gov assitance, trickle of investment, new steel work in South Wales - too late
The success of economic recovery 1934-39
Unemployment fell from 17% 1932 to 8.5% 1937
Borrowing was cheaper as a result of leaing the GS so people used it to buy property resulting in a housing boom in the South East and Midlands - 1934-35 293,000 houses built
The successes of the managed economy
1939-51
Military expenditure - 1939 spent 15% of national income which rose to 53% in 1941, 1940 appeared to be losing the war so required state intervention, Ministry of Aircraft increased war production by producing 32,000 more aircraft 1940-44 which helped Britain win the war at air
Economic aid - lend-lease agreement 1941-45 allowed Britain to finance the war, US Liberty Ships supplied raw materials which was a lifeline for the UK
Exports grew near 80%
Nationalisation - hope for full-employment, from 1946-49, unemployment under 300,000
The failures of the managed economy
Economic aid - £4 billion debt at the end of WW2, lend-lease agreement
Post war austerity 1945-51 - trade fell by 2/3, ships were destroyed and trading countries were the same, the US dominated the market (Cadbury’s vs Hershies), worsened by the Harsh Winter 1946-47 resulting in a food shortage
Nationalisation - cost £2 billion meaning there was limit money left to modernise industries and left future problems
Positive action by the Conservatives on the economy 1951-64
Iron and steel de-nationalised 1953
End to wartime rationing in 1954 - an economic boom was underway.
The gov was quick to use Keynesian-style public works schemes when unemployment began to rise. Unemployment averaged 500,000, with lows of 300,000.
Decolonisation reduced vast expenditure and an influx of hundreds of thousands of new workers from the Caribbean and South Asia brought new energies and skills to the British economy.
Negative action by the Conservatives on the economy 1951-64
Allowed the consumer economy to grow, but lots of spending resulted in a growth in inflation. It also resulted in an increase in imports which led to balance of payments problems.
Struggled to deal with increased spending – ‘Stop-go – the gov didn’t devleop consistent policies to ensure growth – increase taxes and raise interest rates to make it difficult to borrow money investment to slow things down when the economy grew too quickly
Negative attempts of managing the economy 1957-64
1960 - Japan had 12% growth while Britain had 4%
NEDDY 1962 - management and union could discuss economic development and co-operate, assumed they’d would together for long term growth but was unable to enforce legal control, hoped for voluntary action - unsuccessful
NICKY 1962 - advisor council to guide employers +unions on what the gov considered reasonable pay rises, unions ignored wage restraint, society wanted better living standards
1961 £74 million IMF loan instead of devaluing pound
Positive attempts by the 1st Wilson government on the economy 1964-70
1964 The Ministry of Technology - grew to be one of the largest in the gov, big achievement was creating the Concord
Prices and Income Act 1966 - forced a statuary 6 month wage freeze to curb inflation and the following Act in 1967 allowed rises in companies who output and productivity rose
