How Effectively did Labour Manage the Economy, 1945-51?

Question 1

Context

Answer 1

July 1945 election of Attlee’s Labour government- landmark event
First Lab gov. with parliamentary majority
Promised to organise resources efficiently + fairly- no mass unemployment of 1930s

Question 2

Successes- Social Reform

Answer 2

Introduced reforms- ‘welfare state’, based on universality and collectivism
Established principles of centralised state planning + collectivism (used for decades)

Question 3

Successes- Economic Management

Answer 3

Keynesianism- high gov. borrowing + spending, centralised gov. management of economy
Keynes negotiated loan of $3.75 billion from US in 1946, used by Chancellor (Dalton) to fuel industrial recovery + nationalise key industries

Question 4

Successes- Nationalisation

Answer 4

Key industries brought into public ownership
Promoted efficiency + fairness, profits reinvested into society
Coal (1946), Bank of England (1946), Transport (1947), Electricity and Gas (1947), and Iron and Steel (1949)

Question 5

Successes- Nationalisation (+ job creation schemes)

Answer 5

Nationalisation + money into job creation kept unemployment below 2% throughout 1945-51

Question 6

Successes- Cost of Living

Answer 6

Centralised economic planning + austerity policies (wage freezes, rationing, price controls) helped maintain steady cost of living
Inflation fell from 16% to 9% by 1951
Middle class found policies frustrating, but generally viewed as fair + improved standard of living for poorest

Question 7

Successes- Devaluing Pound

Answer 7

1949- devalued pound from $4.03 to $2.80
Made British goods competitive abroad, boosted industry
Industrial production grew by 30%, new industries boomed- creating jobs
Exports grew by 80% by 1951, reduced balance of payments deficit
World trade inc. from 17% to 20%, economy grew by 4% each year after 1948

Question 8

Failures- Nationalisation

Answer 8

1951- 20% of state assets nationalised, but significant cost
Cost £2 billion- could have been used to modernise + improve infrastructure

Question 9

Failures- Welfare State/Lack of Investment in Industry

Answer 9

Focused too much on welfare state- failed to drive economic regeneration + development
1951- investment in infrastructure only 9%, Germany’s 20%
Did little to invest in developing industries (car + electrical), superseded by Japan + USA

Question 10

Failures- Little Done to Centrally Plan

Answer 10

Aside from investing money in nationalised industries, Attlee did little to manage economy
Created Central Economic Planning Staff + Economic Planning Board to help gov, employers, and trade unions work together- but not given power to enforce decisions, so largely ignores

Question 11

Failures- Deficit

Answer 11

Deficit continued to grow due to relationship with US- agreed to increase defence spending from £2.3 to £4.7 billion (Cold War)
Occupying force in Europe + UN Security Council member, so had army of 1 million
Commitment to develop nuclear weapons + role abroad, Greece, Korea, Kenya, West Germany
1951- spending 14% of GDP on defence

Question 12

Failures- US Loans

Answer 12

Argue that they could shoulder burdens only because of £2.7 billion from Marshall Aid (1948)
Not used on long term infrastructure and investment in economy long-term

Question 13

Failures- Overall

Answer 13

Attlee’s policies all contributed to high levels of debt
Subsequent governments left to tackle