How far did Attlee’s ‘Managed Economy’ tackle the economic problems facing Britain after the Second World War?

Question 1

P1
P2
P3

Answer 1

Success: unemployment
Success – industrial recovery
Failure

Question 2

P1 evidence

Answer 2

- 1945 2 main prioties = help Britain’s struggling industry to recover and create jobs for the thousands of
unemployed men (and demobilized soldiers)

E1: Unemployment
-economic strategy based on the principles of John Maynard Keynes-Cambridge economist- highly influential in the 1930s and 1940s:
-advocated a ‘managed economy’= emphasizing high gov spending
-only governments had the necessary capital=kick-start an industrial
recovery
-must be prepared to borrow highly + go into short term debt

E2: new economic philosophy, the government sought to borrow from America:

John Maynard Keynes negotiated a $3.75 billion loan from the US in 1946
 Chancellor Hugh Dalton negotiated a $6 billion loan from the US to fuel industrial recovery
 Labour used this capital to nationalise key industries in order to run them centrally
 Coal (1946), Gas (1948), Iron and Steel (1949)
As a result of the investment provided to industry, unemployment stayed below 2% (1945-51) and had fallen to 300,000
by 1951

Question 3

P2 evidences

Answer 3

Britain faced a number of significant problems in 1945:
 Britain had worked up £4 billion of debt from war, British exports had fallen by 40% due to the disruption to
global trade, and this had in turn created a dangerous balance of payments crisis
 the British economy had shrunk by 25% since 1914
Labour had significant success in stimulating overseas trade and giving a much-needed boost to British exports

E2:Attlee’s Chancellor, Sir Stafford Cripps, took the radical (and unpopular) measure of devaluing the pound in 1949 from
$4.03 - 2.80:
 the devaluation helped to stimulate overseas trade and increased the competitiveness of British goods
 Britain’s global exports grew by 80% and the percentage of world trade dominated by Britain grew from 17-20%
 overall industrial production rose by ⅓ and new industries (such as cars and electrical goods) boomed in the
late 1940s
 gross domestic product (GDP) increased 3% each year during Attlee’s premiership

Question 4

P3 evidence

Answer 4

Despite the successes, Attlee’s government has been accused of inadequate economic planning which led to long-term
damage:
 the nationalisation cost the government over £2bn (over £1bn was spent on purchasing the railways alone)
 after such high expenditure the government lacked the money needed to invest in infrastructure and therefore
there was no economic regeneration
 as a result, little was done to modernise or improve Britain’s heavy industry – this would lead to a long-term
decline of the competitiveness of British industry
 while Britain spent 9% of her GDP on infrastructure and industrial restructuring in the 1940s, Germany spent
20% - as a result, British industry would struggle to keep up with Germany, Japan and the US in the 1950’s
 the devaluation gave a short-term boost to British exports as it made British goods cheaper abroad, however,
this also reduced the buying power of British industry and significantly increased the cost of imports

Attlee’s government was also constrained by a number of spending commitments that prevents meaningful post-war
reconstruction and investment in infrastructure or industry:
 the introduction of the welfare state was incredibly costly and put huge strains on the economy
 in particular, the NHS and National Insurance were extremely costly = debt prevented investment in
infrastructure long-term investment in industry or economic growth
 by prioritising social reform, Attlee’s government failed to deliver the much-needed industrial investment
Attlee’s loans from the US also came with a costly commitment to supporting American foreign policy:
 Britain’s overseas military commitments during Cold War proved costly: due to Britain’s involvement in Greece,
Korea, and in occupying the Western zone in Germany, British military spending had increased 5 times by 1951
 Britain’s pursuit of nuclear weapons also led to spiraling spending from £2.3 billion to £4.7billion by 1951 = 14%
of GNP