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Analysis of growth in the UK economy

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Introduction

Analysis of growth in the UK economy After the Second World War, Britain enjoyed the longest boom in its history until the 1973-74 oil crisis. There are many, though, who do not view this as a successful period of Britain's history. Although Britain experienced unprecedented growth, its rate of growth was slower than that for many other countries. It is therefore debatable as to whether this was a successful period of Britain's history or not. This essay will examine the statistics of Britain's growth after the Second World War and compare this to statistics for other countries as well as statistics from Britain's past. This will provide evidence to accurately assess Britain's growth performance during this period. The essay will also examine possible reasons for Britain's relative decline such as demand management Government policies, balance of payments problems, an over reliance on traditional manufacturing industries, low investment in capital stock, Trade Union power, poor management, poor business structure and a poor education system. The 25 years from 1948 to 1973 produced growth faster than had been seen in any previous period of equivalent length. During this period, real gross domestic product doubled. Fig 1: UK Gross Domestic Product Average Growth Rates 1874-1973 1874-1937 1948-1973 Average Growth Rate 2% 2.8% Source: May T., "An Economic & Social History Of Britain 1760-1990 2nd Edition", Longman Group Limited, 1996 The increase in the average growth rate from 2% to 2.8% shows that UK productivity increased considerably. ...read more.

Middle

This was a mistake with Germany and Japan, amongst the fastest growers, investing in electrical products and chemicals, areas that raised far more from exports in 1960-61. Fig 6: Export Markets 1960-1961 (Total Exports Of The World's Nine Leading Economies) ($m) Machinery (general) 7215.2 Chemicals 6086.6 Vehicles 5062.4 Electrical machinery and instruments 3837.6 Aircraft 1551.2 Source: "The British Economic Crisis: It's Past And Future" There are a number of reasons for the relatively low level of British investment, many of which emanated from the Government's 'Stop-Go' policies. The policy of adopting demand-management policies, invented by John Maynard Keynes, was generally accepted to be the correct way to progress amongst both the Labour and Conservative parties after World War II. Hence, when the Conservatives replaced Labour in 1951, this policy, which had been adopted by Labour after World War II, was continued. The idea was that demand would be controlled fiscally to counteract a boom (by reducing aggregate demand by reducing taxes and reducing Government expenditure) or a recession (by increasing aggregate demand by reducing taxes and increasing Government expenditure). Aggregate demand would also be controlled with monetary policy (varying credit control and controlling the interest rate). One problem with this strategy is that it meant the Government was regularly cutting back on or postponing investment programmes in nationalised industries. ...read more.

Conclusion

There were also problems with business structure in Britain where family-run companies led to people being in roles who were not ideal for the job. Britain also lacked the large multinational companies that were especially prevalent in the USA so were never going to achieve the advantages of scale that would give them a similar level of output per worker to the USA. It is understandable that economists and politicians in the 1960s had great concern about British growth rates. Since World War II, Britain had relatively declined with many other countries achieving faster growth rates. There are a number of reasons why Britain was unable to achieve a good growth rate but the main reason is probably the unwillingness of investors to invest in British industries. Britain put itself at a disadvantage by continuing to use outdated capital stock that meant Britain would always have comparatively low levels of output so could never compete with countries that had modern capital stock. Other reasons should not be neglected though. Management failure, inferior education and poor business structure meant Britain would always have lower levels of output per worker than other countries. There are a number of reasons for Britain's economic decline but there is plenty of evidence to suggest the most significant of these was lack of investment. The 'long boom' saw Britain slide down the list of the world's richest nations so concern about Britain's growth performance was fully justified. ?? ?? ?? ?? 1 ...read more.

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