Economic changes in the UK since 1945

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The aim of this assignment is to make comparisons between two important post WW2 decades and try to explain the differences in economy and economic policy of the two decades.

In 50s UK was a major world power, militarily and economically, but it had lost all that dominance in 70s because of the slowness in its economy and partly because of major political and economical mistakes, the other reason being was the slow economic growth of the UK compared to other industrialised countries.

Another big difference in the two decades were the economic policies, and theories used by the government. The government of the 1950s were using more of Keynesian theories and were trying to control the economic factors (e.g. Inflation, unemployment) using Keynesian theories and demand side policies. Whereas the governments of the 1970s were using and implementing Monetarist (Supply & money side policies), they were beginning to realise that Keynesian policies were ineffective. In the two decades, labour government tended to be more Keynesian and Conservatives tended to be more Monetarist.

Average inflation in 50s was 4.7 %, but in 70s it was 14.8%. The 1956 Suez crises resulted in the decreased the dominance of UK in international arena and showed how powerful USA really was. The decade also showed that the UK was about to be overtaken by the more dynamic European countries. The power of the pound went down because of the creation of EEC, also the trade between the European countries grew bigger than the trade UK had with the commonwealth countries.

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When the conservative leader Winston Churchill returned to power in 1951, he had some hard tasks waiting for him. The economy was in a bad situation because of the Korean War in 1950 and the bad winter in 1951, the people were even being rationed for food. The beginning the 70s couldn’t have been much more different, in 70s the economy was enjoying a good time, the economy was in the middle of a short lived economic boom.

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One of the major differences between the two decades for the UK was the defence budget. In 1950s the defence budget was at a record post-war high, this was because of the development in Korea and the start of the cold-war between the NATO countries and the communist states. The UK economy was taking enormous straits to fund this enormous need. In 50s a third of the motor manufacturing factories had to be converted for the production of defence equipment. But 70s was a decade of low defence spending, the cold war was going on between Soviet Union and ...

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