Using the sources and your own knowledge, to what extent were the government policies the main reason for sluggish economic growth between 1951 and 1964?

The Conservative’s government policies were not completely responsible for the relative decline. The effects of World War 2 could still be felt in this period, Britain were only beginning to emerge from post-war austerity when public finances had been crushed by an accumulation of war debt. However, the government’s policies did increase the negative impacts affecting the “relative decline”, such as the many policies, which increased inflation. The most major policy to affect the economy was Macmillan’s ‘Stop-Go’ Policy. He staged mini-booms in the economy to coincide with the 1959 general election to boost his electoral appeal. Source C agrees with my judgment, “…needed a boom to coincide with an appeal to the country…staged…managed this in 1959”. The ‘Stop-Go’ made the economy unstable and made society richer, which led to an increase in the buying of consumer durables, which increased inflation. Furthermore, in 1951, Churchill’s policy to reduce purchase tax saw a dramatic rise in the sale of consumer durables. Moreover, between 1951 and 1955 Macmillan reduced unemployment by providing jobs nationwide through his “National Housing Crusade” to build 300,000 houses per year, which led to a richer society and eventually higher inflation.

Another factor which influenced the “relative decline” was the governments high spending on defences. Britain spent a higher proportion of its wealth on defence than most of its industrial foreign rivals. For example, in the 1960s Britain spent 6% of its GNP on defence, compared to Japan who spent a low 1.1%, which is almost one sixth of the expense contrasted with Britain. This choice for heavy spending abroad regularly pushed the balance of payments into red which caused cut backs in domestic expenditure and ultimately added to the “relative decline”. For example, the Conservatives bought ‘Polaris’ from the USA in 1961, which was a very expensive piece of artillery equipment. This factor is also demonstrated in Source E, “…too much money was exported abroad…spent on defence.” However, the Suez Crisis in 1956, involving the barricade of the canal by Nasser, prevented Britain’s connection to its oil reserves in the Middle East and its routes for trade. This resulted in negative affects on the economy because trade suffered due a decrease in imports and exports via this route.

Another major factor was the affluent society in the 1950s. Consumer durables had become available to everyone, such as, vacuum cleaners which increased to 51%, T.V. (35%) and telephone (19%). By the late 1950s, disposable income had risen by 50%, which further added to the buying of consumer durables and therefore caused a price increase and high rates of inflation. This factor became a permanent problem when society gained a rise in weekly earnings from £7.83 in 1950 to £40.52 in 1960, add this to the decrease in number of hours worked which declined to 45 hours per week and it resulted in a society who expected to have a high standard of living. This expectancy led to fixed high rates of inflation through the increased buying of consumer durables. Source C agrees with my interpretation, “…a more affluent society was expectant…of improvement in standard of living.”

I therefore conclude that the Conservatives policies were not the main reason for the “relative decline”. However, they did influence it some what, because they did not try to stimulate productivity in industry and allowed Trade Unions to strike for long periods of time which resulted in less manufacturing. Furthermore, they gave into the Trade Unions demands for higher wages, which endorsed in an increase in inflation. Additionally, the Conservatives ‘Stop-Go’ policy simultaneously caused the stagnation of the economy, as Macmillan’s mini-booms before an election ultimately caused poor economic performance in the long term compared to foreign countries. However, the “relative decline” can be justified as foreign countries, such as, Japan were receiving loans from the USA to help their economies recover from World War 2. Whereas Britain had to deal with the post-war austerity alone, whilst simultaneously keeping up with industrial competitors who had had help to be able to concentrate on their industries for longer compared to Britain who had not. On the other hand, Source E indicates the Conservatives were solely to blame because their naivety in wanting to gain an election majority led to the “sluggish growth”. “…Tory complacency ensured that…economic growth would never be generated.” This suggests to me that the Conservative’s believed they could do what they wanted with the economy and that the effects of the mini-booms were not taken into account in the long term. This ultimately increased the underlying economic problems from post-war austerity which accumulated throughout this period.