Britain also failed to succeed in the drive for exports. Britain’s share of world trade declined a quarter to ten per cent between 1950 and 1970. In shipbuilding, the tonnage produced by British shipyards collapsed from 37 to less than four per cent. The British car industry, who had a dominant position in the 50’s, ran into difficulties in the 60’s with the rise of imports from Europe and Japan. There was low productivity because the person-hours required for manufactured products was more important in Britain than for foreign competitors. An excessive government intervention in the economy is a possible reason for the lack of productivity because the government protected the small and inefficient industries from tough competition and burdened efficient and successful industries with high taxes and over-regulation which would slow down the economy. The British educational system favoured arts and humanities over science and technology. For example, Germany was far more likely to have graduate production managers than Britain.
The British economy was run by a cycle called “Stop-Go”. From the 50’s and onwards, bursts of economic growth and consumer spending were halted by fears of inflation and recurrent balance of payment crises, leading to the government cutting the demand and thus to increase unemployment. This was a real difficulty for Macmillan and the conservatives when he was in power with sharp slow-downs in 1958 and 1962. These economic problems were one of the main reasons why Macmillan wanted Britain to apply for membership of the EEC in 1961. When De Gaulle vetoed Britain’s application in 1963, it created a big economic setback.
The Labour government under Harold Wilson had ambitious plans to restructure the economy. Wilson called it the “white heat of the technological revolution”. However, with the devaluation of the pound in 1967, these plans collapsed with gaping divisions within the Labour Cabinet, where George Brown’s new Department of Economic Affairs clashed with the Treasury. Wilson also attempted large-scale reform of trade union power through his White Paper “In Place of Strife” but then backed up because of the trade unions which would create unsolved problems. Even though there was prosperity in the 1960’s, it can be argued that many problems in the British economy were not tackled.
With the sudden rise of oil prices in 1973, this ended the long post-war boom. There was also deeper structural weakness in Britain which would cause a major depression and much gloom about the prospects for the economy. With the damaging miners strike of 1973-74, it persuaded Heath’s government to create a three-day week and then to call a national election in 1974. When Labour returned to power, both of Wilson’s and Callaghan’s government’s found numerous difficulties in overcoming industrial unrest, or in avoiding splits within the Labour Party about how to deal with it. There was also in Britain rising unemployment and financial instability. During the time of the rising unemployment, there was also a period of rapid inflation. The pound lost almost a quarter of its value against the American dollar in 1976. Denis Healey, the Chancellor was forced to take out a massive loan from the International Monetary Fund. This was a humiliating way of showing weakness. The only way the government could obtain this loan was by cutting government spending, which made splits in the Labour party.
Now I will talk about the point of view which believes in a sustained economic success during this period of time.
There was stability in the international monetary sys tem. The Bretton Woods Conference of July1944 established The International Monetary Fund (IMF). With the permanent dominance of the US dollar, this led to an international stability which was very different than in the interwar years. With the initiation of the General Agreement on Tariffs and Trade (GATT) in 1947, it helped to encourage growth and helped to reduce trade barriers. The GDP annual rate growth between 1951 and 1973 was 2.8 per cent. This rate was much better than the one of the interwar times and also better than the time before the First World War. There was also high employment and low inflation. The average annual rate of unemployment was of about two per cent which is a very different number from the rate of 1930’s which was 12.7 per cent. Even in the recession of the 1970’s, unemployment was rarely over one million, in the interwar years, unemployment was always above one million. Living standards were also rising during this time and infant mortality halved. Car ownership increased from 46 cars per thousand to 247 cars per thousand. By 1973, the two-thirds of households had washing machines and refrigerators. In 1950, five per cent of the population had these equipments. By 1973, one house out of five had a colour TV.
The Labour and Conservative governments were successful in maintaining stable exchange rates and ensuring that the “Stop-Go” cycle actually produced a mostly prosperous and stable outcome overall during this period. One of Macmillan’s government successes was in recovering from the downturn of 1958. The Labour recovered well by 1970 the devaluation crisis of 1967. In the period of 1973 to 1997, there was an improvement in trades. In 1973, Britain entered the EEC which reflected an appreciation that British trade links with the rest of Europe were much more significant than with the Commonwealth. In this period, British trade with Common Market partners rose from 30 per cent to over 50 per cent. Britain also became a net exporter of North Sea Oil, which helped the balance of payments. Heath and Callaghan were able to recognise the need for restraints on pay and on bargaining power of the trade unions. In the 1980’s, Thatcher was able to weaken the trade unions power. In 1970, Heath wanted the British industries to stand on their own but wasn’t able to carry out his policy because of the oil crisis. Callaghan wanted to do the same thing but was not able to because he did not have a big enough majority or enough political will to carry out the policy. Thatcher was able to carry out that policy with a big enough majority and the will which made Britain become more competitive and helped the rise of productivity.
The 1980’s were a period of restructuring and the drastic slimming down of traditional industries. From the depths of the crisis years up to 1981 there was a burst of prosperity, “The Lawson boom”. Many historians say that in 1997, Labour inherited a healthy economic situation, after the Conservatives were in power for 18 years.
In conclusion, it is very difficult to determine which of these parties is the right one. One thing that we are sure of is that the British economy of 1997 has a much more extended progress in terms of living standards than the British economy of right after the war. The British population had much more money than after the war. Rationing was a far away memory. During the Cold War era, there was much more stability and a greater peace.
The Thatcherian view says that Britain followed the wrong economic path from 1951-79. “Butskellism” was a mistake, too much nationalisation and not enough privatisation and not enough competition. The Thatcherian’s are against the “nanny state”.
The view of the “Golden Age” says that the post-war boom was a period of sustained social and economic success. They say that Britain became more prosperous and an equal society. They are completely against the Thatcherian view.
The “balanced” view believes in post-war recovery but they also say that Britain was not competitive enough. They believe in Thatcher’s economic reforms but at too high a price in social divisions. They say that the period from Churchill’s second term to 1997 has been uneven but probably a successful part of the post-war prosperity of Western Europe as a whole.
