Another factor, although Britain’s 1950-1973 growth rate was high for modern standards, in it was greatly below its’ competitors’. Indeed, during this period, the UK’s GDP was of around 3% while West Germany’s stood a 5.9% and Japan at a staggering 9.4%!
Also, Britain experienced a economic phenomenon called a ‘Stop-Go’ economy. This consists of cycling trough periods of growth and others of either decline or, more often, periods when the government tried to keep the situation under control.
A ‘Go’ period was characterized by economic growth and increased consumer spending which was based on credit. This high use of credit created a greater demand for goods, which itself caused inflation and therefore wages were rising as well as the price of exports. However, because of the increasing demand for goods, more and more foreign goods such as Japanese motorcycles were being bought. All of this combined created a balance of payments problem.
A ‘Stop’ period was when the government in place tried to control the balance of pyaments deficit by increasing interest rates. This caused demand to decrease and inflation to decrease. This itself eased the pressure to augment wages and lessened the balance of payments deficit. However, ‘Stop’ periods often created unemployment. The government then reduced interest rates and the economy entered another go cycle.
This ‘Stop-Go’ cycle caused the Conservative Prime Minister Macmillan to want Britain to apply for membership in the EEC but French President Charles de Gaulle’s veto was a major economic setback.
Finally, the Labour governments had ambitious plans to restructure the economy (Harold Wilson’s “white heat of technological revolution”). However, in 1967, Britain was forced to devaluate the pound making it impossible for the government to put in place these restructuring policies. Moreover, these plans were further abandoned because of the divisions inside the Labour party caused by on one hand, clashes between the newly created Department of economic Affairs and the original Treasury and on the other hand, caused by Wilson’s policy of reforming trade union power which he thought they had too much of.
Therefore, by the end of 60’s, there were many problems which had not been solved such as reforming of trade union power, restructuring the economy or modernizing the industries and these hindered Britain’s 1970’s development.
The long post-war boom ended in 1973 with a major oil crisis during which the price of oil quadrupled. This caused pressures which, coupled with underlying weakness which had not been solved, created a depression and much concern for the weak economy.
There was a miners’ strike in 1973-4 caused by the miners’ dislike for the Conservatives’ policy in power at the time (Edward Heath’s Conservative party won the 1970 election). This was part of Heath’s introducing a damaging three day week and then a election in 1974 which Labour won. However, these following Labour governments had major problems solving massive industrial unrest, reducing the trade unions’ power and also avoiding major splits in the party itself. This destroyed the confidence of both outsiders and the British people in the economy. They also faced rising unemployment, financial instability and inflation. The government was forced to take out a massive loan from the IMF (International Monetary Fund) because of a sudden loss of value of the pound against the US dollar. This was terribly humiliating and was obtainable only on the condition that there be cuts in government spending which made the already existing splits in the Labour Party worse.
Finally, there were many failures of the Thatcher government during the 80s. Indeed, there was a decline in the manufacturing industry because of monetarist policies (mainly restricting government debt and leaving non viable industries to fail) which initially worsened the decline of the industry and caused 2 million jobs to be lost and exports to decline more than doubling the number of unemployed in only 2 years.
There were also continuous problems with trade unions and industrial relations. The miners’ strike of 1984-5 contributed to widespread demoralization. There was also a failure to invest the benefits of privatization.
However, other historians believe that during the period from 1953 to 1973 there was continuous and sustained economic success of the British economy. Indeed, there was a good amount of stability in the international monetary system thanks to the establishment of the IMF by the Bretton Woods Conference in 1994. There was also permanent dominance of the US dollar. There was also in the establishment of GATT (General Agreement on Tariffs and Trade) which reduced trade barriers and helped encourage trade. Also, between, 1953 and 1973, British GDP was 2,8 per cent which was better than the interwar and pre-World War 1 years.
Moreover, there was low unemployment (about 2% which is far from the 12% of the 30s)and relatively low inflation. Even the recession of the 70s, unemployment rarely reached 1 million. Also, living standards of most people were rising during this period. Indeed, child mortality was divided by two from 1950 to 1973! For many, weekly earnings rose and work hours fell. Car ownership increased more than 5 times (from 46 cars per thousand to 247 cars per thousand); by 1973, 60% of households owned washing machines and refrigerators (whereas in 1950, only 5% of households did) and 20% of households had a color TV set.
Also, during this period, various Conservative and Labour governments managed to maintain stable exchange rates and also succeeded in making the Stop-Go cycle produce a mostly positive result. Moreover, the Macmillan government was successful in dealing with the 1958 crisis and Labour managed to recover quite well form the devaluation of 1967.
Between 1973 and the 90s, there was a good amount of improvement in trade. This period was marked by the entry of Britain into the EEC which showed that links with Europe were much more significant that with the Commonwealth. It was also marked by the discovery of oil in the North Sea which allowed Britain to become self sufficient in oil for a time and more importantly an exporter of oil. This hugely helped the balance of payments. Many actions were taken against the power of the trade unions but they were only tamed under Mrs Thatcher during the 1984-5 miners’ strike. This was vital in increasing competitiveness. There had been since Heath a desire amongst British PM’s to make British industry more competitive and productive. This was only accomplished under the Thatcher government of the 80s (with the help of a large majority) which caused the productivity growth rate to double between the 70s and 80s (whereas other countries such as Germany and France experienced a decline or stagnation in their productivity).
The 80s were a time of restructuring and reform for many of Britain’s industries. By the 90s, the coal-mining workforce was reduced to less than 5 times its amount of the 70s. Many think that these reforms were too divisive but the positive view deems they were necessary.
As a conclusion, we can say that there are basically three main views concerning the topic of post-war British economics. Firstly, the Thatcherite view is that between 1953 and 1979, Britain was on the wrong economic path and that the policies used during this period were a mistake. This view also suggests that there were too many nationalizations, too much government spending, not enough interest in modern management techniques, too much government intervention (the “nanny state”) and not enough competitiveness. It also argues that the period from 1979 onwards was one of “revival” (change word), that socialism was a mistake and that during that period, Britain finally became competitive.
On the other hand, the view of the ‘Golden Age’ argues that there was, during the post-war period, sustained social and economic progress. It suggests that in the period 1951-73 Britain was more prosperous and had a more equal society and that it had recovered very well from the devastating war. It argues that Thatcherism was a mistake, that these policies created unnecessary divisions in the society and that they greatly damaged the manufacturing industry.
Finally, the balanced view supporters think that post-war economy was neither a success nor a failure, but merely a mix of them both with ups and downs. These supporters also think that Mrs Thatcher's reforms may have been necessary but the price paid for them – of social division – was too high.
Therefore, although there was poor management between 1951 and 1979, the economy was relatively successful and the policies of Mrs Thatcher could probably have been replaced by some who were to be less costly to society.
