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Response to economic challenges (1951-79) - Coggle Diagram
Response to economic challenges (1951-79)
Butskellism
Took Keynesian approach
Tories accepted Labour's post war reforms
Economic policies by R Butler (Tory) and Gaitskell (Labour)
Economic problems
Unemployment
1955 - 1.2% 1973 - 2.7%
Winter of Discontent (1979) - trade unions demanding higher wages
Tories accused of using 'go' policies before elections
If economy dipped, measures like reducing taxes and interest rates were implemented
Slow economic growth
2.3% per year whereas Italy had 5.6%
Lack of investment in research and development in areas other then defence
British economy grew at slower rate than competitors
However, this was because the government had spent lots of money on WWII. Counter with Marshall Plan
Balance of payment problems - pound was too higher - devalued by 14% in Nov 1967
Inflation
1975 around 25%
1955 - 4.36%
Government was unable to prevent build up of inflation
Government raised taxes or limiting pay increase to ensure prices did not continue to rise
1968 - 18%
Stagflation (1964-79)
But there was a lack of resources and working relations with the Treasury
Ministry of Technology was created but suffered from lack of funding
Department of Economic Affairs was launched in 1964
Value of the £ was too high - had to be devalued
Wilson lost credibility
Oil crisis (1973)
Lead to shortages of fuel for industry and petrol for transport
Imports were expensive = value of £ fell to $1.50
OPEC reduced its supply of oil and raised prices to $35 as a response to Western support for Israel
Led to increase in inflation to 16% by 1974
Major war broke out between Israel and its neighbours
EXR collapsed in 1976 - Govt applied for IMF loan of £3bn
Govt spending fell by 7% in 1978
Government strategies
National Income Commission regulated wages
Labour govt (1964-70) set up Department of Economic Affairs to create competition between government, employers and trade unions
Representatives of employers, unions and government planned growth
Economic growth remained poor and by 1967 plan was dropped
Tories set up National Economic Development Council in 1961
Value of £
Govt devalued the £ by 14% which made exports cheaper
Led to greater inflation at home as imports became more exports
Sterling was valued too highly
1968 inflation was 18%