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UK history: 1951-1964 - economic - Coggle Diagram
UK history: 1951-1964 - economic
problems with the economy
Wages were rising faster than production could keep pace with;
--> firms increased their prices for products which is known as
inflation
- the fact that prices are rising because of wages rising and demand not being there
dilemma of how to maintain growth and full employment, while also ensuring that prices remained steady was
never fully resolved between 1951-64
especially
difficult to persuade the trade unions
that their members should
not
have high wage increases; this was especially true for miners unions
governments become locked in a cycle of
‘stop-go
’ policies, where short-term economic measures had to either prevent the economy from ‘
overheating
’, or to
restart
it after a
slum
economy --> increased affluence of population
Britain enjoyed a higher average income per head than any other country with the exception of the USA
The combination of the benefits of the welfare state, full employment, better housing and more money to spend on new consumer goods leads to a strong sense of affluence
political gain from the improving economy + links to improving social developments
Economic growth and low unemployment led to rising wages; most people’s incomes rose significantly - ‘never had it so good’
Just before the 1955 election, Butler announced £134 million, improving the economic situation further for many of the middle classes - purposefully done before the election
1) post war boom
conservatives came to power --> economy recovering from austerity after war
food rationing ended 1954
The post-war ‘baby boom’ led to a 5% increase in the population between 1951-1961
global economy was rebuilt after the war, trade increased, leading Britain to become more prosperous thanks to rising exports
alongside rising consumer demand at home, led to virtually full employment, fewer than 1% of the workforce was unemployed by 1955
expansion in electrical + engineering work, car + steel industries (about 5 million people). --> accompanied by a decline in traditional sectors such as agriculture, coal mining and fishing
positives of the economic + political issues
Selwyn Lloyd
(Chancellor 1960-62) set up the National Economic Development Council (NEDC) - groups of academics, economists, trade unionists and politicians to
co-ordinate long-term economic planning.
A
National Incomes Commission
was established in
1962
to monitor wages and prices
Reginald Maudling (replaces Lloyd) implemented the final ‘go’ phase,
lowering interest rates.
As a result,
economic growth increased from 4% to 6% between 1963-1964
However, despite a r
ise in exports of 10%
between
1961 and 1964
,
imports
remained nearly
20% higher
problems with stop-go
reactionary
, government cant plan for the future --> base it on whats happening in the moment -->
unstable
when inflation goes up, govt has to stop the economy + try + reduce inflation
economy shrinks too much, the govt has to make things 'go' again + encourage spending
no long term plan -->
short term
economic + political issues of the period
1956 suez crisis: led to a run on the pound - that means that the value of the pound against the US dollar dropped dramatically.
divisions in government
between one-nation Conservatives such as Macleod, who
favoured consensus policies
(people that believe stop-go is important), and right-wingers such as Chancellor Thorneycroft, who
wanted to end stop-go policies
through drastic spending cuts, cutting the money supply and stopping wage increases
Thorneycroft resigned in 1958 when
Macmillan opposed his proposals
, arguing they would
lead to rising unemployment and housing cutbacks
Despite economic problems and government tensions,
Macmillan achieved a
landslide victory in 1959;
the
pound had regained its value against the dollar,
and the government was able to
cut taxes by £370 million
- a popular policy
economy continued to grow; growth was at its peak in the period from 1960-64
britian economic position in the world was a concern
had to ask IMF for a loan
Other European countries such as West Germany were experiencing better growth than the UK. It was clear that trade with the Empire and Commonwealth was not enough
As a result,
Macmillan applied to join the EEC
(European Economic Community).
France vetoed
the application and Britain could not benefit economically from closer ties with Europe
The
1963 Beeching Report
on the railways led to
significant savings in public spending,
by putting in place the
closure of over 30% of the rail network
. This
left rural communities isolated and causing transport difficulties for millions
key terms:
Balance of trade
: The
difference
between the
value of a country’s imports and the value of its exports.
If imports exceed exports, there is a trade deficit; if exports exceed imports, there is a trade surplus - want a
surplus
. Not massively successful
Balance of payments
: the
difference
between the
total flow of money coming into a country and the total flow of money going out of a country
. It includes imports/exports, but also loans; foreign aid; and financial transfers between governments, firms and individuals.
Governments looking at the
balance of payments
will be worried and this is where
stop-go comes into effect