Politics and the Economy Intro to Economy in the UK

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UK economy from 1918-1940's 

Intro of Keynianism and General theory of employment 1936

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  • Created on: 15-04-16 10:29
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Politics and the Economy:
Keynes was a very influential economist in the early C20 (After WW1)
After WW1 Liberals were in power (Lloyd George)
o After WW1 there was a massive economic depression
19221923 Bonarlaw (Conservative) formed coalition with Lloyd George (Liberal)
Baldwin (1923) Conservative saw struggling economy, he wanted to introduce the idea of
tariffs on imports into the UK this would be done in order to protect certain parts of
industry. Economics model before this was one of Laissezfaire, the introduction of
o Labour manage to gain enough seats in order to form the first Labour official
opposition
o Introduction of Tariffs was unpopular so General election was called by Baldwin so
he could get a mandate, but lost to Ramsey (Labour)
Ramsey: Labour (1924) First Labour Prime Minister only for 9 months
o Brought in Protectionism Protection for industry e.g. coal
1924: Another General election is held and Baldwin regains power
o Coal miners take 17% pay cut due to demand of coal going down
o Caused 7 day general
o Baldwin expected a fall in the economy so started to plan and managed to prevent
the general strike for 9 months
Union rights were restricted
1920's30's:
1929: Wall St. Crash leads to depression
o Economist Keynes starts to question Britain's economic model
o Protectionism was brought in straight away this was done by nearly all countries
all over the world
General Theory:
Can't expect economy to fix itself
Before demand goes down of products people may notice a slight fall in the economy and
this may result to them planning ahead. It's the idea that due to a slight fall in the
economy the demand of products will go down before it actually does.
This could result in companies laying people off, however due to this people spend less
money, so the drop in the economy that was predicted does actually happen (Selffulfilling
prophency)
If it happens in one sector it can happen in other sectors as well

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WAGES DEMAND
Government intervention, happens in order to stimulate the economy
o Increased government spending
o Inject money into the economy
Companies expectations of the economy improve
Government Spending
Taxation people then lose money and don't spend
Borrowing Short term only
Government should only be there to balance the books.…read more

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