A2 History Britain

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To what extent did Britain deal with its economic

  • The war had destroyed 1/3 of Britain's national wealth so recovery was slow
  • GB had relied on lands from the USA during the war to keep going but Attlee had to ask America for more after the war because if Britain's economic weakness
  • Britain still had crippling defence costs to deal with in the post war period and the remains of the British Empire to run eg defence spending was 23% of all government spending in1950 (7% today).
  • The new welfare state and NHS had imposed even more burdens on the British economy
  • Labour had also 'Nationalised' major industries in Britain like iron and steel, road haulage, air, coal, gas, electricity, railways etc. Britain now had a 'mixed economy' part private and part state controlled but the state run industries dwarfed the private ones eg by 1960 transport alone employed 3/4 million, coal 643,000 and electricity 193,000.
  • Rationing of basic foods continued until 1954
  • This was known as the 'Age of Austerity' when Britain had to put up with low livings standards to survive after the war.
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The debate over the economy after 1951

Interpretation 1: the Golden Age

E Roger Middleton and Roger Skidelsky, two British economists, argue that the Long post war boom was the greatest in the history of capitalism

  • The wealth of the country (economic growth) increased steadily throughout this period by an average of 2.6% per year but in some boom years like 1959 it reached nearly 5%.
  • Full employment was achieved - average 1.6% were unemployed which is extremely low (7.8% in 2013). There was job security and plenty of jobs for all.
  • In the second half of the period 1955-63 there was a massive consumer boom as people began to spend their new wealth and the 'affluent society' was born.

Reasons for boom

  • laissez faire economics
  • Keynes wanted a greater role for the gov. in managing the economy to ensure full employment
  • make sure that there was enough 'demand' in the economy
  • encouraging ordinary people to spend by cutting their taxes
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The debate over the economy after 1951

Interpretation 1: The Golden Age

How did this work in Britain?

  • "Few British politicians questioned Keynesian demand management" ( Kenneth O Morgan)
  • RA Butler Churchill's Chancellor flirted with abandoning full employment and Keynesian controls in 1952 when he argued for floating the £ in the ROBOT plan. When this was defeated by his colleagues he adopted classic Keynesian expansionary policies. In 1953 he gave away £170 million in tax cuts to encourage people to spend and in 1955 he gave away a further £134 million
  • Eden- In the 1957 budget even though GB was in a financial crisis the Chancellor Thornycroft gave away £100 million and there was no cutbacks in welfare spending
  • Heathcoat Amory in 1959 gave away £370 million and also cut the Bank Rate to 4 1/2 %

Consumer boom

  • In 1955 only 17% of households owned a washing machine - by 1966 it was 60%. In the same period there were 2 million car owners in Britain in 1950 - by 1964 it was 8 million.
  • 1950-59 average spending per person rose by 1/5
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The debate over the economy after 1951

Interpretation 2: Relative Decline? The stagnant society?

  • Government economic policy in this period was a failure and led to stop/go policies and recurring  balance of payments and sterling crises 
  • Britain experienced an economic decline relative to other more successful Western economies
  • GO - Macmillan's new government began by trying to increase spending again - his new Chancellor Peter Thornycroft gave away £100 million
  • STOP - Thornycroft argued for a drastic cut in government spending to deal with this but was overruled by Macmillan although they did cut some spending by £100 million  and raised the cost of borrowing from 5% to 7%
  • GO - Macmillan's new Chancellor Heathcoat Amory began a new expansion of spending - he cut taxes, gave away £370 million in 1959 and cut the cost of borrowing from 7% to 4 and a half %
  • Relative economic declineThe British economy grew at an average of 2.6 % in this period but this was the worst rate of all developed countries except Ireland
  • Britain's share of world exports fell from 26% in 1953 to 20% in 1961
  • Britain's share of manufacturing exports fell from 20% to 14% in this period
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Explanations of relative decline

This has been debated since the early 1960s when optimism about the economy turned to pessimism.  Eg Shanks 'The Stagnant Society'

  • Failure to Modernise - Continental countries like Germany and France further afield Japan had their economies destroyed by the war and had to 'start again', Britain had no incentive. eg British workers were half as productive as American workers who had new machinery and equipment.
  • Restrictive Practices - Trade unions didn't allow for modern technology and went on strikes to demand higher wages
  • Poor Management - lack of specialised training and knowledge of the managers of British firms
  • The costs of the welfare state - Barnett have argued that the post war consensus led to a large 'public sector' which was to large for the economy to sustain and which could take up between 1/3 to 1/2 of Britain's wealth or GDP
  • Britain's overseas commitments - Others like Hennessy and Kenneth O Morgan have pointed to Britain's massive defence spending and overseas responsibilities. E.g. defence was 23% of all British spending in 1950' 24% in 1970 and still 17% as late as 1970 (7% today and still high by international standards)
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