2 - Responding to Economic Challenges 1945-1979

Question 1

How much was PW debt as well as interest?

Answer 1

£4 billion of debt with USA post war. Interest mounting to £70 million each day.

Question 2

In what state was the economy after WW2?

Answer 2

GB trade disrupted by the war, economy had contracted by ¼, trade declined by ⅔

Question 3

How had PW trading been impacted?

Answer 3

GB shipping sunk by German U boats, European and Asian countries who had previously been customers to GB had been destroyed, US dominated markets

Question 4

Why was rationing re introduced in 1947?

Answer 4

Keynes visited Washington in 1945 to negotiate an emergency loan for GB - wanted it to be non repayable, a gift for war efforts but US didn’t agree.

Question 5

What did the end of WW2 signify?

Answer 5

A reduction in GB’s world role

Question 6

Why did GB fail to invest in industry?

Answer 6

used the money to pay for general expenses at home and overseas

Question 7

When did national service end and what conflicts was GB involved in until then?

Answer 7

1965 and was involved in conflicts with Greece, Korea, Malaya and Kenya in 1940s-1950s.

Question 8

How did GB investment compare to other countries?

Answer 8

1950 - infrastructure investment only 9% of GDP compared to 20% - Germany and high amounts in Japan.

Question 9

What did underinvestment result in in the PW period?

Answer 9

Germany and Japan became leaders in car manufacturing and the manufacturing of electrical and consumer goods in 1950s and 60s.

Question 10

Why was industry nationalised?

Answer 10

Because state control of the economy during the war had been successful, needed to create jobs to alleviate unemployment

Question 11

What acts nationalised industry?

Answer 11

The Coal Industry Nationalisation Act 1946
The Bank of England Act 1946
The Transport Act 1947
The Electricity Act 1947
The Gas Act 1948
The Iron and Steel Act 1949

Question 12

What was the total bill for nationalisation and what did this mean?

Answer 12

Total bill for nationalisation £2 billion = little money for important modernisation needed.

Question 13

In what state was the economy in in the 1950s?

Answer 13

Boom began after the war that lasted until the 70s. Expansion of world economy during 1950s and 60s due to a global recovery and new technology invented during the war applied to civilian industries.

Question 14

Why was there still relative economic decline despite a post war boom?

Answer 14

Balance of payments deficit
Devaluation
Inflation
Union disputes
Unemployment

Question 15

When did rationing end, under which gov and what happened?

Answer 15

1954 under Conservatives, led to economic boom

Question 16

What did the 1951 conservative gov prioritise?

Answer 16

Full employment - used keynesian style public works schemes when unemployment rose.
Mixed economy - pledged not to increase the level of nationalisation but didn’t reduce it

Question 17

What did unemployment average at in the 1950s?

Answer 17

Averaged at 500,000, lowest point 300,000. Never returned to mass unemployment of 1930s.

Question 18

What did decolonisation mean for GB?

Answer 18

GB world role retreated, end of empire in Asia and Africa, reduced expeniture and more skilled workers

Question 19

What was a key feature of the post war boom?

Answer 19

Consumer affluence and ability of people to borrow and spend more on consumer goods

Question 20

How did the government react to the post war boom?

Answer 20

Relaxed laws on consumer credit

Relaxed laws on borrowing

Question 21

What consequence did allowing the economy to grow have in the 1950s?

Answer 21

Excessive spending = growth of inflation = increase in imports = balance of payments deficit.

Question 22

How did Macmillan under the Eden gov try and slow the economy down after the post war boom?

Answer 22

Raised interest rates and taxes to slow the economy down = exports becoming less competitive and resentment from taxpayers

Question 23

What did the government demonstrate after trying to combat the consequences of the post war boom?

Answer 23

That it was impossible to control inflation and unemployment. Called Stop/Go because consistent policies couldn’t be put in place to ensure growth.

Question 24

What did stop go economics involve?

Answer 24

Increase taxes and interest rates to prevent borrowing for investment in order to slow economy after quick growth. Reduced to make money easier to borrow to facilitate acceleration

Question 25

How was GB’s growth doing relative to other countries after WW2?

Answer 25

GB not very competitive in comparison to Germany and Japan in terms of economic output. Japan experienced growth of 12% in 1960, GB managed 4%.

Question 26

What did Harold Macmillan believe in when he took over and how did he show this?

Answer 26

In a united GB regardless of social class to solve economic problems. Decided to try corporatism to try and arrest economic decline.

Question 27

What was corporatism?

Answer 27

Believing that by uniting labour, management and gov, economic goals could be achieved.

Question 28

What was NEDDY that was set up in 1962?

Answer 28

Management + unions could discuss development of the economy and co-operate. Assumed they would work together to both benefit from LT economic growth. Unable to enforce legal control though.

Question 29

Why was NICKY set up in 1962?

Answer 29

1950s - no. of working days lost to striking increased. Demands for higher pay. Tories interested in keeping unemployment down, but feared that inflation would be uncontrollable unless pay rises were controlled.

Question 30

What was NICKY that was set up in 1962?

Answer 30

Advisory council - gave advice to employers and TUs on which pay rises were reasonable. Couldn’t enforce anything. Unions ignored NICKY, consumerism made it necessary to ignore NICKY.

Question 31

What economic problems did the gov face in 1964?

Answer 31

Increased consumer spending = increased demand for foreign goods = balance of payments deficit and a threat to the value of the pound
1961 - Gov refused to devalue the pound and borrowed £714 million from the IMF to support it

Question 32

At what level was unemployment in 1963?

Answer 32

Unemployment grew to its highest level since the war

Question 33

How did Wilson aim to manage the economy?

Answer 33

Wanted to modernise economy + allow talented people into the country, irrespective of class, to have opportunities. Believed the economy could be transformed through technology

Question 34

Why was the prices and incomes act put in place?

Answer 34

In response to balance of payments deficits, increasing inflation and failure of voluntary wage restraint, gov created incomes policies to limit pay complains.

Question 35

What did the prices and incomes act do 1966/1967?

Answer 35

1967 - allowed wage increases if companies could prove they were increasing productivity and output, 6 month wage freeze had been put in place prior to this in 1966

Question 36

What was the ministry of technology that Wilson set up in 1964?

Answer 36

Created the Concorde, designed to improve productivity in industry.

Question 37

What was the IRC?

Answer 37

Industrial Reorganisation Corporation - promoted efficient practices in industry, offered loans to companies to implement efficiency measures. Promoted mergers between businesses fo efficiency

Question 38

How effective was the IRC?

Answer 38

Failure - 1968 British Leyland + British Motor Corporation - £25 million loan offered - couldn’t compete with European and Japanese imports. In 1970s, British Leyland operated with a loss year after year.

Question 39

By how much was the pound devalued in 1970 and what happened?

Answer 39

Decreased value of the pound by 14%. Claimed it wouldn’t affect the pound in your pocket. Callaghan resigned in protest.

Question 40

What did EH believe in and what did he do?

Answer 40

EH rejected corporatism and wanted free market ideas. IRC axed by Heath. Argued that privatisation provided modernisation. Wanted to break with consensus policies.

Question 41

How did EH implement spending cuts?

Answer 41

£330 million of cuts made to…
Council house subsidies
Free school milk for children
Prescription charges

Question 42

What problems did EH face in the 1970s?

Answer 42

Mounting inflation internationally as boom slowed
GB inflation - 15%
Unemployment rose from 2% to 6% in 20 years
1975 Oil crisis

Question 43

How did Barber try to cool the economy in 1975?

Answer 43

Public sector pay cuts = union unrest = confrontation with National Union of Miners

Question 44

What new ecomic thinking emerged at the end of the 1970s?

Answer 44

Supply side economics. Realised demands for wage restraints were pointless and commitment to full employment meant greater inflation.

Question 45

What happened with the IMF loan in 1976?

Answer 45

Confidence in economy declined due to inflation and union unrest. GB had to loan from IMF. Pound declined by 20% by the time of the loan - $2.00 to $1.63. GB had to agree to £3 billion of spending cuts.

Question 46

How did the left of the labour party disagree with JC?

Answer 46

Wanted out of the EEC
To make GB economically self sufficient by investment in industry + increased nationalisation
The use of trade barriers to keep out foreign exports