2.2 The Economy Under Wilson Flashcards
(38 cards)
What were the options to solve the economic crisis during Wilson’s time as PM?
The options were devaluation (reducing the value of the pound) or deflation (cutting economic growth), both with their downsides.
Why was Wilson hesitant about devaluing the pound?
Wilson was initially reluctant because he presented himself as a defender of the currency and feared the impact on the money markets. Devaluation would also require cutting spending, going against their promises.
What steps were taken during the 1964 Sterling Crisis to stabilize the economy?
Measures included raising the bank rate, imposing a temporary import surcharge, increasing income tax, and securing international aid of $300m from the US and European central banks.
Why was Harold Wilson hesitant about devaluing the pound during his time as PM?
Wilson was initially reluctant because he presented himself as a defender of the currency and feared the impact on the money markets. Devaluation would also require cutting spending, going against their promises.
What happened to the pound and markets by early 1965?
The pound strengthened, and the markets recovered by early 1965.
What were the average unemployment rates in 1965-66?
Unemployment averaged only 1.5% throughout 1965-66.
In 1966, what led to Labour calling for an election?
Higher wages compared to prices in 1966 led Labour to call an election.
What was the purpose of the Department for Economic Affairs (DEA)?
The DEA aimed to coordinate national resources and investment for economic improvement.
What was the National Plan’s goal, and why did it become challenging to achieve?
The National Plan aimed for sustained growth at 4% per annum, but it became challenging due to government decisions, rendering it unlikely.
What happened to Brown and the DEA by the end of 1965?
By the end of 1965, Brown moved from the DEA to the Foreign Office.
According to Kenneth O. Morgan, why did the DEA face challenges in its role?
Kenneth O. Morgan argued that the Treasury’s strong control over the economy made it hard for the DEA to promote stable expansion, making its role difficult from the start.
What was included in Callaghan’s 1966 Budget to increase employment in manufacturing?
The Selective Employment Tax.
Why did the markets remain unconvinced about the strength of Sterling despite measures in the Budget?
A seamen’s strike damaged exports and caused a significant run on reserves and the exchange rate.
What happened to the trade deficit in June 1966?
The monthly trade deficit doubled.
Why did Frank Cousins resign from the government in June 1966?
He resigned in protest at the government’s income policy.
Who supported devaluation from the Left?
Castle and Crossman supported devaluation from the Left.
Who backed devaluation from the Right?
Brown, Crossland, and Jenkins supported devaluation from the Right.
What were the measures introduced in the July package to address the 1966 Sterling Crisis?
The measures included a 7% bank rate, cuts in government spending, hire purchase restrictions, and a freeze on wage and price increases.
What happened to Brown and his National Plan after the July measures?
Brown was removed from the National Plan and transferred to the Foreign Office.
What were the immediate effects of these measures?
Industrial earnings’ rise halved, and the economy only grew by a little over 2% in 1966 and 1967.
What was the conclusion after implementing the July measures?
Despite these measures, it was evident that more actions were needed to address the economic situation.
How did the balance of payments change after these measures?
While the balance of payments finished in the black for 1966, it shifted into heavy deficit afterward, with a trade gap reaching £600 million in 1967.
What did the Crisis of 1966 highlight regarding Britain’s defense?
It demonstrated the necessity for defense cuts.
What was the primary target for these cuts?
Britain’s presence east of Suez was the main focus for these reductions.
