(Economic challenges) Response to economic challenges, 1951-1979

Question 1

What problems did Britain face after 1951?

6

Answer 1

Under-investment
Industrial action
Inflation
Economic shocks
Trade deficit
Stop-go economics

Question 2

Under-investment - what did it lead to?

Answer 2

Lower productivity

Question 3

Under-investment - what did the economy look like in the 50s?
What happened to the manufacturing industry between the 50s & 70s?

Answer 3

Grew rapidly

Fell into decline compared to other nations, which experienced a post-war economic miracle.

Question 4

Under-investment - what happened as a result of the manufacturing industry falling into decline?

Answer 4

It was difficult for the country to remain competitive.

Question 5

Under-investment - what policy did government investment and nationalisation follow?
What did this do?

Answer 5

Essentially “picking winners”

Lowered overall productivity & helped fuel some problems growing in industrial relations.

Question 6

Under-investment - what did the govt fail to embrace?

What did this lead to?

Answer 6

Supply-side economics

Lack of competition in production and labour markets

Question 7

Under-investment - what does demand-side economics create?

How does this link to the post-war consensus?

Answer 7

Lack of incentive for wealth creation.

Commitment to supporting failing companies, nationalisation & tolerance of TU militancy created a culture of lack of competition.

Question 8

Under-investment - what was there arguably a lack of?

How is this evident?

Answer 8

An overall coherent industrial strategy.

A number of initiatives (eg setting up a Department of Economic Affairs, 1964-1970) being dropped.

Question 9

Under-investment - there was an overall lack of coherent industrial strategy.
What did this mean for the economy?

Answer 9

Only some areas of the economy benefited from long-term industrial plan, like aerospace & other industries based in the south.

Question 10

Trade deficit - what was Britain not able to take advantage of?

Answer 10

Global demand for exports, instead becoming overly reliant on imports.

Question 11

Trade deficit - Britain was not able to take advantage of global demand for exports, instead becoming overly reliant on imports.
What did this result in?
Give evidence

Answer 11

Relatively slow economic growth

By 1964, the balance of payments deficit was £800 million - more than the incoming Labour government was expecting.

Question 12

Trade deficit - this _____ combined with _____ in the ______ _____, the closure of the _____ ____ and _____ ______ eventually led to Prime Minister Wilson ___________ the _______ in 19__.

Answer 12

a) deficit
b) unrest
c) Middle East
d) Suez Canal
e) dock strikes
f) devaluing the pound
g) 1967

Question 13

Trade deficit - Harold Wilson was forced to devalue the pound in 1967. How did he justify this in a televised speech?

Answer 13

“We shall now be able to sell more goods abroad on a competitive basis”.

Question 14

Trade deficit - with a policy of full employment, what was there more of a need to do?
What did this result in?

Answer 14

Import raw material to produce products & sell to the home market, booming due to full employment.

Pushed economy to full capacity due to labour & raw material shortage, pushing prices & import demand up.

Question 15

Inflation - what was inflation ultimately worsened by?

Answer 15

Stop-go economics

Question 16

Stop-go economics - what did Harold Macmillan’s team of Treasury Ministers chose to do in 1957?

Answer 16

Resign over the decision to follow the risky ‘stop-go’ economic policy.
Instead, they had wanted to reduce welfare spending.

Question 17

Stop-go economics - what was the alternative option for stop-go economics?
Why didn’t Macmillan adopt this?

Answer 17

Reduce welfare spending

He was a one-nation conservative.

Question 18

Stop-go economics - ‘stop-go’ was an ________ ________ that was _________ throughout the 19__s to appease ______ of ________ side economics and solve the problem of a ________ of _________.

Answer 18

a) economic strategy
b) repeated
c) 1950s
d) critics
e) demand
f) balance of payments

Question 19

Stop-go economics - what was stop-go economics?

Answer 19

Stop = govt deliberately slows the growth of the economy when reaching full capacity by raising taxes and cutting govt spending as 2 main ways of reducing demand.

Go = when economic activity reduced and the balance of payments was more level, taxes were cut to stimulate demand.

Question 20

Stop-go economics - what are the faults of stop-go economics?

(manufacturers, consumer market, inflation)

Answer 20

Short-termist & didn’t deal with the central problem that caused the balance of payments problems: British manufacturers weren’t being encouraged to boost import trade.

Only maintained and regulated the health of the domestic consumer market, so a cost-push inflationary pressure was created.

Combined with the failure of the National Economic Development Council and the National Incomes Commission set the scene for inflation to become overwhelming for the economy, reaching a high point in the 70s.

Question 21

Stop-go economics - what was the National Economic Development Council?
What was the National Incomes Commission?
Were these, combined with stop-go economics, successful?

Answer 21

Representatives of employers, TUs and the govt would work together to plan for growth.

Set up to regulate wage demands.

No

Question 22

Inflation - inflation _______ every year from 19__ to 19__.

Answer 22

a) inflation
b) 1967
c) 1975

Question 23

Inflation - inflation in 1972 was at __% compared to 1975 when it was at __% (after economic shocks).

Answer 23

a) 7.10%

b) 24.2%

Question 24

Economic shocks of 1973 - what caused the 1973 Oil Crisis?

Answer 24

A war between Israel and its Arab neighbours that massively reduced the supply of oil to the west and raised the prices as the west supported Israel.

Question 25

Economic shocks of 1973 - give evidence of the price of oil changing in the west during the Oil Crisis of 1973.

Answer 25

$2 in 1973 to $35 in 1980

Question 26

Economic shocks of 1973 - name 3 impacts of the Oil Crisis of 1973.

Answer 26

Severe shortages of fuel for industry and petrol for transport.

Imports became more expensive and the economy was dependent on imports.

Heath lost the GE in 1974 and Wilson became PM again, again inheriting huge economic problems.

Question 27

Economic shocks of 1973 - one of the impacts of the 1973 Oil Crisis was the severe shortages of fuel for industry and petrol for transport.

Expand on this.

(2)

Answer 27

Britain was more connected and had an economy dependent on transport at this time.

The first motorway opened up in the late 1960s.

Question 28

Economic shocks of 1973 - one of the impacts of the 1973 Oil Crisis was imports becoming more expensive and the economy was dependent on imports.

Expand on this.

Answer 28

The value of the pound fell again and inflation skyrocketed as price of goods increased, even as the govt maintained its commitment to full employment.

Stagflation set in and the productivity of the economy was weak, but at the same time, prices increased.

Question 29

Economic shocks of 1973 - one of the impacts of the 1973 Oil Crisis was that Heath lost the GE in 1974 and Wilson became PM again, again inheriting huge economic problems.

Expand on this.

Answer 29

Value of the pound went into free fall in 1976 - from $2.41 in march 1975 to $1.63 in october 1976.

The govt, now under the leadership of James Callaghan, had to apply for a £3 billion loan from the IMF under condition that the govt had to take deflationary measures - including a public spending cut of 7% in 1978.

Question 30

Economic shocks of 1973 - how did labour cope with the economic shocks?

Answer 30

Embraced it and became the first western economy to break with Keynesian principles of the post-war years

Question 31

Economic shocks of 1973 - labour embraced economic shocks and became the first western economy to break with Keynesian principles of the post-war years.

What had been recognised by the Chancellor at the time that enabled this?
(2)

Answer 31

Printing more money would just add to the problem the British economy was facing.

The spending cuts were known as retrenchment.

Question 32

Economic shocks of 1973 - spending cuts undertaken by James Callaghan were known as retrenchment.
What was this?

Answer 32

When active decisions are taken to reduce the supply of money in the economy.

Question 33

Strike action - briefly sum up what strike action had done.

Answer 33

Created problems.

Question 34

Strike action - what is the context of strike action after WW2?

Answer 34

Strike action in the interwar years and WW2.

Question 35

Strike action - the context of strike action after WW2 is determined by strike action in the years before.
Summarise this.

(3)

Answer 35

Although 1926 General Strike led to widespread distrust for Unionism and passing of 1927 Strikes Dispute Act, it was changed by WW2 and Attlee’s election.

In WW2, Ernest Bevin was appointed Minister of Labour and established better relations between govt and unions as days couldn’t be afforded to be lost to wage disputes.

Power of TUs grew after 1945 with repeal of 1927 Strikes Dispute Act.

Question 36

Strike action - what did industrial relations look like in the 50s/60s?
Why?

Answer 36

Boiled over into conflict between management and labour.

The conservative govt tended not to get involved in strike disputes, mostly because one of the post-war consensus principles was to maintain harmony with industrial relations.

Question 37

Strike action - what did workers get as a result of the government’s commitment to full employment (post-war consensus) in the 50s/60s?
What did this then result in?

Answer 37

More power

They felt empowered to make demands

Question 38

Strike action - what did govt intervention regarding industrial relations/strikes look like in the 50s/60s?

Answer 38

Encourage unions to practise “voluntary restraint” when it came to pay demands: as seen with the setting up of The National Incomes Commission.

Question 39

Strike action - what happened as a result of the lack of legislation and perceived strength that unions had in the 50s/60s?

Answer 39

Industrial disputes tended to happen at a local level.

Question 40

Strike action - industrial disputes tended to happen at a local level in the 50s/60s.
Explain this further.

Answer 40

Local shop stewards often called ‘wildcat’ strikes that were damaging to production as they didn’t follow the formal process and led to short or no notice walkouts.

Question 41

Strike action - industrial disputes tended to happen at a local level in the 50s/60s.
Give evidence to highlight the impact of this.

(2)

Answer 41

Britain lost 3 million+ working days to strikes in 1960 and 10 million by 1970.

94% of the strikes outside the coal industry between 1969 to 1973 were unofficial localised disputes.

Question 42

Strike action - industrial disputes tended to happen at a local level in the 50s/60s.
Name a particular strike that is a good example to illustrate the impact of this.

(3)

Answer 42

The 1966 Seamen’s Strike - damaged the economy as it led to a collapse in the value of the sterling.

Subsequently, there was a dockers’ strike in 1967 which halted the loading and transportation of exports.

Trade deficit grew from £52 million to £107 million between sept to oct 1967.

Question 43

Strike action - what did Edward Heath attempt to do that was different from before?
Be specific.

Answer 43

Break away from post-war consensus by challenging unions.

Particularly in coal mining - it was discovered workers were paid more to produce less and with more money being pumped into the economy again due to demand side economics, it created stagflation.

Question 44

Strike action - what made Heath back down from breaking from the post-war consensus?

Answer 44

His battle with the National Union of Miners in 1972

Question 45

Strike action - what created the 3 day week?

Answer 45

Miners strike & having to ration electricity.

Question 46

Strike action - what was the context of the 3 day week?

Answer 46

The Oil Crisis of 1973 that was creating inflation.

Question 47

Strike action - in 1973, with the hardship of the _____________ and the leader of the ___________________ (Arthur Scargill) - refusing to __________, the miners won a ___% pay ________ and returned the next _____ with an increased _______.

Answer 47

a) 3 day week
b) national union of miners
c) compromise
d) 21%
e) increase
f) year
g) demand

Question 48

Strike action - who was the leader of the national union of miners in 1973?

Answer 48

Arthur Scargill

Question 49

Strike action - what was happening in the country when Jim Callaghan became PM?

Answer 49

Economic damage caused by industrial unrest was increasing.

Question 50

Strike action - ____ ______ showed no regard for the ______ _______ installed in 19__ that was an alternative to the _____ __________ of the 19__ _________ _________ Act.

Answer 50

a) Moss Evans
b) social contract
c) 1974
d) strict legislation
e) 1971 Industrial Relations Act

Question 51

Strike action - what was the Social Contract of 1974 that Moss Evans rejected?

(2)

Answer 51

Allowed employers/the state to treat individual groups separately in wage negotiations to avoid the difficulty of former income policies.

The point was to encourage good faith between union and govt negotiations, at the same time limiting economic damage done by strike action.

Question 52

Strike action - how did the govt go about setting tighter budgets for the country and dealing with out of control inflation in the 1970s?

(2)

Answer 52

A 12-month interval between wage settlements to prevent repeated wage demands and allow the state a level of predictability for future wage expenses.

Negotiated increases in wages were to be either confined to compensating for inflation since the last settlement or for anticipated future price increases before the next settlement.

Question 53

Strike action - what caused the Winter of Discontent?

When was it?

Answer 53

Moss Evans (leader of largest union) refused to accept the social contract.

1978

Question 54

Strike action - give statistics to support the extent to which the Winter of Discontent 1978 happened.

(2)

Answer 54

Lorry drivers halted the transport network before accepting a 20% increase.

Low-paid public sector workers went on strike.

Question 55

Strike action - what was the context of which the Winter of Discontent 1978 took place?

Answer 55

Demands placed on labour govt by IMF and the expected retrenchment.

Pay rises worsened inflation as more money was pumped into an economy that wasn’t producing in a way that presented enough successful industries.