Labour Economy

Question 1

Economic issues affecting labour in 1945

Answer 1

• promised to introduce nationalisation and the welfare state
• balance of payments crisis- spending £750 million more abroad than receiving in imports
• debts from war- loans to pay back to America
• large expenditure- empire to govern etc

Question 2

Describe the USA loans

Answer 2

• 1946
• lord Keynes- adviser to the treasury- was sent to Washington to negotiate a loan of $5000 billion
• American government unsympathetic and drove a very hard bargain
• would only lend $3750 billion
• this was repayable over 50 years, starting at 2% interest in 1951
• conditions: Britain would have to dismantle system of imperial preference and sterling would have to be made freely convertible with the dollar
• Canadian government provided a further loan of $1500 billion, which gave Britain breathing space
• by 1946- industrial production was back to prewar levels, exports had doubled

Question 3

Issues with the USA loan

Answer 3

Most of the money had been used up within a year and the deficit on the balance stood at £450 million in 1947

Question 4

Describe Marshall aid

Answer 4

• from America to maintain market abroad for their exports
• European recovery programme
• offered grants to any country in Europe
• Britain got the largest grant
• got $3000 million, out of a total $12,000 million
• without this loan, rations would have been cut by a third, shortages of timber would have slashed the building programme
• stabilised the sterling and financed imports of food and raw materials

Question 5

Why was Marshall aid in America’s interest

Answer 5

• they wanted to keep countries capitalist and stop communism from spreading
• also needed to boost their main trading partners to restore their own economy
• did not want poor prospects for their exports abroad

Question 6

Problems with Marshall aid

Answer 6

• Bevin described Marshall aid as a lifeline to sinking men
• did not however, solve all of Britains problems

Question 7

What was cripps austerity programme

Answer 7

• austerity= cuts, high taxes, prioritising exports
• this would be through a massive increase in exports to North America
• Britain hoped to wipe out debt and achieve credit surplus in the face of collapsing foreign reserves and severe balance of payments crisis
• cripps was chancellor of the exchequer
• bread and potato rationed after the war
• rationing continued until 1951, meat, butter, bacon, led and sugar and still rationed
• maintained full employment due to prioritising exports
• wages were to remain low to prevent home consumers buying goods which could be profitably exported- reducing the trade gap
• resulted in a 20% increase in agricultural output between 1947 and 1952

Question 8

Limitations of cripps austerity programme

Answer 8

• severe consumer hardship as consumer goods were scarce
• lack of investment in domestic industry- minimising long term growth
• rationing and the unpopularity of this contributed to labours defeat in 1951

Question 9

Describe the devaluation of the pound

Answer 9

• August 1949
• president of the board of trade- gaitskell
• Britain still suffering from trade deficits
• Labour devalued the pound from $4.03 to $2.80
• this was partly caused by the recession in the USA
• this made British exports cheaper and more competitive abroad (especially since America was in a recession)

Question 10

Limitations of the devaluation of the pound

Answer 10

• imports were more expensive, leading to rising prices- particularly for food and raw materials
• this worsened the austerity conditions already in place under cripps
• living conditions stagnated or even declined for many
• to some the devaluation of the pound was humiliating
• cripps had also made previous reassurances that the pound was stable- made government look contradictory
• provided the conservatives with ammunition to criticise labours handling of the economy

Question 11

Describe the Korean War

Answer 11

• 1950
• due to the American aid from Marshall aid and USA loan, they felt like we owed our support
• in January 1951, the government agreed to an additional £4,700 million on the armed services over the next three years
• meant that rationing had to be extended/maintained
• also meant that govt had to charge for procedures such as dental procedures- NHS cutbacks
• very unpopular- Britain was amid an economic crisis and the increased defence expenditure came at the expense of welfare
• diverted funds away from labours flagship domestic priorities, especially the NHS, housing, education- so seen as a betrayal of labours post-war social promises, causing disillusionment amongst core supporters

Question 12

Aims of nationalisation

Answer 12

• govt intervention to improve the economy- through controlling/state intervention in industry
• believed that nationalisation could create full employment
• socialist ideals- fit with clause iv of labours constitution of common ownership of the means of production

Question 13

Briefly describe nationalisation

Answer 13

• central control over key industries such as civil aviation, coal, cable, gas, electricity, steel and iron
• 20% of the post war economy was nationalised under the Labour government

Question 14

Nationalisation successes

Answer 14

• even though national control went against conservative philosophy, there was no significant opposition to nationalisation apart from of iron and steel
• would allow for more efficient planning and cooperation between industries
• unemployment very low by the late 1940’s
• electricity and gas- should lead to lower charges, more research, innovation and development/modernisation
• took into public ownership. 20% of economic enterprises and these employed around 10% of the workforce
• improvements in some industries- supply of gas and electricity was expanded
• there was a growth in aviation - with the formation of the BOAC, British European airways, and British South American airways
• Bank of England nationalised in 1946, so gave govt more control over monetary policy

Question 15

Nationalisation failures

Answer 15

• substantial sums paid in compensation to previous owners- mine owners alone were paid around £164.6 million
• since substantial investment was already needed, the likely profits would have been restricted
• this was therefore a windfall for the owners who were able to invest instead in more profitable industries
• this meant that the state had to pick up the bill for investing in older industries
• most cases, nationalised industries were run by the same managers as previously- reducing impetus for innovation
• parliament had nominal responsibility but in practice had very little control over new corporations
• run like private businesses- very little input from the workers
• no worker control or industrial democracy
• public dissatisfaction and poor service
• fuel crisis in harsh winter 1946-1947, there was no central panning agency to allocate resources or find solutions
• pay was not high due to austerity
• nationalisation cost approximately £2,700 million in compensation.