Since the 19th century, because of the Second World War and because of the wall street crash, Britain’s economy could really slipped downwards. Was there continuous economic decline in Britain in the second half of the 20th century ? In questions like this the answer is not just yes or no but an answer in between. This issue is really divided between two groups of people, ones who think there was economic decline and ones who agree that there wasn’t. For many historians there was economic decline because of things such as low productivity of industries or because the second world war.
For others, Britain’s economy was really stable and peaceful because of low unemployment and low inflation. There are arguments for both points of view, first we will see what could have made continuous economic decline and then what could have sustained economic success. Many events can brings us to the conclusion that there was economic decline. The beginning of this decline was certainly the First World War who really damaged Britain in all the sectors. The first thing that helped the decline was the lack of competitiveness of Britain’s industries.
They failed to develop during the industrial revolution, they kept the old machines and so weren’t efficient any more. These industries also had a tendency in short-termism, which is concentrating on immediate profit at the expense of long term security. These industries had low productivity because of the fact that they had old machines and low investments they failed to develop. After the war, Britain had debts and had seen its political position in Europe lowered, so it tried to maintain a costly world role. The government brought the welfare state and nationalization, which was not priceless and certainly wasn’t worth it.
The government was spending too much money in the Korean war, trying to have the atomic bomb and in general, and so there was less money left for other things which could have help Britain. It could have helped the industries for example, but they didn’t and instead they laughed at their own lack of competitiveness. After the war, Britain had to reconstruct all the houses destructed by the bombs but it failed in investing in housing. Again there is the idea of short-termism which is really present, the government wasn’t thinking of the future.
Three Prime Ministers, Macmillan, Wilson and Heath set a great deal about the need to modernize Britain, which wasn’t modern due to nostalgia, people didn’t wanted change. All three failed in achieving their goal. Britain’s government failed in keeping exports high. Between 1950 and 1970 Britain’s shipbuilding went from 37% to less than 4%. Britain’s car industries also really declined because they were old and because of their lack of competitiveness against Japanese industries which were really efficient. Also, British failed to see this decline, they took the habit of joking about it, and so didn’t correct this problem until 1979.
Since Britain’s industries were really not efficient due to outdated machinery and bad management, making a product in Britain took much longer than anywhere else. There was bad social relation between workers and employers which created tensions between the social classes and made British industries slow. Also, people working in industries weren’t working hard since they thought Britain would always be good. This created low productivity and was directly linked to Britain’s economic decline. Since 1951 Britain’s economy was getting worse due to excessive government interventions in the economy and over-regulation.
The government had two choices which were each other as bad, first they could have help industries but this would have made people stop fighting and so become lazy, secondly they could have not help the industries but this would have made people lose their jobs. All the interventions from the government made inefficient industries last longer and efficient industries burdened with taxes. Between 1950 and 1970 the government taxed industries too highly which discouraged companies to expend or people to create new companies.
A proper education for everybody began to develop in 1870, not long before 1950 because of the growing need of literate workers. However rich people were still advantaged on the working class. The weakness of British education also played a role in the decline of the economy. Since a long time in Britain, sciences education was less valued that art or humanity education and so we began to see a shortage of scientific students in Britain compared to Germany were it was far more likely to find graduate production manager, students who would have been a great help for British industries.
Another thing that proves the decline was the Gross Domestic Product (GDP) much lower than foreign competitors such as Japan (3. 0 against 9. 4). Britain’s government, aware of its bad economy, in attempt to resolve this problem created the new Department of Economic Affairs lead by Georges Brown. However there was already the Treasury which did the same thing and so created a clash between the two organizations which was really bad for the economy. During the second half of the 20th century there was a “stop-go” economy.
A go period was characterized by economic growth and consumer spending based on credits. There is then an increase of the use of credits (people buying on Hire Purchase) and so an increase in the demand for goods making the prices rise. This influenced exports because people were buying foreign goods, which lead to a balance of payments problem, Britain was importing more than they were exporting. The government tried to deal with this situation by rising the interest rates on credits which slowed the economy down and created a stop period.
So prices decreased, inflation too as well as the balance of payment problem but this created unemployment. So the government reduced interest rates and people began to buy many things using credits and recreated the same cycle over and over again. This stop-go economy continued until the Prime Minister Tony Blair and Georges Brown, the Chancellor of the Exchequer, who didn’t approve the power the government to change interest rates and so they gave this power to the bank of England which was free of political interferences.
Wilson was really concerned by the power of the trade Unions which he considered too big so he released the “white paper” which reduced the Union’s power: however this was not considered a good thing for a Prime Minister. In the 1970s Britain had to face another crisis. In 1973 the price of oil quadrupled due to a problem between Britain and the middle east. In 1973-1974 there was the miner’s strike, who hated the Tories lead by Heath as Prime Minister and so miners wanted to stop him. So miners stopped producing which created a huge strike and which damaged Britain’s economy.
Responding to this damaging strike the government, and more precisely Edward Heath, introduced the three day week which destroyed the economy since four days per week workers were not working. In 1967 the economy was so bad that Britain had to devalued the pound to boost the exports. After this the government couldn’t keep the country running and couldn’t control the power of the Trade Unions so the Labour Party won the election of 1974. However this government failed in reducing the power of the Unions and had enormous difficulties in overcoming the industrial and economic problems.
The government also faced rising unemployment and financial instability. In 1976 the pound lost a quarter of its value against the US Dollar. The Chancellor had to do a massive loan from the International Monetary Fund (IMF) which was an humiliation really proving Britain’s weakness. Mrs. Thatcher was the first women to be Prime Minister in 1979 and was against the Trade Unions. She introduced monetarist policies which initially made British industries worse. Thousands of industries went out of business, because the old problems stayed unsolved, and created unemployment and made the economy even worse.
In 1984-1985 there was another miner’s strike, defended by the Unions, which was crushed by Mrs. Thatcher who really did well in reducing the Unions power. However the Labour Party was split because of her, the right wanted the Trade Union Reform and the left didn’t. There was also a widespread demoralization in the public sector. In conclusion, Britain’s economy, politics, industries and also Britain in general was in great decline since the 1870s. We just saw the negative view on Britain’s economy however there is also a positive view contrasting with the first one and adding more precision to it.
The economy was going pretty bad however we can find some positive things to say about Britain’s economy. The first argument against the total decline of the economy of Britain is the great stability of the IMF since its creation. The creation of the General Agreement on Tariffs and Trade (GATT) also created stability and encouraged growth within Britain. Britain had to recover from the war and, according to specialists, it did pretty well. Another positive thing is that between 1951 and 1973 there was an annual growth rate of 2. 8% of GDP which is far better than others.
Adding to this, this period was a period of low unemployment and low inflation which is really positive(2% against 12. 7% in the 1930s). Low unemployment means that almost everybody had some work and so could bring money to the state. People had better jobs and better payments so they had more money and could buy on Hire Purchase. This leaded to the increase in the living standards. Infant mortality was decreasing thanks to the National Health Service (NHS) which offered a better service and better health(better diet: free orange juice) making everybody healthier.
Weekly earnings rose and hours worked fell so people became healthier and richer. The car owner ship increased over five times, people had money so they bought cars. The increase in payments made more people buy washing machines and refrigerators. There was also stable exchange rates which created confidence in economy and encouraged investments. The stop-go economy, explained higher, could be considered as a bad economy however it really insured a stable cycle since when there was a stop period, people knew the go period was coming soon, producing a prosperous outcome.
Industries were outdated, this is true, however Mrs. Thatcher helped them such as the industries of coal, between 1970 and 1990 she reduced the number of miner from 170000 to 30000 finding them new jobs. Thanks to her Britain was able to compete with foreign industries. However unemployment and misery stayed and provoked social divisions. In 1973 Britain entered in the European Economic Community (EEC) which really helped exchanges between countries. Thanks to the Marshal Aid, Britain recovered from the debts from the war.
Also Britain took advantage of North Sea Oil, exported it and became self-sufficient in oil helping the economy. The “Lawson boom” was a boom of property prices and consumer thanks to the easy credits people could have. British became more materialistic than they had ever been which was good for the economy. The end of the Unions power by Mrs. Thatcher was really a vital factor in decreasing industries’ lack of competitiveness. This helped the growth productivity as between 1973 and 1980 it went from 0. 6% to 1. % per year which is a good increase since Britain’s economy was pretty bad since then. There are three arguable views on this period sustaining that there was economic success. The first is the Thatcherite view which says that Britain’s economy was in great decline between 1951 and 1979 but rose thanks to Mrs. Thatcher. It proclaims that there were too many nationalizations, too little investment and competition, too much spending on the welfare state, too little focus on modern management techniques and too much government intervention.
This created the disaster called the “Winter of Discontent” which finished in 1979. Thanks to Mrs. Thatcher Britain became competitive. The second, the Golden Age view, says that the post war boom was a period of sustained social and economic success. Britain recovered admirably well from the war and from the crisis which created continuity. However in this view, Mrs. Thatcher damaged the industries by creating an economy based on services such as shops or banks rather than on industries. The third view, the “balanced” view says that Britain recovered relatively well and that Mrs.
Thatcher helped in some points Britain’s economy. This view argues that the period 1951-1997 was a successful period in Western Europe. The questions cannot be answered properly, we just proved that the answer is more than just yes or no. An evaluation of the economic situation in 1997 has to recognize the extent of progress in the living standards and the consumer economy, people had more money, more food, better health, were better housed… One thing that cannot be argued is that this period benefited of great peace and stability than ever before.