Britain's economy: reasons for post-war affluence, trade and the balance of payments and 'stop-go' policies

what came to an end in July 1954?

• food rationing

what was the ‘baby boom’ post world war?

• swift acceleration in the birth rate at the end of the 2nd world war leading to a fast-growing population

• by 1961 there were 51 million people in GB, which was 2 million more than in 1951

what did the global economy boom mean for Britain?

• as countries rebuilt after the war this led to a sustained increase in overseas trade which brought high levels of earnings from exports and investments

• this, with rising demand at home ensured plentiful employment

• by 1955 it was estimated that full employment had been achieved

what was the result in an improvement in world trade for Britain?

• Britain was allowed to import about 29% more goods than it had in 1951 for the same number of exports

• Britain enjoyed a higher income per head than any other country, except for the USA

How did Britain’s financial weakness get exposed?

• The pressure from the USA over the Suez crisis exposed Britain financially and started a ‘run on the pound’

• Peter Thorneycroft (Macmillan’s Chancellor) wanted to limit wage increases and cut the money supply

which side did Macmillan end up going with?

• he sided with those who wanted to keep up an expansionist economic policy

when was the british economy at its peak?

• 1960 to 1964

what was the ‘run on the pound’

• a term describing a rapid fall in the value of the pound in international currency markets, especially in relation to the US dollar

what did peter thorneycroft want?

• he wanted to limit wage increases and to cut the money supply

• other cabinet ministers such as Iain Mcleod, who were one-nation conservatives, were strongly opposed to such a policy because it would lead to increased unemployment and cutbacks in housing

how and when did the popularity of the conservative party improve?

• the sterling regained its value against the dollar after the financial crisis

• the economy expanded so much that the budget of April 1959 provided tax cuts of 370 million£

• the general air of consumer affluence is generally accepted as the key factor in Macmillans comfortable re-election in 1959

what did britain get rejected by in january 1963?

• joining the EEC

what is the summary of Britain’s economy?

• although the british economy was still growing and living standards were still going up, the cycle of stop-go economics had not been broken

• economic growth would still lead to the overheating of the economy through excessive, expensive imports and rising wage demands.

• britain continued to slip behind foreign competitors such as West Germany, the USA and Japan