Chapter 2 - Economic Developments

Question 1

What was Britain shaped by in 1951?

Answer 1

1. The impact of the Great Depression: mass unemployment, failure by government to solve problems.
2. WW2, where the whole nation collaborated to defeat the Axis through national effort and shared sacrifice.
3. Rebuilding post-war by the Attlee government from 1945-1951.

Public and political opinion believed that the ‘Hungry Thirties’ or WW2 should never repeat.

Question 2

What did the Conservatives inherit in 1951 (economically)?

Answer 2

The beginning of the post-war recovery, leading to economic improvement in the 1950s.

Question 3

When did rationing end?

Answer 3

July 1954.

Question 4

How did the population grow from 1951 to 1961?

Answer 4

From 49 million to 51 million (5% increase)

Question 5

When was full employment estimated to have been achieved?

Answer 5

1955, only 200,000 were estimated to be unemployed (under 1% of the workforce).

Question 6

Despite full employment, which industries declined post-war?

Answer 6

Agriculture, fishing, coal mining and shipbuilding.

Question 7

Which industries expanded post-war?

Answer 7

Electrical and engineering work, as well as jobs in car production, steel and other metals.

Question 8

How did service industries grow post-war?

Answer 8

By 1960, nearly 5 million people were employed in service industries, roughly equivalent to the number in heavy industry.

Question 9

What did economic growth lead to in the 50s?

Answer 9

Rising wages and a rise in income.

Question 10

What tax cut was promised in the 1955 election?

Answer 10

Rab Butler promised a £134 million tax cut.

Question 11

How did improvements in world trade affect Britain in the late 50s?

Answer 11

Britain could import 29% more in the late 50s than 1951.

Question 12

What was Britain’s income per capita compared with other countries?

Answer 12

2nd highest globally, behind the U.S.

Question 13

What were the average % wage increases in the 1950s?

Answer 13

1948-1958: 6.5%

1958: 2.5%

1959: 3.5%

1960: 7%

Question 14

What was Britain’s rise in industrial production compared with West Germany and France?

Answer 14

W.G: 1952 - 126, 1959 - 225

France: 1952 - 110, 1959 - 170

Britain: 1952 - 101, 1959 - 129

Question 15

What was productivity by 1960 per worker in West Germany, France and Britain?

Answer 15

Britain: 125

W.G: 159

France: 177

Question 16

What were the 1950s, economically, in Britain?

Answer 16

Years of optimism - more jobs, more money, more goods, better housing and provisions of the welfare state.

Adults who were deprived in the war found themselves with money to buy cars, new appliances, luxuries and entertainment, whilst the younger generation could enjoy life to the full.

Question 17

What was the % of world trade that Britain, the US, West Germany and Japan comprised from 1950 to 1962?

Answer 17

UK: 1950 - 25%, 1962 - 15%

US: 1950 - 27%, 1962 - 20%

W.G: 1950 - 7%, 1962 - 20%

Japan: 1950 - 3%, 1962 - 7%

Question 18

What is productivity?

Answer 18

Efficiency for workers: the amount produced per worker per shift.

Question 19

What were issues in the economy?

Answer 19

Wage growth outstripped the rate of increase in production, bringing inflation.

Question 20

What was Macmillan’s (and the Conservatives’) answer to the economic problems?

Answer 20

‘Restraint in the demands we make and common sense in how we spend our income’.

Question 21

How did trade unions pose a challenge to the government in the 1950s?

Answer 21

It was difficult to persuade them that their members should not have high wage increases in some industries like coal where miners felt underpaid.

Government controls had to be used to curb inflation and tax remained high, both to control spending that would increase imports and pay for the expensive public services.

Question 22

What is a ‘go’ phase in the economy in ‘stop-go’?

Answer 22

Government controls on wages etc removed.

Demand increases.

Imports rise.

Imports exceed exports and balance of payments crisis.

Enter a ‘stop’ phase.

Question 23

What is a ‘stop’ phase in the economy in ‘stop-go’?

Answer 23

Government introduces controls after a balance of payments crisis.

Demand falls.

Output decreases.

Enter a ‘go’ phase.

Question 24

What was the issue with ‘stop-go’ economics?

Answer 24

The government had to intervene when the economy threatened to ‘overheat’.

Higher salaries had created high demand, but this did not encourage manufacturers to increase exports to fix the balance of payments, leading to a trade deficit.

Question 25

What is the difference between balance of trade and balance of payments?

Answer 25

Balance of trade encompasses total exports - total imports, whereas balance of payments includes invisible imports and exports not encompassed by the balance of trade. Balance of trade is only a part of balance of payments.

Question 26

What was Britain's trade balance from 1946 to 1960?

Answer 26

1946-50: -£56m 1951-55: -£19m 1956-60: +£132m

Question 27

How did the Suez crisis impact the economy?

Answer 27

The U.S. sold its pounds and applied financial pressure on Britain, causing the pound's value to fall rapidly (run on the pound).

Question 28

Which two key ministers had tension over economic theories and policy in the Conservative party in the late 50s?

Answer 28

Chancellor under Macmillan, Peter Thorneycroft, wanted to limit wage increases and cut the money supply (monetarism), more right-wing economic ideas. Iain McLeod, and other One Nation cabinet ministers, strongly opposed monetarism as it would increase unemployment and lead to housing cutbacks.

Question 29

What result from the tensions in the Conservatives in 1957/58?

Answer 29

Divisions continued throughout summer 1957, but Macmillan sided with economic expansionists. When Thorneycroft proposed drastic spending cuts in 1958, Macmillan overruled him, leading to Thorneycroft's resignation, alongside junior ministers Enoch Powell and Nigel Birch.

Question 30

Did the economic problems of 1957/58 have a lasting impact for the Conservatives?

Answer 30

The did not, and they increased their majority by 40 seats at the next election as their popularity soon bounced back. Macmillan shrugged off Powell and Thorneycroft's resignations. The pound regained its value.

Question 31

How much did Butler give away in tax cuts in the April 1959 budget?

Answer 31

£370 million. This helped secure an even higher majority in thr October 1959 election.

Question 32

What was the issue between 1960 and 1964?

Answer 32

The economy continued to grow and peaked at this time, but the government became even more trapped in 'stop-go' to maintain stability.

Question 33

What was the government forced to do in 1961?

Answer 33

Worries over the economy overheating forced the government into a pay pause to hold down wage rises and ask for an IMF loan. Stop-go issues and balance of payments issued reoccured.

Question 34

What was becoming evident about economic growth in Britain?

Answer 34

European growth, especially in West Germany, was leaving Britain behind and Commonwealth/Empire trade wasn't sufficient. Macmillan thus saw it as essential to join the EEC, for economic growth, sending an application in 1961.

Question 35

What did Selwyn Lloyd do as chancellor?

Answer 35

As Macmillan's third chancellor, established the National Economic Development Council (NEDC), consisting of government representatives, academics, employers and trade unionists, responsible for long-term planning. He added a National Incomes Commission to manage wages and prices in 1962.

Question 36

How did EEC rejection in January 1963 impact Macmillan's economic prospects?

Answer 36

It setback his proposals. Heath claimed he never saw Macmillan as bitterly depressed as after De Gaulle's veto.

Question 37

What did the Autumn 1963 Beeching Report suggest? What was its impact?

Answer 37

As a review into cutting public spending, recomended massive cuts to the rail network (more than 30%), provoking public outrage. Hundreds of branch limes and thousands of stations were axed, causing social change, and leaving rural areas more isolated. The government could no longer surf a wave of prosperity and economic success.

Question 38

What did Reginald Maudling do as Chancellor?

Answer 38

He pushed the economy into a 'go' phase by lowering the bank rate to encourage consumer spending. Growrh rose from 4% in 1963 to 6% in 1964.

Question 39

How were exports and imports between 1961 and 1964?

Answer 39

Exports rose 10%, but imporrs remained 20% higher.