Economic growth between 1951 and 1964 - Assignment Example

In my opinion, the “sluggish economic growth” in the context of this period would be better termed as “relative economic decline”. This suggests that Britain’s economy grew 2. 5% per year by the 1960s, however, at a rate far slower than its foreign competitors, such as, Germany and Japan. There are many factors that led to “relative economic decline” such as, poor industrial relations, large amounts of money spent on defences, government policies and the most important factor, a decline in industrial productivity. The most affecting factor leading to Britain’s economic situation was low industrial productivity.

We will write a custom essay sample on Any topic specifically for you For Only $13.90/page

order now

This was caused by a sequence of factors, such as poor management and insufficient technology leading to poor industrial relations and strikes. This negative multiplier effect resulted in poor economic performance and low wages for workers. The low wages further enhanced the problems by increasing tension between workers and managers, which led to a greater frequency of strikes. Due to increased strikes, productivity was reduced, as most workers were too busy striking. Between 1960 and 1964 workers spent only 48% of their time at a machine.

Overall the low productivity eventually led to “relative economic decline”. Poor management is responsible for low productivity and the strikes, because the managers were poorly trained and paid themselves high rewards whilst encouraging restraints on workers. Furthermore, productivity was affected by the insufficient technology and machinery Britain possessed compared to the latest and most productive equipment that foreign competitors had, such as France. This is evident from the productivity figures between 1952 and 1956, Britain’s output increased by 15%, whereas France’s grew by 20% and West Germany by 38%.

This low productivity and therefore “relative decline” can be blamed on the government, because during the 1950s the Conservatives were too weak to prevent wage increases which Trade Unions demanded, because they did not want to jeopardise their paper-thin majority, which led to high inflation. On the other hand, inter-rivalry unionists did not help themselves. They were too busy fighting each other so industrial production decreased behind foreign competitors. The Conservative’s government policies were not completely responsible for the relative decline.

The effects of World War 2 could still be felt in this period, Britain were only beginning to emerge from post-war austerity when public finances had been crushed by an accumulation of war debt. However, the government’s policies did increase the negative impacts affecting the “relative decline”, such as the many policies, which increased inflation. The most major policy to affect the economy was Macmillan’s ‘Stop-Go’ Policy. He staged mini-booms in the economy to coincide with the 1959 general election to boost his electoral appeal. Source C agrees with my judgment, “… needed a boom to coincide with an appeal to the country… taged… managed this in 1959”.

The ‘Stop-Go’ made the economy unstable and made society richer, which led to an increase in the buying of consumer durables, which increased inflation. Furthermore, in 1951, Churchill’s policy to reduce purchase tax saw a dramatic rise in the sale of consumer durables. Moreover, between 1951 and 1955 Macmillan reduced unemployment by providing jobs nationwide through his “National Housing Crusade” to build 300,000 houses per year, which led to a richer society and eventually higher inflation. Another factor which influenced the “relative decline” was the governments high spending on defences.

Britain spent a higher proportion of its wealth on defence than most of its industrial foreign rivals. For example, in the 1960s Britain spent 6% of its GNP on defence, compared to Japan who spent a low 1. 1%, which is almost one sixth of the expense contrasted with Britain. This choice for heavy spending abroad regularly pushed the balance of payments into red which caused cut backs in domestic expenditure and ultimately added to the “relative decline”. For example, the Conservatives bought ‘Polaris’ from the USA in 1961, which was a very expensive piece of artillery equipment.

This factor is also demonstrated in Source E, “… too much money was exported abroad… spent on defence. ” However, the Suez Crisis in 1956, involving the barricade of the canal by Nasser, prevented Britain’s connection to its oil reserves in the Middle East and its routes for trade. This resulted in negative affects on the economy because trade suffered due a decrease in imports and exports via this route. Another major factor was the affluent society in the 1950s. Consumer durables had become available to everyone, such as, vacuum cleaners which increased to 51%, T. V. 35%) and telephone (19%).

Source C agrees with my interpretation, “… a more affluent society was expectant… of improvement in standard of living. ” I therefore conclude that the Conservatives policies were not the main reason for the “relative decline”. However, they did influence it some what, because they did not try to stimulate productivity in industry and allowed Trade Unions to strike for long periods of time which resulted in less manufacturing. Furthermore, they gave into the Trade Unions demands for higher wages, which endorsed in an increase in inflation.

Additionally, the Conservatives ‘Stop-Go’ policy simultaneously caused the stagnation of the economy, as Macmillan’s mini-booms before an election ultimately caused poor economic performance in the long term compared to foreign countries. However, the “relative decline” can be justified as foreign countries, such as, Japan were receiving loans from the USA to help their economies recover from World War 2. Whereas Britain had to deal with the post-war austerity alone, whilst simultaneously keeping up with industrial competitors who had had help to be able to concentrate on their industries for longer compared to Britain who had not.

On the other hand, Source E indicates the Conservatives were solely to blame because their naivety in wanting to gain an election majority led to the “sluggish growth”. “… Tory complacency ensured that… economic growth would never be generated. ” This suggests to me that the Conservative’s believed they could do what they wanted with the economy and that the effects of the mini-booms were not taken into account in the long term. This ultimately increased the underlying economic problems from post-war austerity which accumulated throughout this period.