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Age Of Affluence Notes

History Notes > British Economic History - 1840-1964 Notes

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BRITISH ECONOMIC HISTORY

BRITAIN AFTER 1945 Why did Britain perform relatively poorly after 1945?
Lectures 15/16: J. Fenske
Broadberry argues that British wage restraint in exchange for full employment during the 1950s served to entrench restrictive practices, labour market inflexibility, and constrained the modernisation of industry.
Trade union density rose from 40% to 50% in the 30 years to 1975, and many nonunionised workers had their wages set by unions.
Despite headwinds, firms could achieve high profits thanks to the existence of cartels, restrictive practices, and access to protected markets.
Unemployment averaged 1.9% between 1950 and 1973 and per capita income grew at 2.25%; inflation was moderate at 4.4%; savings and investment were high at 18.4% of GDP, double the pre
war average.
Stop/go demand management destabilised the economy, created uncertainty, and undermined investment.
Why do poor nations converge? They can import technology without innovating. They can add to capital stock. They can rapidly improve education. They can move workers out of agriculture and unskilled trades. They have more scope to improve economies of scale. The Golden Age of European Growth: P. Temin
European average GDP growth between 1950 and 1973 was 4.6%, with real GDP per capita growing at 3.8%1.
The BrettonWoods system allowed European nations to adjust exchange rates and avoid overvaluation.
Role of the Marshall Plan.
Golden Age halted by the 1973 oil crisis. The Politics of Productivity in West Germany, Sweden, and the United Kingdom, 1945-1955: 2. Booth, Melling et al
Symptoms of the 'British disease' included adversarial relations between employers and unions, with the latter opposing new technologies and rationalisation through defence of inflexible division of labour2. The involvement of the TUC in national policy making amplified this trend. Macroeconomic Performance in the Bretton Woods Era and After: Cameron & Wallace
The demandside thesis argues that mistakes in demand management led to the deflation of the 1970s; policy makers believed there was a permanent tradeoff between unemployment and inflation, and pursued expansionary monetary policies3.

1 The Golden Age of European Growth: P. Temin 2 The Politics of Productivity...: Booth, Melling et al 3 Macroeconomic Performance in the Bretton Woods Era and After: Cameron & Wallace

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