The reasons for Britain's slow economic growth in the 1970s

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The reasons for Britain's slow economic growth in the 1970s

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Abstract

Britain already had experienced economic difficulties in the 1960s, but the concerns did not grow since the overall standard of living was keeping on rising. On the contrary, the 1970s proved to be much more worrying economically, as they presented a sluggish and lasting economic performance -the average real domestic product grew annually only by 1.9 per cent during the decade. The succeeding Conservative and Labour governments, in spite of their many attempts, were totally unable to improve the situation. This essay will concentrate on discussing the main reasons for this slow economic growth experienced by Britain in the 1970s. It will first start by considering the role of the heritage from past economic policies and the burden of inflation. Secondly, it will look at the global difficulty that British industry faced at that time. Finally, the problem of the balances of trade and of payments will be underlined as an explanation of Britain's relative decline.

Introduction.
Britain's slow growth in the 1970's and the burden of inflation.
1. Unstable environment and short run policies.
2. Mounting unemployment and mounting inflation.
Role of Britain's poor industrial performance in the relative economic decline of the 1970's.
1. Increase in trade union membership and increase in the frequency of labour strikes.
2. Declaration of emergency frequently in 1970.
3. Effects of strikes.
4. Lack of investment and slow growth rate.
The part played by international trade and the balance of payments deficit in Britain's slow economic growth.
1. Failure to produce products adequate to the world's demand.
2. Decline in exports.
3. Increase in imports and oil crisis.
4. Military expenditure.
Conclusion.
Bibliography.

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[...] Of course, this was bound to lead to a slow economic growth.[17] III/ In the third part, the essay will discuss the part played by international trade and the balance of payments deficit in Britain's slow economic growth First of all, the abovementioned difficulties faced by the British industry created a problem for its exports. Indeed, along with the vast price increases in exports goods and the failure to produce products adequate to the world's demand, these difficulties resulted in a worrying decline in competitiveness of export manufactures: their index of competitiveness, with base 100 in 1970, went down to 93.4 and 94.3 respectively in 1974 and 1976. [...]

[...] In fact, the balance of payments deficits were most of the time the result of public expenses, given that the private balance was rarely negative. Hence, the official balance for the period 1970-1981 amounted to a deficit of almost 23 billion pounds, over 7 billion pounds of which was composed by military spending. This is a striking illustration of the burden that military expenditure meant for the British balance of payments, and, therefore, for Britain's rate of economic growth.[22] To conclude, the essay has found diverse reasons for Britain's slow economic growth in the 1970s. [...]

[...] Thus, in the 1970s wage increases and inflation were part of a vicious circle, in which there was no room for sustainable economic growth.[8] II/ The second part of the essay will now address the role of Britain's poor industrial performance in the relative economic decline of the 1970s First of all, we have to quote once again the importance of strikes. Indeed, the 1970s were the post-war decade which experienced the greatest increase in trade union membership: in 1969, trade union members were around 10 million and a half, and they exceeded 13 million ten years later. [...]

[...] Indeed, we can conclude that the factors explaining Britain's slow economic performance in the 1970s were diverse and numerous, but however all related to each other. Bibliography Cairncross, A. The British Economy since 1945: Economic Policy and Performance, 1945-1995 (Oxford: Blackwell Publishers, 2nd edition, 1995). Gibbons, S.R. Britain: 1945 to 1985 (Glasgow: Blackie, 1986). Hannah, L. ‘Crisis and Turnaround? 1973-1993' in P. Johnson Twentieth-century Britain: Economic, social and cultural change (London: Longman, 1994). Howlett, P. Golden Age: 1955-1973' in P. [...]

[...] As a consequence, the industry suffered from low productivity, which accentuated for good the balance deficit and the other shortcomings of British economy.[2] Indeed, people such as the monetarists have argued that these kinds of Keynesian policies only provoked a situation of stagflation, which precisely was the characteristic of the British economy in the 1970s. Thus, the latter had the features of stagflation: mounting unemployment combined with mounting inflation. Unemployment grew from 2.6 per cent in 1970 to 7.4 per cent ten years later,[3] with peaks of around one million in 1971 and one million and a half in 1978.[4] Between 1973 and 1980, inflation reached an average of 16 per cent.[5] Of course, in these tragic conditions a high growth could not take place. [...]

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