Periods in the Economic History of Britain in the 20th Century
England was the first country in the World to have an industrial revolution and to develop a capitalist economy. There was an enormous increase in wealth during the 19th century. The new manufacturing methods and the rich supply of raw materials and sources of energy turned Britain into the first industrialised country. It produced 40% of the world’s industrial output. There was no interference by governments, the laissez-faire liberalism let the market regulate the economy.
By the beginning of the 20th century Britain was no longer the world’s richest country. There was a growing competition from newly industrialized countries like US and Germany. This made a decline in British dominance in world trade but still remained a very important financial centre.
The post war period was characterized by Keynesianism, which means that governments should be more involved in the management and planning of economy. The budget should be used to determine production and to maintain full employment, like in United Stated in the 1930’s The New Deal programme.This meant that the performance of the economy was closely connected to government policies. During the 2 World War the government’s intervention in the economy was essential. It controlled the labour force,decided the location of industry, rationed the supply of raw materials .
The 1950’s was the period of ’postwar consensus’ that persisted until the 1970s. In the economy there was prosperity, high level of consumption, there was a more equal society what is called a welfare state.
The 1970’s brought international and national crisis. There was an economic recession, fluctuation in the prices of oil and there were also domestic problems as well: devaluation of the pound, growing unemployment, high inflation, low productivity. All these made the governing Labour Party and PM James Callagham to loose the elections in 1979 and the Conservatives with PM M.Thatcher came to power. The new government’s aim was to push down inflation by reducing money supply and turning back to laissez faire economy such as free market, no government involvement.
There was introduced a new monetary policy, carried out by the Bank of England. Its aim was to control the volume of money plus purchasing power in the economy. In 1990 Britain joined the Exchange Rate Mechanism (ERM) of European Monetary System. On Sept. 1992 called Black Wednesday within hours the interest rates raised and lowered and the pound had to be withdraw from ERM. The Conservatives seemed to be enable to manage the economy. In 1997 the Labour Party inherited a well performing economy, but there were still problems. The North Sea oil brought an industrial strenght and also the production of microprocessors was the ’Golden Corridor’:London,along the M4, ’Silicon Glen’ between Edinburgh and Dundee, Cambridge and London. London became one of the leading financial centers of the world.
The Bank of England is the central bank of Britain, closely tied to the government, main functions are: prints money notes, supervises the gold reserve contact between the government and other financial institutions. Central clearing banks or the ’High Street Banks are Midland, NatWest, Barclays, Lloyds. The main markets are: The International Stock Exchange, Foreign Exchange Market, Lloyds of London, an insurance market