The British economy

THE BRITISH ECONOMY

1. The Rise to Economic Supremacy:

Britain became the leading economic and trading power in the world. This devolopment was caused by several factors:

- The Industrial Revolution:
- Britain was the first country in the world which introduced the factory system and mechanizised the manyfactories
- Britain had a lot of natural resources like coal and iron and colonies, from which they got cheap supplies of raw material
- The colonies were also a secure market for British goods
- Britain´s important merchant fleet¹
- Britains entrepreneurs were willing to invest capital in technological innovations
- A strong banking and credit system was neccessary
- The textile industries, the coal mining and the iron and steel industries were very important for Britain
- the British industry kept ist leading position although other European countries and the USA had become powerful industrial nations too

1. Economic Decline

After the second World War, Britain has lost its leading postion. This had several economic, political and social causes.

politico-economic reasons:

- loss² of British capital during the two world wars
- loss of colonial markets
- antagonistic³ economic principles of the alternating⁴ Labour and Tory governments
- Lack of innovation and modernization, mismanagement and low productivity especially in the traditional industries (coal, iron, steel, textiles)
- Low exports of British-made goods and increasing dependence on foreign- manufactored imports
- Inadequate infrastructure
- Bad relations between the Trade Unions and management à numerous official and unofficial (or so-called „wildcat“) strikes; there are more than 400 different unions in Britain which are loose organized

During the 60´s and 70´s, industrial relations deteriorated⁵ and the amount of strikes in mining, shipbuilding and the car industry began to paralyse⁶ the country.

Socio- economic reasons:

- rigid class system
- upper class people are generally prejudiced against manufactoring careers
- the class antagonism of the working class leads to industrial conflicts
- class distinctions make it difficult for people from the lower class from moving up the social scale
- dual school system of state and private educationà gap between employers and employees
- lack of prestige of managerial jobsà crisis of industrial management

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2. Structural changes in the British economy

- traditional industries in South Wales, Merseyside, the Midlands, North East England and Scotland have lost their important role à unemployment and poverty in these parts
- rise of new, fast expanding industries
- light and high-tech industries (aerospace,computer manufactoring, chemical pharmaceutical and plastic industries)are settled mainly in the London conurbation¹
- discovery and exploitation of North sea oil and gas à new petro- chemical industry in North East Scotland, Orkney and Shetland Islands
- change in the econ. structure from manufactoring to service industries
- London has maintained and streghtened ist position as international trading centre

3. The British economy in the 80´s and 90´s

Thatcherism: -reform policy in the 80´s
-intended to create an economic climate of competition, production and efficiency
-government influenced economy
-the Blair government accepts these reforms,but fine tune them

Economic Growth: -caused by strengthening competition, reducing tax rates, exploitation of North sea oil
-recession in the early 90´s, then grew steadily for several years
-economic problems that arose worldwide in 1998 had effect in Britain too

Inflation: -the Tories have successfully fought inflation under Thatcher and Major through austerity² policies and strict control of the money supply
-inflation fell from 18% (1979) to 4% (1986), but then doubled and peaked to more than 10% (1990), since than, inflation declined

Trade Union Policy: -between 1980 and 1983, different Employment Acts gave Britain a tough labour law ( unions³ could be sued⁴ for organizing unlawful industrial action, the forced trade union membership was restricted, it´s free to bargain⁴ with trade unions for employers)
-since then, the industrial power of unions had diminished⁵ and union membership has fallen

Privatization: -the Torie reforms during the 80´s intended to privatize nationalised industries and to turn people who work in these companies into shareholders⁶
-electricity, gas, water, British Airways and British Rail were privatized

Housing: -council houses⁷ were selledà higher house prices à inflation increased
-boom ended in 1988; in 1991, the government introduced measures to protect houseowners
-now, houses are built for the private sector
-between 1994 and 95, the government financed 100 million pounds to help people moving to these private houses
-council houses are re-let to families in great housing need

4. Unsolved Problems

Unemployment: -the Conservative governments of the 80´s and early 90´s Failed to control unemployment; they wanted to maintain Only productive jobs and abolished not subsidising Unprofiable working places
-in 1986 3.3million were unemployed; between 1986 and 1989 unemployment decreased to just under 2 million, increased again to nearly 3 million and is below 2million since 1998

The Two Britains: -Britain is geographically, economically, socially and Politically a divided country
-there is new prosperity in the South on the one hand and industrial decay in the North on the other hand
-new industry branches developed in the South and this the reason for the gap between the North and the South

Shortage¹ of Skilled: -the shortage of vocational² training and technical Colleges was another basic problem for Britains Economy
-today, employers spend over 20 million pounds a year on employee training and development
-Britain is now acknowledged as an innvative world leader in open and flexible learning