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
Frequently asked questions about The British Economy
What factors contributed to Britain's rise to economic supremacy?
Several factors led to Britain becoming a leading economic power. These include the Industrial Revolution (with the introduction of the factory system and mechanization), abundant natural resources (coal, iron), access to cheap raw materials from colonies, secure colonial markets for British goods, a strong merchant fleet, entrepreneurs willing to invest in technological innovations, a robust banking and credit system, and the prominence of the textile, coal mining, and iron and steel industries.
What caused Britain's economic decline after World War II?
Britain's decline was caused by a combination of economic, political, and social factors. These included the loss of capital during the world wars, the loss of colonial markets, antagonistic economic principles of alternating Labour and Tory governments, lack of innovation and modernization, mismanagement and low productivity in traditional industries, low exports and increased reliance on foreign imports, inadequate infrastructure, and poor industrial relations with numerous strikes.
What are some of the structural changes that have occurred in the British economy?
Significant structural changes include the decline of traditional industries in areas like South Wales and the rise of new, fast-expanding industries, particularly in light and high-tech sectors. The discovery and exploitation of North Sea oil and gas led to a new petro-chemical industry. There's been a shift from manufacturing to service industries, and London has maintained its position as an international trading center.
What were the key aspects of Thatcherism and its impact on the British economy?
Thatcherism, a reform policy in the 1980s, aimed to create an economic climate of competition, production, and efficiency. It involved reducing government influence on the economy. Economic growth was stimulated by strengthening competition, reducing tax rates, and exploiting North Sea oil. Inflation was fought through austerity policies and strict control of the money supply. Trade union power was diminished through new employment acts, and privatization of nationalized industries was pursued.
What were some of the unsolved economic problems in Britain, particularly in the late 20th century?
Unemployment remained a significant problem, with governments struggling to control it. A geographical, economic, social, and political division existed between a prosperous South and an industrially decaying North. A shortage of skilled labor and vocational training posed challenges for the British economy.
What impact did privatization have on housing in Britain?
The sale of council houses led to higher house prices and increased inflation. After a boom period, the government introduced measures to protect homeowners. New houses are primarily built for the private sector, and council houses are re-let to families in need.
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- Evelin Palis (Autor:in), 2001, The British economy, München, GRIN Verlag, https://www.grin.com/document/104585
