In her 70s on the throne, the Queen was served by 14 prime ministers and 22 finance chancellors. She saw the country become richer and healthier despite five significant recessions. In 1952, the economy was dominated by production and fueled by coal. Seven decades later, the pits have closed and Britain is largely an economy in the services sector.
The last 15 years have been the most difficult of the Queen’s reign. Two deep recessions contributed to a period of extremely low growth and equalization of living standards. Inflation is the highest in four decades and the immediate outlook for the economy is poor.
However, much has changed for the better since 1952. People are living longer, working fewer hours, traveling more widely and enjoying the benefits of 70 years of technological progress in everything from improved medical treatment to mobile phones. . Only wealthy people had TVs, washing machines and refrigerators in the early 1950s.
One thing that hasn’t changed is the search for the magic ingredient that will make the economy more dynamic or, to be more precise, return the watch to its former glory under another long-ruling monarch, Queen Victoria.
There were many experiments. When Queen Elizabeth II came to the throne in early 1952, the post-war Labor government had just lost power and was replaced by Conservatives led by Sir Winston Churchill. However, there was little relinquishment of the Labor nationalization program, and it was so difficult to distinguish between the new Chancellor’s (Rab Butler’s) economic policy and that of the old Chancellor (Hugh Gateskel) that the centrist approach became known as Bootskelism.
In many ways, the 1950s were a good decade in which aid queues from the 1930s were replaced by full employment, relatively low inflation and growing consumer purchasing power. The problem was that if Britain did well, other countries did better – in some cases much better. By the end of the 1950s, the English Channel was envious of much higher growth rates in West Germany, France and the Netherlands.
And so began the search for the miracle cure. In the 1960s, French-style and national indicative planning came and went. By the early 1970s, they hoped that joining (what it was then) the European Economic Community would work. By the end of this decade, Margaret Thatcher’s response to Britain’s economic downturn was a dose of monetarist shocking treatment: controlling the money supply and limiting public spending to reduce inflation.
The United Kingdom then joined the European Exchange Rate Mechanism in 1990, only to leave it two years later, Tony Blair gave the Bank of England the freedom to set interest rates in 1997, and David Cameron said austerity is needed to repair the damage caused by the 2007-08 financial crisis. Brexit and Boris Johnson’s equalization program are simply the latest in a long line of alleged panaceas.
Some preliminary conclusions can be drawn from this mix of initiatives. The key period for the economy in the last 70 years was the long 70s of the last century, which began in 1969 with the repeal of Harold Wilson’s In Place of Strife law to reduce the power of trade unions and ended with the defeat of miners in 1985. t simply the power of organized labor was shattered; it was that finance shifted production as the driving force of the economy.
Few chancellors have changed the economic narrative so much since 1952, and even then not always in a useful way. Some – like Dennis Healy and Alistair Darling – have never had time for anything more than crisis management. And there were many crises we had to deal with: the threat of the United States to stop sterling because of Suez in 1956; the 1967 devaluation; the arrival of the International Monetary Fund in 1976; Black Wednesday; the imminent collapse of banks in 2008; the global pandemic of the last two years.
More successful chancellors have been lucky enough to get jobs as the economy recovers. This was true of Nigel Lawson, who replaced Sir Jeffrey Howe after Thatcher’s first turbulent term, and Ken Clark, who succeeded Norman Lamont after he became the autumn man for Black Wednesday. The next decade and a half was the longest period of continuous growth since the Industrial Revolution.
Britain tends to move quickly from a sense of national gloom to a premature belief that the country has finally “broken” it. The years leading up to the financial crisis were an example of this, when speculation spread in the city and the real estate market failed. Another was in the late 1980s, when the strong recovery from the recession earlier in the decade allowed it to spiral out of control.
Getting the big picture right – setting interest rates at the right level and competing pounds – obviously matters, but so does applying the little things correctly. Over the years, too little attention has been paid to the supply side of the economy, in part because long policy deadlines are turbulent with the requirements of the election cycle for immediate results.
The message from other – more successful – economies is clear and has been clear for the last 70 years. Identify the structural weaknesses of the economy, which in the case of the UK include overinvestment in local ownership and insufficient investment in almost everything else. Enter the correct troubleshooting policies. Then stay on course.
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