THE 1970s IN PERSPECTIVE*
The 1970s were a decade of tumult, doubt and discontent. Violent changes took place in economic activity, in government policy and in the ideas by which policy was guided. Inflation took hold and reached a rate that frightened even the trade unions. Wages outstripped prices and at one stage rose in a year by nearly one-third. Unemployment rose from 600,000 in 1970 to 1.5 million in 1980 but ceased to be the touchstone of policy as the need to control inflation took precedence over the earlier aim of full employment. The rate of exchange was allowed to float in June 1972 and fluctuated violently, with a drop of 8 cents in a single day in 1976. The effective exchange rate fell by 40 per cent between 1972 and 1976 and then recovered about half the fall by 1980. For three years in the middle of the decade consumers’ expenditure fell and for two of these years GDP fell too—experiences without precedent in the years since 1945. Yet the record of the decade was not so black as is sometimes suggested. The increase in GDP (thanks in part to North Sea oil) was not far short of the increase in the 1960s and a good deal greater than in the 1950s. Consumer spending rose by more than in the 1960s; it was capital investment, not consumption, that suffered.
The decade fell into three very different parts. First came the years of Conservative Government from 1970 to the first oil shock at the end of 1973 and the miners’ strike that followed; then the three years leading up to the IMF crisis at the end of 1976; and finally the last years of Labour Government from 1977 to the second oil shock in 1979. It is usual to concentrate on the middle period. But we should not lose sight of events in the other two periods, especially the first. It was in that period that the flight from the dollar led America to put an end to the Bretton Woods system in the autumn of 1971. It was in that period, too, that the annual rise in hourly wage rates reached double figures and consumer prices began to increase at a rate not experienced since 1950-1. By 1973 an international commodity boom greatly reinforced inflationary tendencies all over the world and was in turn reinforced by the
* Paper read at All Souls Seminar on Recent Economic History, 28 April 1992 (unpublished).