Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85

By Andrew Graham; Anthony Seldon | Go to book overview

Chapter three

The United Kingdom

Alec Cairncross

Introduction

The United Kingdom emerged from the Second World War in what seemed, in comparison with most of her continental neighbours, to be a relatively favourable position. In 1946 industrial production was as high as at any time before the war and rising quite fast. By the end of the year exports had regained their pre-war level. There was little unemployment and retail prices were relatively stable. All this contrasted strongly with the situation in France, Germany, and Italy.

Yet appearances were deceptive. The British economy was overloaded from the start and faced with acute balance of payments difficulties. From being an investor in foreign securities on an unprecedented scale, with nearly one-third of her wealth overseas, the United Kingdom had become the largest external debtor in history. The net change on capital account during the war had amounted to $20 billion and was equal to the amount that the USSR sought in reparations from Germany. It completely offset the net addition to domestic assets since 1914, leaving the country no richer than thirty years earlier.

Since most of the debts contracted in wartime were short term, they represented a continuing overhang of liquid liabilities with damaging consequences in postwar years in the form of an abundance of sterling not in firm hands and threatening a flight from the pound. This limited the freedom of action of the government and contributed to that jerkiness of postwar growth that came to be labelled 'stop-go'. The loss of income from foreign investments and shipping earnings, which had paid for 35 per cent of prewar imports, also added to Britain's balance of payments difficulties, and these were intensified by a sharp rise in the cost of imports in relation to the prices obtained for exports and by a large continuing outflow on military account as the United Kingdom undertook world-wide defence responsibilities in highly unsettled conditions.

The weakness of the postwar balance of payments had three important consequences for policy-makers. It was difficult to reconcile with the effort

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Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Acknowledgements ix
  • Figures x
  • Tables xi
  • Chapter One - Introduction 1
  • Part I 7
  • Chapter Two - The International Environment 9
  • Chapter Three - The United Kingdom 30
  • Chapter Four - France 54
  • Chapter Five - West Germany 79
  • Chapter Six - Italy 104
  • Chapter Seven - Spain 125
  • Guide to Further Reading 153
  • Chapter Eight - Scandinavia 154
  • Chapter Nine - Eastern Europe 179
  • Chapter Ten - The Soviet Union 205
  • Chapter Eleven - The United States 225
  • Guide to Further Reading 252
  • Chapter Twelve - Japan 253
  • Part II 271
  • Chapter Thirteen - Comparative Economic Performance of the Oecd Countries, 1950-87: a Summary of the Evidence 273
  • References 283
  • Chapter Fourteen - Benefits of Backwardness and Costs of Continuity 284
  • References 293
  • Chapter Fifteen - Economic Policies and Traditions 294
  • References 302
  • Chapter Sixteen - The Meaning of Hard Work 303
  • References 313
  • Chapter Seventeen - Political Institutions and Economic Performance 315
  • References 322
  • Index 323
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