Was the UK economy really a total disaster in the 70s?
The period of the decade of the 70’s is often described is one of the darkest in the history of modern Britain after the period of great depression. This statement seems to be quite reasonable, when remembering the economic facts that United Kingdom had to struggle with. When being truthful, the period of recession, which reached its peak during the fourth quarter of the 1970’s, was a logical effect of previous decades and improvident policies and continuation of stagflation. According to Moore, “It is important to realize that the energy crisis of 1973 aggravated a situation that was already precarious”. However, radical government actions helped to regulate situation and slow down this process.
Each phenomenon has its own preconditions. The beginning of the 1970’s decade did not show any signs of upcoming disaster. During the order of Edward Health’s government, in 1970, Anthony Barber became a new Chancellor of Exchequer and launched a new economic policy, followed with mortgage market deregulation, that caused rapid rise of house market and increased consuming propensity, large direct taxes cut, which was approved with the budget of 1972, and the liberalization of banking credits, that caused their rapid raise and development of usage of credit cards.
However, such actions did not help solving the problem of inflation, and its indexes kept growing: by the 1973 inflation reached 20%. The other cause of such policy, complemented with Health’s government wages capping, was rapid growth of unemployment, which led to so-called phenomenon of “3 days week”. As a state, highly dependent from energetic industry, Britain suffered from numerous strikes of unemployed miners, that blocked whole industry. The next strike on the British economy was the 1973 oil crisis, that cause double rise of petrol prices and energy crisis in the whole UK. In 1976, British government was forced to ask International Monetary Fund for a £2.3bn loan to cover its high budget deficit and fight Sterling depreciation. As a countermeasure, requested by IMF, the government made a great public spending cut. As a consequence, by 1977, the economy has begun the slow recovery.
After analyzing all the facts, there can be a conclusion, that, although the period of 1970’s decade was one of the most difficult in the history of United Kingdom, but most of the troubles were successful fought.
DeLong, J. B. (1998). Supply Shocks: The Dilemma of Stagflation. Berkeley: University of California.
Moore, Z. &. (1977). The Recession and Recovery of 1973-1976.
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