The Economy in the 1960s and 1970s

The end of the 1950s was a period of rising living standards, summed up by Harold MacMillan's 'you've never had it so good'

Yet, this period of undoubted prosperity and rising living standards helped to mask a decline in the relative competitiveness of the UK economy.

Whilst our competitors like Germany, Japan and US roared ahead, Britain lagged behind. Our productivity growth was inhibited by both stuffy 'old school tie' managers unwilling to innovate and bring in change, and unions increasingly confrontational and belligerent. Industrial relations resembled more a war zone than anything meaningful and productive. Whilst Japanese workers sang company songs with zest and loyalty, British workers were more likely to be working to rule or plotting the next strike. Industrial relations certainly weren't a one way problem. But, the break down in industrial relations threatened the future competitiveness of UK industry.

It was left to the Socialist Barbara Castle (an MP I admire) to take on the unions. Her white paper 'In Place of Strife' was positively moderate in comparison to the later Thatcherite era. But, even the hint of attacking union power was too much. The unions stood firm and pushed Wilson and Castle to drop their plans. It was a missed opportunity that would impact the government later.

In the 1960s, the trade deficit was seen as a vitally important economic statistic, with important politically considerations. Unfortunately, for the Harold Wilson government of the 1960s, the UK trade deficit was embarrassingly large - a result of the decline in competitiveness and a wish to retain a strong pound. Campaigns like 'Buy British' were surprisingly prominent, but, ultimately failed to make any real dent in the trade deficit. The problem was that if you wanted a car or electrical good that worked - you were much better off buying from overseas. If we made jokes about Skodas and Ladas in the 1980s, British Leyland was the butt of many jokes during 60s and 70s.

Forced To Devalue

If you look at the economic history of Britain. There have been several occasions when a government has politically committed to keeping a strong Pound, - even when this didn't make economic sense. Yet, despite all the government's boasts that they would never devalue - the markets invariably have destroyed the government's vain hopes - leading to a devaluation. Invariably the devaluation was a political embarrassment, but, beneficial for the economy. 1968, was no exception. Harold Wilson was forced to devalue. The devaluation did no harm. The whole experience was later repeated in 1992, when the markets again forced the government to devalue against its wishes.

But, the experience did seem to sum up the 1960s. - not bad - but, could have done better - and we certainly weren't as good as everyone else. It is also interesting to remember how reliant Britain still was on loans from the United States. Britain was slowly lowering its debt. But, even after two decades of growth, national debt was uncomfortably high. Undoubtedly, had it not been for the necessity of borrowing from the US, Harold Wilson would have been freer to be more critical of the Vietnam War - as he told his cabinet on why he would not criticise the war - 'You can't afford to kick your main creditor in the balls' - or words to that effect

But, ff the late 1960s were difficult, the 1970s proved to be one of the most difficult economic decades since the 1930s. It was an era of industrial confrontation, rampant inflation, an unexpected oil shock and an unwelcome return of mass unemployment. The economic power of the UK was exposed for what it had become.... (to be continued)
Perma Link | By: T Pettinger | Wednesday, February 17, 2010
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