You are on page 1of 6

To what extent did Britain enjoy an economic golden age circa 1950-1973?

Economic growth is defined as the increase of per capita gross domestic product or other measures of aggregate income. The golden age is where Britain maintained a strong economy with continues progress. Unemployment and inflation was low and Britains exchange rate was strong and maintained, aswell as having a positive balance of payments. To many, the golden age was the era post of World War Two where Britain had the strongest economy in its history. The golden age started due to various reasons, one of which was the Keynesian approach which stated that the economic boom was caused by the adoption of the Keynesian economic policy such as government spending a fiscal stimulus. Another reason was the perspective of how economic growth was linked to the economic cycle. A temporary boom may not only increase the output in the short run but it may also increase R&D and learning by doing, which in turn will put the economy on a higher growth path(1). There was such a large amount of economic growth in this period because a small boom had a knock on effect on the economy and led to larger increase in output and growth. The fast growing economic growth of the golden age affected Britain in a large number ways. First of all looking at the macroeconomics outcomes, we can determine that as there was economic growth, there would be a rise in GDP. We can clearly see this in Fig 1. Although there were fluctuations in GDP, we can see there was a general increasing trend between 1950 and the early 1970s.

Figure 1: Graph showing Economic Growth 1949-2011

Britain also obtained a strong Balance of Payments in this era. In the first ten years of this period, Britain mostly had a positive Balance of Payments with approximately 20 million in surplus (2). Both the value and volume of it exports were at a constant rise. With these, also came low unemployment. It achieved levels of low unemployment in its history, which contributed to its high levels of output and GDP. However, with all this came a price. Although Britain was obtaining economic growth, a balance of payment surplus and low levels of unemployment. It was also facing increasing inflation. With growth came inflation. The meant although GDP was increasing, real GDP could be decreasing meaning people were not as well off as they were. Inflation always comes with growth. As GDP rises and people earn more, demand for goods increase causing a simple demand-pull inflation meaning prices of good would generally increase too. As the government saw pressure being put on inflation and balance of payments due to and expanding economy, it cleverly used a stop-go(3) method to try and control it. It used fiscal/monetary policy to control demand. When they wanted

the economy to slow down, they would use a stop phase in other words cause the AD to fall. This would reduce inflation but result in a rise in unemployment. When they wanted to economy to recover, they would use the go phase. This would cause the AD to rise leading to more output and employment but inflation too. In 1952, Britain started by using the stop method to tackle the rescission. In 1953-1955 it used the go method to push the economy and enter a boom. Between 1955-1958 it again used the stop technique to tackle the inflation problems it was having due to a booming economy. Finally, between 1958-1960 it used the go technique to re-expand the economy. The golden age favored Britain in other ways too. There was a dramatic improvement in living standards as there was very low unemployment and continues growth. Infant mortality rates fell and peoples life expectancy increased as well as weekly earnings for both males and females. People seemed to be wealthier, as ownership in homes, cars and other consumer durables increased. As there was increasing R&D, this meant that there was also technological advancement meaning the quality of goods increased and prices of those goods fell as they became cheaper to manufacture. This increase in technological advancement meant Britain PPF shifted outwards meaning it could now produce new and more amounts of goods which it previously could not. This is shown in fig 2.

Figure 2: PPF showing an outward shift

There was also a down side in this golden age, Britain had decline in their productivity. A major reason for this was because as employment was increasing, more and more less skilled workers were getting jobs meaning they were less efficient and were not working to their maximum. Alongside this there were also limitations of training. Workers had a lack of training making them not efficient enough and unions were not willing to change which further increased the productivity issue. This suggests that although Britain had obtained an outward shift in its PPF, it was not producing to the maximum of it (it was producing inside it, not on the border). Inefficiency in productivity meant that Britains growth was lowered by approximately 1% and resulted in limited in a lower scope to catch up. Supply side policy was affected and soon led the AS to fall. Britain fell back on its manufacturing and services sector drastically. Soon this could be seen in Britains economy as performance fell and there was a rising productivity gap. The golden age of economic growth soon came to an end in 1972 with the 1970s rescission. The collapse of this era started in 1973 with the oil crises. Followed by the stock market crash in 1973-1974. After in-depth analysis of the golden age for Britain between 1950-1972 different views have come across. Britain did enjoy a period of economic growth and high GDP. It enjoyed a strong economy for many years and resulted in it being one of its best periods it had gone through in the economic history. However it did also face some downsides. With all this economic uplift came inflation meaning peoples real GDP could have declined making them worse off. However the government using the stop-go technique cleverly controlled this. Another issue that arised was the decline in productivity which in turn affected Britains growth, output and efficiency.

In general although there were some flaws in the golden age, Britain did well in maintaining a strong and firm economy and should be proud of what it achieved in that period and should look forward and work to achieve something like that again.

Harvard APA Style Referencing:


British Economics Growth Since 1949. Failure followed by success or success followed by failure? A re-examination of British economic growth since 1949. Retrieved May 11, 2011. Economics Help. (2010). Graph showing economis growth 1949-2011. Retrieved May 11, 2010, from www.economicshelp.org The 1950s youve never had it so good. (March 29, 2011). Modern British Economy. Retrieved November 14, 2010.

You might also like