Реферат: The Economy of Great Britain

The Economy of GreatBritain

Little more than a centuryago, Britain was 'the workshop of the world'. It had as manymerchant ships as the rest of the world put together and it led the world inmost manufacturing industries.This didnot last long. By1885 one analysis  reported,«We have come to occupy a position In which we are no longer progressing,but even falling bock.... We find othernations able tocompete with us to suchan extent as we havenever beforeexperienced.» Early in the twentieth  century Britain was overtakeneconomically by the United States and Germany. After two world. wars and therapid loss of its empire, Britain found it increasingly difficult to maintainits position even in Europe.

Britain struggled to find a balance between governmentintervention in the economy and an almost completely free-market economy suchas existed in the United States. Neither system seemed to fit Britain's needs.The former seemed compromised between two different objectives:planned economic prosperity and the means of ensuring fullemployment, while the latter promised greater economic prosperity at the costof poverty and unemployment for the less ablein society. Neither Labour nor the Conservatives doubted the need to find asystem that suited Britain's needs, but neither seemed able to break from theconsensus based on Keynesian economics .

People seemed complacent aboutBritain's decline, reluctant to make the painful adjustments that might benecessary to reverse it. Prosperity Increased during the late 1950s and in the1960s, diverting attention from Britain's decline relative to its maincompetitors. In 1973" the Conservative Prime Minister Edward Heath warned,«The alternative to expansion is not, as some occasion­ally seem tosuppose, an England of quiet market towns linked only by steam trains puffingslowly and peacefully through green meadows. The alternative is slums,dangerous roads, old factories, cramped schools, stunted lives.» But inthe years of world-wide recession, 1974-79, Britain seemed unable to improveits performance.

By the mid 1970s both Labourand Conservative economists were beginning to recognise the need to move awayfrom Keynesian economics, based upon stimulating demand by Injecting money intothe economy. But, as described in the Introduction, it was the Conservativeswho decided to break with the old economic formula completely. Returning topower in 1979, they were determined to lower taxes as an incentive toindividuals and businesses to Increase productivity; to leave the labour forceto regulate itself either by pricing itself out of employment or by workingwithin the amount of money employers could afford; and, finally, to limitgovernment spending levels and use money supply (the amount of money incirculation at any one time) as a way of controlling inflation. As PrimeMinister Margaret Thatcher argued in the Commons, «If our objective is tohave a prosperous and expanding economy, we must recognise that high publicspending, as a proportion of GNP gross national product;, very quickly killsgrowth… We have to remember that governments have no money at all. Everypenny they take is from the productive sector of the economy in order totransfer it to the unproductive part of it.» She had a point: between 1961and 1975 employment outside Industry increased by over 40 per cent relative toemployment in industry.

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                 During the 1980s theConservatives put their new ideas into practice, income tax was reduced from abasic rate of 33 pet cent to 25 per cent. (For higher income groups thereduction was greater, at the top rate from S3 per cent to 40 per cent.) Thisdid not lead to any loss in revenue, since at the lower rates fewer peopletried to avoid tax. At the same time, however, the government doubled ValueAdded Tax (VAT) on goods and services to 15 per cent.

 The most notable success of 'Thatcherism' wasthe privatisation of previously wholly or partly government-owned enterprises.Indeed, other countries, for example Canada, France, Italy, Japan, Malaysia andWest Germany, followed the British example. The government believed thatprivatisa­tion would increase efficiency, reduce government borrowing, increaseeconomic freedom, and encourage wide share ownership. By 1990 20 per cent ofthe adult population were share owners, a higher proportion than in any otherWestern industrialised country. There was no question of taking theseenterprises back into public ownership, even by a Labour government.

Despite such changes, however,by 1990 Britain's economic problems seemed as difficult as ever. The government found that reducing public expenditure wasfar harder than expected and that by 1990 it still consumed about the sameproportion of the GNP as it had ten years earlier. Inflation, temporarilycontrolled, rose to over 10 per cent andwas only checked from rising further by high interest rotes which also hadthe side effect of discouraging economic growth. In spite of reducing the poweror the trade unions, wage demands (most notably senior management salaries)rose faster than prices, indicating that a free labour market did notnecessarily solve the wages problem. By 1990 the manufacturing Industry hadbarely recovered from the major shrinkage in the early 1980s. It was moreefficient. but in the meantime Britain's share of world trade In manufacturedgoods had shrunk from 8 per cent in 1979 to 6.5 per cent ten years later.Britain's balance of payments was unhealthy too. In 1985 it had enjoyed a smallsurplus of £3.5 billion, but in 1990 this had changed to a deficit of£20.4 billion.

 Many small businesses fail to survive, mainlyas a result of poor management, but also because, compared with almost everyother European Community member, Britain offers the least encouragingconditions. But such small businesses are important not only because largebusinesses grow from small ones, hut also because over half the new jobs inBritain are created by firms employing fewer than 100 staff.

It is not as if Britain iswithout industrial strength. It is one of the world leaders in the productionof microprocessors. Without greater investment and government encouragement itis doubtful whether Britain will hold on to its lead in this area. However, ithas already led to the creation of 'hi-tech' industries in three main areas,west of London along the M4 motorway or 'Golden Corridor', the lowlands betweenEdinburgh and Dundee, nicknamed 'Silicon Glen', and the area between London andCambridge. In the mid 1980s SiliconGlen was producing 70 per cent of British silicon wafers containing themicrochips essential for the new information technology- The Cambridge SciencePark, symbolised by its Modernist Schlumberger Building, is the flagship ofhi-tech Britain. Beginning in 1969, by 1986 the Park contained 322 hi-tech companies.In the words of a consultant, «The Cambridge phenomenon… represents oneof the very few spontaneous growth centres in a national economy that has beendepressed for all of a decade.»


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