Nowadays, the United Kingdom of Great Britain is a highly industrialized state and one of the leading countries in the world. London is one of the largest financial centers not only in the UK but also in the whole world. The country has a lot of banks and insurance companies abroad. It is known that 1/5 of all the world transactions are conducted in pounds. However, the UK economy has been exposed to continuous changes. The present day state of the economy is the result of numerous changes which led the country to the top position in the world economy. The political leaders of the United Kingdom of Great Britain applied a great deal of efforts to bring the country’s economy to the current state. Moreover, the present day characteristics of the UK economic structure depend on the different stages of the UK economic development.
My goal in this paper is to discuss the major causes for the changes in the UK economy since year 1964. In order to achieve this goal it is necessary to discuss the major stages of the UK economy development.
THE OVERVIEW OF THE UK ECONOMY
According to the historical data, when the British Empire was at the height of its power, the economy of the country was considered to be the largest, the strongest and the most influential one. Sometimes the UK economy is called “the birthplace of the industrial revolution” as it succeeded in different technological changes and innovations. (Hassan 23) However, there were some other countries such as the USA, France, Germany which tried to catch up to the UK technological progress. The global influence of the UK also began to weaken. The main cause lies in fact that the numerous British colonies were ready to declare independence. Finally, the UK’s economy was weakened due to the enormous impact of the World Wars which caused great damages to the country.
Of course, due to the great efforts of the country’s leaders, the UK’s economy “was recovered from the World War I and World war II”. However, it could not take the former top position in the world’s economy. (Middleton 14)
Today, according to the statistical data, the UK’s economy takes the 6-th position in the world according to GDP (current prices) and the 8-th position according to GDP (PPP).
The United Kingdom of Great Britain is a member of EU and the Organization for Economic Cooperation and Development. (Hassan 29)
It is clear that the global financial crisis influenced the UK economy to a great extent, but the government of the UK has already takes the appropriate measures to reduce the global debt of the country and to start the long-term economic development.
THE MAJOR STAGES IN THE UK ECONOMIC DEVELOPMENT SINCE 1964
Economic situation in the UK in 1964-1970
It is known that in October, 1964, Labor Party with Harold Wilson at the head won the elections. The new government promised to carry out a lot of social reforms: to nationalize iron and steel industry, to reduce prices and so on. However, the Laborists did not keep their promises. The government declared “the income policy”. It meant that the government began to use “the former method of wage-freezing” in order to help the monopolies to increase the profits which they used for modernization of industry, growth in production and intensification of the workers exploitation.(Chilsholm, Manners 112)
However, after the victory at the elections, the representatives of the Labor Party adopted a law concerning the prices and the incomes which included new methods of the government concerning wage-freezing. Of course, the working class was not satisfied with such an economic policy. There were a lot of strikes of the workers who demanded to pay wages in time. (Danaldson 71)
In 1960s, the overall production of industrial products was decreased from 9% in 1961 to 7% in 1970. At the same time the prices were increased and the wages were rather low at that period. The major causes for such economic situation were concluded in heavy military costs as the UK spent about 2 milliards pounds a year, tax benefits for the monopolies, scarce capital investments to other industries. (Danaldson 82)
Economic situation in the UK in 1970-1997
It is known that the economic situation in the 1970s becomes worth as the manufacturing industries fell into stagnation. There is a considerable rise in inflation and the growth of unemployment. However, the growth of external trade was increased fourfold. On the one hand, capital export increased twofold, on the other hand, the foreign monopolies invested a great deal of money into the UK economy. It provided economic growth of the country in 1980s. (Middleton 38)
The growth of labor production in the UK made it possible to improve the economic situation in the country. There were great changes in centralization of capital which was increased due to consolidation of enterprises. (Danaldson 63)
The election of Margaret Thatcher gave a new approach to the development of the UK economy. The following changes took place in the UK economy and improved the position of the country to a great extent: privatization, deregulation, tax reform, deindustrialization. The period of 1979-1990 is called “the Thatcher’s era” which was focused on the reduction the state’s influence in the economy of the country. The programs of the Conservative Party had the major aim – to support market mechanism and private business. (Chilsholm, Manners 49)
In 1990, another representative of the Conservative Party of the UK, John Major continues the economic policy of Margaret Thatcher. For about 18 years the Conservative Party was at the head of the state. This period was characterized by the following points: stabilization of economy, strengthening of the UK’s role in the world market, overcoming the crisis of 1970s. (Danaldson 52)
1997-2010- the period of New Labor
Tony Blair, a new leader and the representative of the Labor Party did not change the previous economic policy as this model of mix economy was the most efficient in Europe.
The new Labor government used the interest rates as a political tool. Blair represented different strategies which had the major aim – to cut unemployment in the country.
It is also known that the Party increased taxes in order to spend the money on public services such as health care and education systems. The economic policy of this period was the most stable. The development of manufacturing made it possible to improve the growth of production and to develop external relations. (Hassan 91)
THE CAUSES FOR THE CHANGES IN THE UK ECONOMY
The major causes for the changes in the UK economy are concluded in the following factors:
- economic crisis which has such consequences as the growth of unemployment, rise in inflation, drop in the living standards;
- war actions;
- wrong policy of the government;
- the change of the state’s role in the economy;
- the development of market infrastructure;
- the use of new technologies in all the spheres of economy;
- the increase in production;
- change of the leading party who is at the head of the government;
- political situation in the country;
- change in currency exchange rate;
- the efficiency of banking system;
- external debt;
- the state of agroindustry.
There are many other factors which can become the cause of the change in the UK economy.
In conclusion, it is necessary to say that the UK economy
is still one of the most developed economies in the world, although the economic crisis of 2008 influenced it greatly.
It is clear that a great deal of different factors can influence the economy of any country including the UK that is considered to be one of the strongest states in the world. The UK has a long colorful history which proves that the country has always been a powerful one. However, after the colonies of the British Empire declared independence the UK lost its huge power. Moreover, there were great changes in the structure of the UK economy. A great deal of money were spent on military costs. That is why the UK had great difficulties for the Conservative government which wanted to return the leading position of the country in the world market.
The major opponents of the UK are Japan and the USA. That is why the UK had to enter the EU. The economic growth of the country began in 1980s when an active woman Margaret Thatcher was at the head. The major goal of her economic policy was a policy of economic liberalism when the major role is given to the market mechanism but not to the state. The change of the economic policy allowed to get good results: the decline in production was improved, the rate of inflation was reduced to a great extent, the living conditions of the population were improved. London became the major financial center in the world. (Danaldson 62)
In the XXI century, the economy of the UK is developing rather intensively. Due to this fact the economic crisis of 2001-2003 was overcome successfully. It was found the GDP growth (2,1%). If we compare it to the other countries, we’ll find out that it is the highest: GDP of France 1,6%, Italy – 0,3%. It is the result of privatization which gave the UK about 80 milliards pounds and deregulation of the UK economy. Decentralization of economic board also played an important role in this process. (Hassan 61)
The above mentioned characteristics of the UK economy prove that the UK economy change was influenced by a great deal of factors. Any economy is very sensitive and can be influence by any change in the political and social life of the country.
Chisholm, M., Manners, G. Spatial Policy Problems of the British Economy. Cambridge University Press. 1991. Print.
Danaldson, P. Guide to the British Economy. Penguin. 1980. Print.
Hassan, G. After Blair: Politics after the New Labor Decade. London: Lawrence & Wishart. 2009. Print.
Middleton, R. The British Economy since 1945. Palgrave Macmillan. 2000. Print.