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London Forum – Discussion on the economy in Britain and the elections – November 8, 1950 – Gordon Skene Sound Collection –
After the end of World War II, the British economy had huge amounts of absolute wealth. Its economy was driven entirely for the needs of war and took some time to be reorganized for peaceful production. Britain’s economic position was relatively strong compared to its devastated European neighbors – in 1947 British exports were equivalent in value to the combined exports of France, West Germany, Italy, Norway, Denmark, Belgium, the Netherlands, and Luxembourg. Anticipating the end of the conflict, the United States had negotiated throughout the war to liberalize post-war trade and the international flow of capital in order to break into markets which had previously been closed to it, including the British Empire’s Pound Sterling bloc. This was to be realized through the Atlantic Charter of 1941, through the establishment of the Bretton Woods system in 1944, and through the new economic power that the US was able to exert due to the weakened British economy.
Immediately after the war in the Pacific ended, the U.S. halted Lend-Lease, but did give the UK a long-term low-interest loan of $4.33 billion. The winter of 1946–1947 proved to be very harsh, with curtailed production and shortages of coal, which again affected the economy so that by August 1947, when convertibility was due to begin, the economy was not as strong as it needed to be. When the Labour Government enacted convertibility, there was a run on Sterling, as pounds were traded for dollars. This damaged the British economy and within weeks convertibility was abandoned. By 1949, the British pound was seen to be over valued and had to be devalued. The US dollar had become the world’s premier currency.
The major economic priority of post-war Britain was to raise exports to fund the UK’s dollar deficit. This required the extension of rationing, as British goods and produce were prioritized for export markets. Unlike Continental European countries, where rationing was abandoned within a few years of the wars’ end, Britain actually tightened rationing restrictions and didn’t fully abandon them until 1954. The U.S. began Marshall Plan grants (mostly grants with a few loans) that pumped $3.3 billion into the economy and encouraged businessmen to modernize their approach to management. Marshall Aid, however, failed to have the desired effect of modernizing industry and stimulating the economy, because 97% of the funds were used to service British debt repayments. This left the UK at a comparative disadvantage to rivals like France and West Germany, who were able to invest the money directly into industry and infrastructure, creating more competitive, efficient economies in the long-term.
The Labour Governments of 1945–1951 enacted a political program rooted in collectivism that included the nationaliation of industries and state direction of the economy. Both wars had demonstrated the possible benefits of greater state involvement. This underlined the future direction of the post-war economy, and was also supported in the main by the Conservatives. However, the initial hopes for nationalization were not fulfilled and more nuanced understandings of economic management emerged, such as state direction, rather than state ownership. With the extensive nationalization program achieved, Keynesian management of the UK economy was adopted.
With the postwar Labour Governments, the first comprehensive attempts at economic planning were made with initiatives intended to overhaul chronically depressed regions of the UK. The Distribution of Industry Act 1945 designated “development areas” in northeast England, Scotland, and Wales according to the findings of the Barlow Report of 1940, which had recommended a complete economic overhaul of the troubled areas it pinpointed. Between 1945 and 1950, the British government pumped some £300 million into the building of 481 new factories in these regions, to be leased to private industry. In addition there were 505 privately owned factories built in the troubled regions on the active encouragement of the government in London. This activity created an estimated 200,000 new jobs for Britain.
To discuss the situation, this episode of the BBC World Service program London Forum features Anthony Crosland – member of Parliament for the Labour Party and Reginald Maulding member of Parliament for the Conservative Party. The discussion was broadcast on November 8, 1950.