In her 70 years on the throne, the Queen has been served by 14 Prime Ministers and 22 Chancellors of the Exchequer. She has seen the country grow richer and healthier despite five major recessions. In 1952, the economy was dominated by manufacturing and fueled by coal. Seven decades later the wells have all closed and Britain is primarily a service economy.
The past 15 years have been the most difficult of the Queen’s reign. Two deep recessions ended a period of extremely low growth and stagnant living standards. Inflation is the highest in four decades and the immediate outlook for the economy is poor.
That said, a lot has changed for the better since 1952. People are living longer, working fewer hours, traveling more, and reaping the benefits of 70 years of technological advancement in everything from improved medical treatments to cell phones. Only the wealthiest had televisions, washing machines and refrigerators in the early 1950s.
One thing that hasn’t changed is the search for the magic ingredient to make the economy more buoyant or – to put it more accurately – to bring the clock back to its former glory under another long-reigning monarch, the Queen Victoria.
There have been a lot of experiments. When Queen Elizabeth II ascended the throne in early 1952, the post-war Labor government had just lost power and been replaced by the Conservatives led by Sir Winston Churchill. There was, however, no major rollback from Labour’s nationalization program and it was so hard to tell the difference between the economic policies of the new Chancellor (Rab Butler) and those of the former Chancellor (Hugh Gaitskell) that the centrist approach has become known. as Butskelism.
In many ways, the 1950s was a good decade in which the lineups of the 1930s were replaced by full employment, relatively low inflation, and growing consumer purchasing power. The problem was that while Britain was doing well, other countries were doing better – in some cases much better. By the end of the 1950s, envious glances were cast across the Channel at the much higher growth rates of West Germany, France and the Netherlands.
And so the search for the miracle cure began. The 1960s saw a succession of French-style indicative planning and a national plan. In the early 1970s, it was hoped that joining (what was then) the European Economic Community might do the trick. By the end of that decade, Margaret Thatcher’s response to Britain’s economic malaise was a dose of monetarist shock treatment: control of the money supply and restriction of government spending to bring down inflation.
After that, the UK joined the European exchange rate mechanism in 1990 only to leave two years later, Tony Blair gave the Bank of England freedom to set interest rates in 1997, and David Cameron said austerity was needed to undo the damage caused by the 2007-08 financial crisis. Brexit and Boris Johnson’s ‘race to the top’ agenda are just the latest in a long line of supposed panaceas.
From this jumble of initiatives, some tentative conclusions can be drawn. The watershed period for the economy over the past 70 years was the long 1970s, which began in 1969 with Harold Wilson’s failed In Place of Strife legislation to reduce union power and ended in defeat miners in 1985. t simply that the power of organized labor was broken; is that finance has supplanted the manufacturing sector as the engine of the economy.
Few chancellors since 1952 have actually changed the economic narrative to such an extent, and even then not always in a useful way. Some – like Denis Healey and Alistair Darling – never had time to do anything other than crisis management. And there were many crises to manage: the American threat to disconnect the pound over Suez in 1956; the 1967 devaluation; the arrival of the International Monetary Fund in 1976; black wednesday; the near collapse of banks in 2008; the global pandemic of the past two years.
The most successful chancellors were lucky enough to get the job as the economy picked up. This was the case with both Nigel Lawson, who replaced Sir Geoffrey Howe after Thatcher’s turbulent first term, and Ken Clarke, who followed Norman Lamont after becoming the scapegoat for Black Wednesday. The decade and a half that followed was the longest period of uninterrupted growth since the Industrial Revolution.
Britain tends to move quickly from a sense of national gloom to a premature belief that the country has finally “cracked”. The years preceding the financial crisis were an example of this, when the speculation that raged in the City and the real estate market was not managed to be contained. Another was in the late 1980s, when a strong recovery from the recession at the start of the decade exploded out of control.
Getting the big picture right – setting interest rates at the right level and having a competitive pound – is clearly important, but so is the little stuff. Over the years, too little attention has been paid to the supply side of the economy, in part because the long timelines for policy implementation do not mesh well with the demands of the election cycle for instant results.
The message from other – more prosperous – economies is clear and has been for the past 70 years. Identify structural weaknesses in the economy, which in Britain’s case includes overinvestment in domestic property and underinvestment in almost everything else. Put the right policies in place to address the issues. So stay the course.