2S - Economic developments: post-war boom | AQA A-Level History

Britain's post-war boom rested on reconstruction, high employment and growing consumer demand. Factories could expand production as shortages eased; workers with regular jobs could buy goods previously beyond their reach. Wider international recovery enlarged markets for British exports. The end of rationing and greater availability of credit helped turn potential demand into purchases of televisions, cars and household appliances.

Government policy supported high employment and a mixed economy: private firms operated alongside major publicly owned industries. Public housing, roads and services increased demand and productive capacity. The Conservatives inherited much of this framework from Labour and generally retained it. Economic improvement therefore cannot be attributed either wholly to a new government or wholly to forces outside government.

Higher real wages—earnings after allowing for price rises—could improve living standards even when households did not become wealthy. Consumption stimulated employment in manufacturing, retailing and services, creating a reinforcing cycle of income and purchases. Yet growth was uneven. Older industrial regions and people dependent on fixed benefits did not share equally in the expansion. Comparing Britain with France and West Germany also reveals that rising national output could coexist with relatively slower improvement in productivity.

Productivity means output per unit of input, commonly per worker or hour. Firms could meet additional demand through overtime or more labour rather than more efficient machinery and organisation. That raised output without necessarily making exports more competitive. This distinction explains why visible affluence did not settle the question of Britain's economic strength.

The external-payments constraint

Britain needed foreign currency to pay for imported food, fuel, raw materials and manufactured goods. Exports and income from services such as shipping, insurance and finance helped earn it. Overseas military spending and movements of capital also affected the wider balance of payments. A trade deficit was one possible source of difficulty, but was not identical to the entire balance of payments.

Balance of payments

The record of transactions between residents of a country and the rest of the world. A government's payments crisis concerns how external deficits and capital movements can be financed, even though the accounts balance once financing is included.

During this period the government defended sterling's fixed exchange rate of US$2.80 to £1. If demand for foreign currency exceeded demand for sterling at that rate, the authorities could use reserves or borrow to support the pound. Holders of sterling who expected a future devaluation might sell, accelerating pressure even before a further deterioration in trade. Confidence therefore influenced how long a policy could be sustained.

Growth could worsen the constraint. More household spending meant more imported consumer goods; expanding factories also needed imported materials. If exports did not rise equally fast, the foreign-currency gap widened. Britain's commitments abroad and sterling's role as a reserve currency made sudden withdrawals particularly troublesome. The problem was not that prosperity was undesirable, but that domestic expansion could run ahead of the capacity to earn abroad.

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Component 1 option 1A — The Age of the Crusades, c1071–1204

Component 1 option 1B — Spain in the Age of Discovery, 1469–1598

Component 1 option 1C — The Tudors: England, 1485–1603

Component 1 option 1D — Stuart Britain and the Crisis of Monarchy, 1603–1702

Component 1 option 1E — Russia in the Age of Absolutism and Enlightenment, 1682–1796

Component 1 option 1F — Industrialisation and the people: Britain, c1783–1885

Component 1 option 1G — Challenge and transformation: Britain, c1851–1964

Component 1 option 1H — Tsarist and Communist Russia, 1855–1964

Component 1 option 1J — The British Empire, c1857–1967

Component 1 option 1K — The making of a Superpower: USA, 1865–1975

Component 1 option 1L — The quest for political stability: Germany, 1871–1991

Component 2 option 2A — Royal Authority and the Angevin Kings, 1154–1216

Component 2 option 2B — The Wars of the Roses, 1450–1499

Component 2 option 2C — The Reformation in Europe, c1500–1564

Component 2 option 2D — Religious conflict and the Church in England, c1529–c1570

Component 2 option 2E — The English Revolution, 1625–1660

Component 2 option 2F — The Sun King: Louis XIV, France and Europe, 1643–1715

Component 2 option 2G — The Birth of the USA, 1760–1801

Component 2 option 2H — France in Revolution, 1774–1815

Component 2 option 2J — America: A Nation Divided, c1845–1877

Component 2 option 2K — International Relations and Global Conflict, c1890–1941

Component 2 option 2L — Italy and Fascism, c1900–1945

Component 2 option 2M — Wars and Welfare: Britain in Transition, 1906–1957

Component 2 option 2N — Revolution and dictatorship: Russia, 1917–1953

Component 2 option 2O — Democracy and Nazism: Germany, 1918–1945

Component 2 option 2P — The Transformation of China, 1936–1997

Component 2 option 2Q — The American Dream: reality and illusion, 1945–1980

Component 2 option 2R — The Cold War, c1945–1991

Component 2 option 2S — The Making of Modern Britain, 1951–2007

Component 2 option 2T — The Crisis of Communism: The USSR and the Soviet Empire, 1953–2000

Component 3 — Historical investigation

2S - Economic developments: post-war boom

Growth after austerity

The external-payments constraint

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