Describe the macroeconomic performance of the UK economy over the past 40 years. How does this performance compare with other developed industrial economies? The UK and the world recently have been going through a tough time with the worst recession in 2007 for over 6 consecutive quarters since records began. The recent recession blamed on the careless mortgage lending of the US markets has had a domino effect on the rest of the world, the first big blow was the nationalization of northern rock followed by major bailouts by the bank of America for financial institutions such as Fannie Mae and Freddie Mac showed that there was more trouble to come. Before the recession had hit many countries were enjoying high economic growth and poorer countries looked like they were prospering.
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We start from the 1960’s were majority of economies were doing extremely well, this was known as the post war era were things started to change dramatically the start of the industrial revolution in the early 1900’s changed the way most economies operated, the amount of technological change had meant the way people lived and spent money had developed a lot, old manufacturing process of using animals to produce goods had been taken over by machines proving to be far quicker as well as efficient. Unemployment rates in the UK were as low as 2.2% change but rising to an average of 4.5% throughout the 1970-to 1979.
The 1970’s was a huge era during this time things started to change a lot economically the way of Keynesian economics was being scrapped and new ways were being brought in, in Britain this change was signified after conservatives won the vote in 1979 under the power of Margret Thatcher which although signaled change it wasn’t for the better. Growth had gone down dramatically in majority of European countries such as Germany and France from 4.4% down to 2.6% for Germany and from 7.5% to a poor 3.2% for France.
The boom in economic activity due to technological advancement had moved on too quick, the great oil crisis in the 1970’s hit global economies and sent out a warning to everyone that the supply of oil was not limitless. Many countries developed non car days and weekends in order to reduce their dependency for oil from the Middle Eastern countries that were facing their own problems of violence which was at its peak through the 1970’s. Unemployment rates had dramatically increased with many people’s jobs being taken over with machinery.
The UK’s unemployment had moved to 4.5% which was mainly due to the decline motor industry which was the major employer of the UK labor force, however this was the trend for the rest of the major economies, the USA’s labor was also hit unemployment rates from 4.1% to 6.1% were majority of car manufacturers were letting go of staff. The oil crisis had lead to a decade where new forms of transportation using alternative fuels such as electronic cars were trying to be produced but due to most of them failing the motor industry went into decline. However in other parts of the world the Vietnam War had come to an end in 1973 and that meant stabilization for economies in Asia which were affected during the war.
The most dramatic economic change for Britain was the conservatives winning power in the late 1970’s which changed the way the UK worked labor had ideologies about the helping hand and to close the gap between rich and poor however with the conservative views they had the idea of less government spending, weakening the power of trade unions and leaving the free markets to provide for themselves this proved to be a fatal error by Thatcher which lead to her losing power in the next elections.
However in the early 1980’s there is a dramatic change especially for Britain’s current account throughout the whole of the 1960’s till the 1980’s the current account remained negative however in the 1980 we see the current account with a surplus and into positives figures it remains this way for the next 5 years however with the high spending came a lot of unemployment inflation was at its peak and so was unemployment.
The pound had gone up rapidly due to the production of the North Sea oil, this made exports worst for Britain during the 1980 recession however Britain wasn’t the only country feeling it, going over the ocean to USA exports, specially agricultural exports were also bad in USA as well as having high interest rates however the only great change came when a new president was elected his ideas on supply side policies meant that people were taxed less and due to this idea people were enticed to work more for longer hours which would result in saving and investment and that is what recovered the US economy back in the 1980’s. Further the president also felt that not enough had been done to secure defense in the US after the Vietnam War and spent more on defense this extra spending lead to the US debt to be greater but did result in a better economy and the US getting out of a recession.
Much of Europe was also in the same state as the UK and the US however Japan wasn’t as bad its productivity had gone up by double and had annual growth of up to 5% a year which was due to its mass manufacturing in consumer electronics such as computers, that was mostly the case in the continent of Asia due to the big amount of populations and cheap labor available most countries and businesses sent their production to countries such as Malaysia and Singapore which were thriving at the time were more western economies were struggling, as their inflation rates were stable their economic growth was steady and higher then European countries and were also boasting lower unemployment rates than them too.