Britain’s modern history is of a manufacturing country that has had to export goods and services in order to import raw materials and sufficient food to feed its population. Britain and its empire dominated the world economy during the nineteenth century, but its position had weakened by the early years of the twentieth century as other industrial nations increased their output and trade. By the second half of the twentieth century both Labour and Conservative governments became preoccupied with the pressing question of how to stop, and then reverse, Britain’s relative economic decline. The problem was that Britain’s economy grew too slowly compared with its trading rivals (Figure 9.1). For example, whilst the economy grew on average by 2.25 per cent per capita a year between 1950–1979, the equivalent figure for Germany was 4.75 per cent, for France 4 per cent and for Italy 4.4 per cent (Maynard, 1988, p. 27). The special problem for Britain was that high economic growth seemed to cause other problems, for instance higher inflation and a balance of payments deficit, whose only cure was government policies that deflated the economy at the cost of rising unemployment.
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