The Search for Economic Well-Being, Industrial Decline

Almost imperceptibly, Britons came to realize that their nation was in decline during the 1960s and 1970s. Early recovery from the war led to an optimism that could not be sustained as other European countries staged their own revivals. Despite being severed in two, Germany emerged once again as an industrial and trading power. Under the energetic leadership of Charles de Gaulle, France charted a course of independence from the United States by refusing to join the North Atlantic Treaty Organization (NATO), a defensive organization formed by the United States and a number of European countries to counter the military strength of the USSR.

For a time, de Gaulle managed to keep Britain out of the European Economic Community (now the European Union), an organization designed to promote economic integration among European nations. De Gaulle vetoed Britain’s membership applications in 1961 and 1967, largely because of Britain’s close ties with the United States. Britons themselves remained split over closer ties with the continental powers. It was not until 1973 that Britain finally became a member of the European Community.

By the mid-1960s Britain was mired in an economic slowdown. Massive dock strikes in both 1966 and 1967 severely affected British exports. In an effort to prevent the flow of money out of the country, the government devalued the currency. Devaluation lowered the value of British currency in relation to foreign currency, making it less expensive for Britain to pay its foreign debts. It gave a boost to British exports by making British goods less expensive on the foreign market. However, it also made imported products more expensive for British citizens and lowered international confidence in Britain’s currency.

Industries in which Britain had been dominant for centuries were decaying rapidly. Shipbuilding, textiles, coal, and steel, all of which had been bywords of Britain’s Industrial Revolution, were no longer competitive. Each was beset with low productivity, high labor costs, and outdated plants and machinery. Industrial relations between workers and employers were at an all-time low, as workers staged hundreds of strikes, work stoppages, and deliberate slowdowns.

Crisis came in 1973 when oil-exporting nations in the Middle East dramatically cut shipments to pro-Israeli nations following the Arab-Israeli War. Oil prices quadrupled, forcing British industries to use more coal. This was the opportunity for which miners had waited. Miners were dissatisfied because they opposed the government’s wage controls as well as the policy of closing down unprofitable mines at the cost of miners’ jobs. Now the miners introduced a ban on working overtime and finally began an all-out strike to pressure the government to abandon its policy of legislating limits on wage increases. In response, Prime Minister Edward Heath introduced emergency legislation that limited the working week to three days and instituted national electrical power cuts to minimize the amount of coal used in power plants.

The election of 1974 was fought on whether government would restrain the unions. The Labour Party won a narrow majority by promising not to interfere with the unions. With legal limits removed, the unions won wage increases. Workers now had more money to spend, while the amount of available goods on the market remained the same. As a result, prices for products began to rise, and double-digit inflation ensued. Food prices rose 20 percent in 1973 alone.

Wages and prices spiraled out of control. Only a supply of oil drilled from the North Sea off the coast of Scotland saved Britain from a crisis over the payment of its foreign debts. Even with the new supply of oil, the government raised taxes on income and on consumer goods to finance raises in wages that had been negotiated with union members in nationalized industries. The taxes left less and less for reinvestment. In 1979 an arrangement between the Labour Party and the unions to keep wage demands moderate broke down, and another round of strikes took place.