Planning is an economic mechanism for resource allocation and decision-making held in contrast with the market mechanism. Most economies are mixed economies, incorporating elements of market mechanisms and planning for distributing inputs and outputs. The level of centralization of decision-making ultimately depends on the type of planning mechanism employed; as such planning may be based on either centralized or decentralized decision-making. Economic planning can apply to production, investment, distribution or all three of these functions.
Planning may take the form of directive planning or indicative planning. An economy primarily based on central planning is a planned economy; in a planned economy the allocation of resources is determined by a comprehensive plan of production which specifies output requirements. Objectives of Economic Planning Planning is adopted only in Socialistic and Communist countries and also in Mixed Economy. Planning decides in which direction the Country should go.
- How much resources should be allotted to each sectors
- How much to be produced for the present and future periods.
- Planning helps the country to achieve what it can achieve in decades if it is left to natural transformation.
- Planning helps to use the maximum utility of the scarce resources
- Planning is headed by central committee and it decides the periods to be adopted for planning
- Even in capital countries where such strict formalities is not adopted they still decide plan ahead for the country
- Increase in the Rate of Economic Development One of the most important objectives of Economic Planning is to increase the rate of economic development. Capital formation should be carried out.
- Infrastructure facilities should be extended and social overhead such as education, technical training and health facilities should be increased. Planning in Pakistan should be done keeping in mind that country is populous and there are too many people looking for jobs, hence labor intensive projects should be given priority, which will absorb labor force and employment opportunities will increase. Increase in employment will increase national income and per capital income. Standard of living of people will raise and rate of domestic savings will increase.
Diversification of Economy
- All sectors of economy should be given proper importance. No sector of economy should be neglected. Pakistan is an agrarian country, the development of industry of Pakistan depends upon agriculture, therefore more emphasis should be given to agriculture. Since population is too much and it is further increasing at a fast rate, therefore production of food grains should be increased.
- Price Stability Increase in price level hits the poor and fixed income people very much, whereas decrease in price reduces profit margins of the businessmen, which causes reduction in investment. One economic planning is to maintain the price stability.
- Through planning equal distribution of national wealth be made. The society should not be divided between “Haves and Have-nots”
- Higher Standard of Living Economic Planning should ensure that good education; technical training and better medical facilities are available to all the people of the country. Every one should be provided a reasonable accommodation. Thus policy should standard of living of the masses.
- Improving Balance of Payments All out efforts should be done under planning that balance of payments continues to improve. Export oriented and import substitutions industries should be given importance.
Luxurious goods should be banned and small and agro-based industries should be given concessions and facilities. Imports should be reduced and export increased, in order to improve foreign exchange earnings. Dependence on foreign aid and grants should be curtailed. But we also must know; All this doctrines are notional specially if we research somethings history this will be relative and so much pragmatic. “… In the long run we are all dead. ” J. M. Keynes “History is not like some individual person, which uses men to achieve its ends. History is nothing but the actions of men in pursuit of their ends. K. H. Marx Theories about the development of economic activities in the economy began long before the people. Over time, due to human needs, thoroughly thought out, is not part of a system made ?? remedies. These new terms and according to the developments, tried modified, merged, or abandoned, and to this day preserved reached. Economic behavior is often closely related to people’s livelihood in ways they provide. A family, a tribe, a nation, or group of nations, food, shelter, services, manufactures and distributes how the other things that people desire?
How this type of behavior manifests itself in different forms of human communities on earth. “Economy” as the word has been recognized all over the world languages, Greek oiko-nomos. The intruders can be translated as. The house, which is responsible for managing people at home, enough food, clothing, fuel must ensure to have. In order to keep the house, be able to provide household duties, must. Automatically, or a home thanks to the blessings of a generous nature, compassionate, not “folks at home” with their efforts and skilful richer.
Home about Oiko-nomos is not only applied to city-state, ancient (the oldest) is a classic, economics ideas, and then reached today’s economy. Plato: manufacture of the foundation of the State that a society requires to be different occupations. Everyone is engaged in the corresponding self-and other areas do not nose, production much easier and provides a better quality he said. This view is now “Specialization” enacted by the name of Adam Smith has been a view that will affect both today’s economic views.
England, in 16th century point in the opinion of foreign trade may be richer nations do business with Asian countries, the idea was put forward by Thomas Munn. Then the views of economists who pioneered the economic views are some of the important of them is the direction in this area; 1- Machiavellianism (or machiavellian mask) is, according to the Oxford English Dictionary, “the employment of cunning and duplicity in statecraft or in general conduct”, deriving from the Italian Renaissance diplomat and writer Niccolo Machiavelli, who wrote Il Principe (The Prince) and other works.
The word has a similar use in modern psychology. Where it describes one of the dark triad personalities, characterised by a duplicitous interpersonal style associated with cynical beliefs and pragmatic morality. “Machiavellian” (and variants) as a word became very popular in the late 16th century in English, though “Machiavellianism” itself is first cited by the Oxford English Dictionary from 1626. 2- Mercantilism is the economic doctrine that government control of foreign trade is of paramount importance for ensuring the military security of the country.
In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from the 16th to late-18th centuries. Mercantilism was a cause of frequent European wars in that time and motivated colonial expansion. Mercantilist theory varied in sophistication from one writer to another and evolved over time. Favours for powerful interests were often defended with mercantilist reasoning. High tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy.
Other policies have included:
- Building a network of overseas colonies; Forbidding colonies to trade with other nations;
- Monopolizing markets with staple ports;
- Banning the export of gold and silver, even for payments;
- Forbidding trade to be carried in foreign ships;
- Export subsidies;
- Promoting manufacturing with research or direct subsidies;
- Limiting wages;
- Maximizing the use of domestic resources;
- Restricting domestic consumption with non-tariff barriers to trade.
Mercantilism in its simplest form was naive bullionism, but mercantilist writers emphasized the circulation of money and rejected hoarding.
Their emphasis on monetary metals accords with current ideas regarding the money supply, such as the stimulative effect of a growing money supply. Specie concerns have since been rendered moot by fiat money and floating exchange rates. In time, the heavy emphasis on money was supplanted by industrial policy, accompanied by a shift in focus from the capacity to carry on wars to promoting general prosperity. Mature neomercantilist theory recommends selective high tariffs for “infant” industries or to promote the mutual growth of countries through national industrial specialization.
Currently, advocacy of mercantilist methods for maintaining high wages in advanced economies are popular among workers in those economies, but such ideas are rejected by most policymakers and economists. Physiocracy (from the Greek for “Government of Nature”) is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of “land agriculture” or “land development. ” Their theories originated in France and were most popular during the second half of the 18th century.
Physiocracy is perhaps the first well-developed theory of economics. The movement was particularly dominated by Francois Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1781). It immediately preceded the first modern school, classical economics, which began with the publication of Adam Smith’s The Wealth of Nations in 1776. The most significant contribution of the Physiocrats was their emphasis on productive work as the source of national wealth. This is in contrast to earlier schools, in particular mercantilism, which often focused on the ruler’s wealth, accumulation of gold, or the balance of trade.
At the time the Physiocrats were formulating their ideas, economies were almost entirely agrarian. That is presumably why the theory considered only agricultural labor to be valuable. Physiocrats viewed the production of goods and services as consumption of the agricultural surplus, since the main source of power was from human or animal muscle and all energy was derived from the surplus from agricultural production. The perceptiveness of the Physiocrats’ recognition of the key significance of land was reinforced in the following half-century, when fossil fuels had been harnessed through the use of steam power.
Productivity increased manyfold. Railways, and steam-powered water supply and sanitation systems, made possible cities of several millions, with land values many times greater than agricultural land. Thus, whilst modern economists also recognise manufacturing as productive and wealth-creating, the underlying principles laid down by the Physiocrats remain valid. Physiocracy also has an important contemporary relevance in that all life remains dependent on the productivity of the raw soil and the ability of the natural environment to renew itself. – Malthus-ism (Principle of Population) : Between 1798 and 1826 Malthus published six editions of his famous treatise, An Essay on the Principle of Population, updating each edition to incorporate new material, to address criticism, and to convey changes in his own perspectives on the subject. He wrote the original text in reaction to the optimism of his father and his father’s associates (notably Rousseau) regarding the future improvement of society. Malthus also constructed his case as a specific response to writings of William Godwin (1756–1836) and of the Marquis de Condorcet (1743–1794).
Malthus regarded ideals of future improvement in the lot of humanity with skepticism, considering that throughout history a segment of every human population seemed relegated to poverty. He explained this phenomenon by arguing that population growth generally expanded in times and in regions of plenty until the size of the population relative to the primary resources caused distress: Adam Smith, Keynes and other economists, the economy has found its current level of application, the system developed, receives the classical ideas ave contributed greatly to its current state. Difficulties in the implementation of capitalism is opposed to the other forming a school of economists, Saint-Simon, Charles Fourier, Proudhon, Robert Oven, socialism as a system formed. Based on the production and the wealth of the people against the idea of capitalism, economists and social scientists in this second group, the society had considered preliminary. This theory, developed by Marx and is a continuation of its current state of social scientists and economists.
Economists’ views of the world, today’s applications are active in the first group. Second-minded economic overviews, books no longer has to alternatives. Pros and cons of both groups, with the objective views of economists and objectively investigated, attention to these issues that affect our lives in many ways, the path will display information should be preferred to learn from. Quick skip Economic Planning Economic planning is a term used to describe the long term plans of an incumbent government to co-ordinate and develop the economy.
Economic planning is commonly a feature of big government as it usually involves increased spending on things such as public work schemes and government programs. Given the economic woes due to the collapse of international trade on a vast scale in the early 1930s caused by tariff restrictions severally among nation states, economic planning became quite fashionable as a solution among what became the belligerent powers of World War II.
Economic planning can include:
Discussing the long term future of economic growth, and ways of achieving said growth. Meeting social partners such as trade Union leaders to co-ordinate government planning in relation to these partners. Organizing committees to create reports and offer recommendations for future economic expansion. Critics, who generally tend to be pro Free-market argue that the only economic planning that government should engage in is providing a framework for the economy to operate, such as sufficient infrastructure and the maintenance of law and order Characteristics of a centrally planned economy
A centrally planned economic model is when all aspects of the economy are organized from the state or central decision making authority. It is largely an obsolete model, with Cuba, Vietnam and North Korea remaining the only committed centrally planned economies. China, a so-called ‘communist’ state has opened up its economy more and more to free enterprise and away from the centrally planned model. It is based off the doctrines of Karl Marx, most notable of which being From each according to his ability, to each according to his needs.
Essentially this involves an equal distribution of wealth. Unlike in a free market capitalist country, a centrally planned economy provides services such as healthcare and education to the people free of charge. Citizens of a centrally planned economy enjoy better health and education standards than in many other countries, but often at the expense of many individualistic freedoms associated with Free Market economies of the west. Similarly, the state would nationalize all factories and industries.
In the Soviet Union’s case under Stalin, Industrial production increased by many hundred percent and at the height of its industrial production the centrally planned model had insured that the Soviet Union went from being one of the least industrialized areas of Europe to being the second most industrialized economy second only to the United States of America. However, following World War Two the global economy changed dramatically away from the old heavy industrial system to a more light, plastic orientated industrial system.
The Soviet Union concentrated on continuing high levels of industrial production at the expense of producing consumer goods. The inefficient state bureaucracy failed to keep in line with consumer demands and changing consumer tastes, and this was one of the major flaws in the Centrally planned model. The centrally planned model also disagrees with individualism and focuses on collective responsibility. This more often than not coincided with repression of civil liberties and a corrupt totalitarian state.
The fact that the old Soviet Union collapsed and was replaced with free market economics in the former states of the USSR is perhaps a testament to the failure of the centrally planned model. Marxist roots James Burnham, a former Trotskyite, discovered in 1941 that the “workers revolution” which allegedly was to overthrow the capitalist “exploiters,” was in real practice a “managerial revolution” which replaced older 19th century owners of capital with twentieth century technocrats and managers.
Burnham found that “workers in this mythical ‘workers’ state’ were, the facts showed, a subject class far more heavily exploited than the workers under capitalism,” and that the new managers in a planned economy “have curbed the masses and have instituted a social structure in which they are on top, not by virtue of private property rights in the instruments of production, but through their monopoly control of a state power which has fused with the economy. “. Prof.
Carroll Quigley voiced the same sentiments as late as 1966 when he wrote in Tragedy and Hope, “It is increasingly clear that in the 20th century, the expert will replace the industrial tycoon in control of the economic system even as he will replace the democratic voter in control of the political system. This is because planning will inevitably replace laissez-faire in the relationships between the two systems. New Deal From March 4, 1933 to May 15, 1936 Roosevelt spent $25 billion with an increase in the National Debt $13 billion. The American Federation of Labor (AFL) reported 12,184,000 persons still unemployed in March, 1936.
Roosevelt reported 5,300,000 families and individuals still on government relief in March, 1936 in contrast to 3,908,000 in July, 1933.  World War II History of some proactive countrys economic planning: GERMANY Before 1850 Germany lagged behind the leaders in industrial development, Britain, France and Belgium. By 1850 the German states were catching up, and by 1900 Germany was a world leader in industrialization, along with Britain and the United States. In 1800, Germany’s social structure was poorly suited to entrepreneurship or economic development.
The reaction to Napoleon’s conquests of German countries during the era of the French Revolution (1790s to 1815), produced important institutional reforms, including the abolition of feudal restrictions on the sale of large landed estates, the reduction of the power of the guilds in the cities, and the introduction of a new, more efficient commercial law. Nevertheless, traditionalism remained strong in most of Germany. Until midcentury, the guilds, the landed aristocracy, the churches, and the government bureaucracies had so many rules and restrictions that entrepreneurship was held in low esteem, and given little opportunity to develop.
From the 1830s and 1840s, Prussia, Saxony, and other states reorganized agriculture, introducing sugar beets, turnips, and potatoes, yielding a higher level of food production that enabled a surplus rural population to move to industrial areas. The beginnings of the industrial revolution in Germany came in the textile industry, and was facilitated by eliminating tariff barriers through theZollverein (customs union), starting in 1834.
The takeoff stage of economic development came with the railroad revolution in the 1840s, which opened up new markets for local products, created a pool of middle manager, increased the demand for engineers, architects and skilled machinists and stimulated investments in coal and iron. The political decisions about the economy of Prussia (and after 1871 all Germany) were largely controlled by a coalition of “rye and iron”, that is the Junker landowners of the east and the heavy industry of the west.
The economy of Germany during the Hitler era (1933 – 1945) developed a hothouse prosperity, supported with high government subsidies to those sectors that Hitler favored because they gave Nazi Germany military power and economic autarky, that is, economic independence from the global economy. Adolf Hitler, believing that “the economy is something of secondary importance”, left the details of the economic National Socialist Programme out of Mein Kampf. The Nazis rose to power while unemployment was very high, but achieved full employment later thanks to massive rearmament.
Their pre-war economic policies were in the beginning the brainchildren of their non-Nazi Minister of Economics,Hjalmar Schacht, who was later made to focus more on war production, and was eventually replaced by a Nazi, Hermann Goring. The trading policies of the Third Reich aimed at discouraging trade with countries outside the German sphere of influence, while making southern Europe largely dependent on Germany. Eventually, the Nazi party developed strong relationships with big business and abolished trade unions while real wages dropped by a fourth, and employees could not easily change employer.
Taxes, though, were still low well into the war. Already before the war, people undesirable to the regime were used as slave labour, and in 1944 they reached one quarter of the workers. Some like the British Marxist historian Timothy Mason have argued that the Second World War was a direct effect of the German economic system, which made expansionism necessary for domestic prosperity, indeed, survival; and which made Jingoism necessary for the quelling of class conflicts.
Mason called the outbreak of World War II in 1939 a “flight into war” imposed on Hitler by an economic crisis. West Germany Beginning with the replacement of the Reichsmark with the Deutsche Mark as legal tender, a lasting period of low inflation and rapid industrial growth was overseen by the government led by German Chancellor Konrad Adenauer and his minister of economics, Ludwig Erhard, raising West Germany from total wartime devastation to one of the most developed nations in modern Europe.
Contrary to popular belief, the Marshall Plan, which was extended to also include Western Germany after it was realized that the suppression of the Western German economy was holding back the recovery of the rest of Europe, was not the main force behind the Wirtschaftswunder. The amount of monetary aid (which was in the form of loans) received by Germany through the Marshall Plan (about $1. 65 billion in total) was far overshadowed by the amount the Germans had to pay back as war reparations and by the charges the Allies made on the Germans for the ongoing cost of occupation (about $2. billion per year). In 1953 it was decided that Germany was to repay $1. 1 billion of the aid it had received. The last repayment was made in June 1971. It is arguable, however, that recovery would have been possible without the initial economic boost as well as the modernization of infrastructure provided by the economic recovery plan. Apart from these factors, hard work and long hours at full capacity among the population in the 1950s, 1960s and early 1970s and extra labor supplied by thousands of Gastarbeiter (“guest workers”) provided a vital base for the conomic upturn. East Germany By the early 1950s the Soviet Union had seized reparations in the form of agricultural and industrial products and demanded further heavy reparation payments. Lower Silesia, which contained coal mines, and Stettin, a prominent natural port, were lost to Poland. Exports from West Germany exceeded $323 billion in 1988. In the same year, East Germany exported $30. 7 billion worth of goods; 65% to other communist states. East Germany had zero unemployment. In 1976 the average annual GDP growth was roughly 5. %. After reunification The German economy practically stagnated in the beginning of the 2000s. The worst growth figures were achieved in 2002 (+1. 4%), in 2003 (+1. 0%) and in 2005 (+1. 4%). Unemployment was also chronically high. Due to these problems, together with Germany’s aging population, the welfare system came under considerable strain. This led the government to push through a wide-ranging programme of belt-tightening reforms,Agenda 2010, including the labour market reforms known as Hartz I – IV.
In the latter part of the first decade of 2000 the world economy experienced high growth, from which Germany as a leading exporter also profited. Some credit the Hartz reforms with achieving high growth and declining unemployment but others contend that they resulted in a massive decrease in standards of living, and that its effects are limited and temporary. The nominal GDP of Germany contracted in the second and third quarters of 2008, putting the country in a technical recession following a global and European recession cycle. German industrial output dropped to 3. % in September vis-a-vis August. In January 2009 the German government under Angela Merkel approved a €50 billion ($70 billion) economic stimulus plan to protect several sectors from a downturn and a subsequent rise in unemployment rates. Germany exited the recession in the second and third quarters of 2009, mostly due to rebounding manufacturing orders and exports – primarily from outside the Euro Zone – and relatively steady consumer demand. Germany is a founding member of the EU, the G8 and the G20, and was the world’s largest exporter from 2003 to 2008. In 2011 it emained the third largest exporter and third largest importer. Most of the country’s exports are in engineering, especially machinery, automobiles, chemical goods and metals. Germany is a leading producer of wind turbines and solar-power technology. Annual trade fairs and congresses are held in cities throughout Germany. 2011 was a record-breaking year for the German economy. German companies exported goods worth over €1 trillion ($1. 3 trillion), the highest figure in history. The number of people in work has risen to 41. 6 million, the highest recorded figure.
Into 2012 Germany’s economy continued be stronger relative to local neighboring nations. United Kingdom Britain led the industrial revolution and dominated the European and world economy during the 19th century. It was the major innovator in machinery such as steam engines (for pumps, factories, railway locomotives and steamships), textile equipment, and tool-making. It invented the railway system and built much of the equipment used by other nations. As well it was a leader in international and domestic banking, entrepreneurship, and trade.
It built a global British Empire. After 1840 it abandoned mercantilism and practised “free trade,” with no tariffs or quotas or restrictions. The powerful Royal Navy protected its global holdings, while its legal system provided a system for resolving disputes inexpensively. Between 1870 and 2000, economic output per head of population in Britain rose by 500 per cent, generating a significant rise in living standards. However, from the late 19th century onwards Britain experienced a relative economic decline as other nations such as the United States and Germany caught up.
In 1870, Britain’s output per head was the second highest in the world after Australia. By 1914, it was fourth highest. In 1950, British output per head was still 30 per cent ahead of the six founder members of the EEC, but within 50 years it had been overtaken by many European and several Asian countries. The Age of Mercantilism The basis of the British Empire was founded in the age of mercantilism, an economic theory that stressed maximizing the trade inside the empire, and trying to weaken rival empires.
The modern British Empire was based upon the preceding English Empire which first took shape in the early 17th century, with the English settlement of the eastern colonies of North America, which later became the United States, as well as Canada’s Maritime provinces, and the colonizations of the smaller islands of the Caribbean such as Trinidad and Tobago, the Bahamas, the Leeward Islands,Barbados, Jamaica and Bermuda. These sugar plantation islands, where slavery became the basis of the economy, comprised Britain’s most lucrative colonies.
The American colonies also utilized slave labour in the farming of tobacco, indigo and rice in the south. Britain’s American empire was slowly expanded by war and colonization. Victory over the French during the Seven Years’ War gave Britain control over almost all of North America. Mercantilism was the basic policy imposed by Britain on its colonies. Mercantilism meant that the government and the merchants became partners with the goal of increasing political power and private wealth, to the exclusion of other empires.
The government protected its merchants—and kept others out—by trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to the realm. The government had to fight smuggling—which became a favorite American technique in the 18th century to circumvent the restrictions on trading with the French, Spanish or Dutch. The goal of mercantilism was to run trade surpluses, so that gold and silver would pour into London. The government took its share through duties and taxes, with the remainder going to merchants in Britain.
The government spent much of its revenue on a superb Royal Navy, which not only protected the British colonies but threatened the colonies of the other empires, and sometimes seized them. Thus the British Navy captured New Amsterdam (New York) in 1664. The colonies were captive markets for British industry, and the goal was to enrich the mother country. The Industrial Revolution In a period loosely dated from the 1770s to the 1820s, Britain experienced an accelerated process of economic change that transformed a largely agrarian economy into the world’s first industrial economy.
This phenomenon is known as the “industrial revolution”, since the changes were all embracing and permanent. Great Britain provided the legal and cultural foundations that enabled entrepreneurs to pioneer the industrial revolution. Starting in the later part of the 18th century, there began a transition in parts of Great Britain’s previously manual labour and draft-animal–based economy towards machine-based manufacturing. It started with the mechanisation of the textile industries, the development of iron-making techniques and the increased use of refined coal.
Trade expansion was enabled by the introduction of canals, improved roads and railways. Factories pulled thousands from low productivity work in agriculture to high productivity urban jobs. The introduction of steam power fuelled primarily by coal, wider utilisation of water wheels and powered machinery (mainly in textile manufacturing) underpinned the dramatic increases in production capacity. The development of all-metal machine tools in the first two decades of the 19th century facilitated the manufacture of more production machines for manufacturing in other industries.
The effects spread throughout Western Europe and North America during the 19th century, eventually affecting most of the world, a process that continues as industrialisation. According to Max Weber, the foundations of this process of change can be traced back to the Puritan Ethic of the Puritans of the 17th century. This produced modern personalities atuned to innovation and committed to a work ethic, inspiring landed and merchant elites alive to the benefits of modernization, and a system of agriculture able to produce increasingly cheap food supplies.
To this must be added the influence of religious nonconformity, which increased literacy and inculcated a “Protestant work ethic” amongst skilled artisans. A long run of good harvests, starting in the first half of the 18th century, resulted in an increase in disposable income and a consequent rising demand for manufactured goods, particularly textiles. The invention of the flying shuttle by John Kay enabled wider cloth to be woven faster, but also created a demand for yarn that could not be fulfilled. Thus, the major technological advances associated with the industrial revolution were concerned with spinning.
James Hargreaves created the Spinning Jenny, a device that could perform the work of a number of spinning wheels. However, while this invention could be operated by hand, the water frame, invented by Richard Arkwright, could be powered by a water wheel. Indeed, Arkwright is credited with the widespread introduction of the factory system in Britain, and is the first example of the successful mill owner and industrialist in British history. The water frame was, however, soon supplanted by the spinning mule (a cross between a water frame and a jenny) invented by Samuel Crompton.
Mules were later constructed in iron by Messrs. Horrocks of Stockport. As they were water powered, the first mills were constructed in rural locations by streams or rivers. Workers villages were created around them, such as New Lanark Mills in Scotland. These spinning mills resulted in the decline of the domestic system, in which spinning with old slow equipment was undertaken in rural cottages. The steam engine was invented and became a power supply that soon surpassed waterfalls and horsepower. The first practicable steam engine was invented by Thomas Newcomen, and was used for pumping water out of mines.
A much more powerful steam engine was invented by James Watt; it had a reciprocating engine capable of powering machinery. The first steam-driven textile mills began to appear in the last quarter of the 18th century, and this transformed the industrial revolution into an urban phenomenon, greatly contributing to the appearance and rapid growth of industrial towns. The progress of the textile trade soon outstripped the original supplies of raw materials. By the turn of the 19th century, imported American cotton had replaced wool in the North West of England, though wool remained the chief textile in Yorkshire.
Textiles have been identified as the catalyst in technological change in this period. The application of steam power stimulated the demand for coal; the demand for machinery and rails stimulated the iron industry; and the demand for transportation to move raw material ina and finished products out stimulated the growth of the canalsystem, and (after 1830) the railway system. Such an unprecedented degree of economic growth was not sustained by domestic demand alone. The application of technology and the factory system created such levels of mass productionand cost efficiency that enabled Britain to undercut foreign competitors.
The political dominance created by the growth of an overseas empire and the strategic control of the world’s seas by theRoyal Navy, enabled British manufacturers to export their goods to Europe, Africa, Asia, and Latin America. Indeed, the demands of the war economy created by the French and Napoleonic Warsadded to these opportunities. Walt Rostow has posited the 1790s as the “take-off” period for the industrial revolution. This means that a process previously responding to domestic and other external stimuli began to feed upon itself, and became an unstoppable and irreversible process of sustained industrial and technological expansion.
In the late 18th century and early 19th century a series of technological advances led to the Industrial Revolution. Britain’s position as the world’s pre-eminent trader helped fund research and experimentation. The nation was also gifted by some of the world’s greatest reserves of coal, the main fuel of the new revolution. It was also fuelled by a rejection of mercantilism in favour of the predominance of Adam Smith’s capitalism. The fight against Mercantilism was led by a number of liberal thinkers, such as Richard Cobden, Joseph Hume, Francis Place and John Roebuck.
Some have stressed the importance of natural or financial resources that Britain received from its many overseas colonies or that profits from the British slave trade between Africa and the Caribbean helped fuel industrial investment. It has been pointed out, however, that slave trade and the West Indian plantations provided less than 5% of the British national income during the years of the Industrial Revolution. The Industrial Revolution saw a rapid transformation in the British economy and society. Previously large industries had to be near forests or rivers for power.
The use of coal-fuelled engines allowed them to be placed in large urban centres. These new factories proved far more efficient at producing goods than the cottage industry of a previous era. These manufactured goods were sold around the world, and raw materials and luxury goods were imported to Britain. Empire During the Industrial Revolution the empire became less important and less well-regarded. The British defeat in the American War of Independence (1775–1783) deprived it of its largest and most developed colonies.
This loss brought a realisation that colonies were not particularly economically beneficial to the home economy. It was realised that the costs of occupation of colonies often exceeded the financial return to the taxpayer. In other words, formal empire afforded no great economic benefit when trade would continue whether the overseas political entities were nominally sovereign or not. The American Revolution helped demonstrate this by showing that Britain could still control trade with the colonies without having to pay for their defence and governance.
Capitalism encouraged the British to grant their colonies self-government, starting with Canada, which became unified and largely independent in 1867, and Australia, which followed suit in 1901. 19th Century Free Trade After 1840 Britain abandoned mercantilism and committed its economy to free trade, with few barriers or tariffs. This was most evident in the repeal in 1846 of the Corn Laws, which were agricultural on domestic grain. The end of these laws opened the British market to unfettered competition, grain prices fell, and food became more plentiful.
From 1815 to 1870 Britain reaped the benefits of being the world’s first modern, industrialised nation. It was the ‘workshop of the world’, meaning that its finished goods were produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market. If political conditions in particular overseas markets were stable enough, Britain could dominate its economy through free trade alone without having to resort to formal rule or mercantilism. Britain was even supplying half the needs in manufactured goods of such nations as Germany, France, Belgium, and the United States.
By 1820 30% of Britain’s exports went to the Empire, rising slowly to 35% by 1910. Apart from coal and iron, most raw materials had to be imported, so that in the 1830s the main imports were, in order, raw cotton (from the American South), sugar (from the West Indies), wool, silk, tea (from China), timber (from Canada), wine, flax, hides and tallow. Railways The British invented the modern railway system and exported it to the world. They emerged from Britain’s elaborate system of canals and roadways, which both used horses to haul coal for the new steam engines installed in textile factories.
Britain furthermore had the engineers and entrrepreurs needed to create and finance a railway system. In 1815, George Stephenson invented built the modern steam locomotive, launching a technological race bigger, more powerful locomotives using higher and higher steam pressures. Stephenson’s key innovation came when he integrated all the components of a railways system in 1825 by opening the Stockton and Darlington line. It demonstrated it was commercially feasible to have a system of usable length. London poured money into railway building—a veritable bubble, but one with permanent value.
Thomas Brassey brought British railway engineering to the world, with construction crews that in the 1840s employed 75,000 men across Europe. Every nation copied the British model. Brassey expanded throughout the British Empire and Latin America. His companies invented and improved thousands of mechanical devices, and developed the science of civil engineering to build roadways, tunnels and bridges. The telegraph, although invented and developed separately, proved essential for the internal communications of the railways because it allowed slower trains to pull over as express trains raced through.
Telegraphs made it possible to use a single track for two-way traffic, and to locate where repairs were needed. Britain had a superior financial system based in London that funded both the railways in Britain and also in many other parts of the world, including the United States, up until 1914. The boom years were 1836 and 1845–47, when Parliament authorized 8,000 miles of railways with a projected future total of ? 200 million; that about equalled one year of Britain’s GDP. Once a charter was obtained, there was little government regulation, as laissez faire and private ownership had become accepted practices.
Second Industrial Revolution During the First Industrial Revolution, the industrialist replaced the merchant as the dominant figure in the capitalist system. In the latter decades of the 19th century, when the ultimate control and direction of large industry came into the hands of financiers, industrial capitalism gave way to financial capitalism and the corporation. The establishment of behemoth industrial empires, whose assets were controlled and managed by men divorced from production, was a dominant feature of this third phase.
New products and services were also introduced which greatly increased international trade. Improvements in steam engine design and the wide availability of cheap steel meant that slow, sailing ships could be replaced with steamships, such as Brunel’s SS Great Western. Electricity andchemical industries also moved to the forefront. In many of these sectors Britain had far less of an edge than other powers such as Germany and the United States, who both rose to equal and even surpass Britain in economic heft.
Amalgamation of industrial cartels into larger corporations, mergers and alliances of separate firms, and technological advancement (particularly the increased use of electric power and internal combustion engines fuelled by coal and petroleum) were mixed blessings for British business during the late Victorian era. The ensuing development of more intricate and efficient machines along with monopolistic mass productiontechniques greatly expanded output and lowered production costs. As a result, production often exceeded domestic demand.
Among the new conditions, more markedly evident in Britain, the forerunner of Europe’s industrial states, were the long-term effects of the severe Long Depressionof 1873-1896, which had followed fifteen years of great economic instability. Businesses in practically every industry suffered from lengthy periods of low — and falling — profit rates and price deflation after 1873. Long-term economic trends led Britain, and to a lesser extent, other industrialising nations such as the United States and Germany, to be more receptive to the desires of prospective overseas investment.
Through their investments in industry, banks were able to exert a great deal of control over the British economy and politics. Cut-throat competition in the mid-19th century caused the creation of super corporations and conglomerates. Many companies borrowed heavily to achieve the vast sums of money required to take over their rivals, resulting in a new capitalist stage of development. By the 1870s, financial houses in London had achieved an unprecedented level of control over industry.
This contributed to increasing concerns among policymakers over the protection of British investments overseas — particularly those in the securities of foreign governments and in foreign-government-backed development activities, such as railways. Although it had been official British policy to support such investments, with the large expansion of these investments in the 1860s, and the economic and political instability of many areas of investment (such as Egypt), calls upon the government for methodical protection became increasingly pronounced in the years leading up to the Crystal Palace Speech.
At the end of the Victorian era, the service sector (banking, insurance and shipping, for example) began to gain prominence at the expense of manufacturing. Foreign trade Foreign trade tripled in volume between 1870 and 1914; most of the activity occurred with other industrialised countries. Britain ranked as the world’s largest trading nation in 1860, but by 1913 it had lost ground to both the United States and Germany: British and German exports in that year each totaled $2. 3 billion, and those of the United States exceeded $2. 4 billion.
As foreign trade increased, so in proportion did the amount of it going outside the Continent. In 1840, ? 7. 7 million of its export and ? 9. 2 million of its import trade was done outside Europe; in 1880 the figures were ? 38. 4 million and ? 73 million. Europe’s economic contacts with the wider world were multiplying, much as Britain’s had been doing for years. In many cases, colonial control followed private investment, particularly in raw materials and agriculture Intercontinental trade between North and South constituted a higher proportion of global trade in this era than in the late 20th century period of globalisation.
Export of capital With London as the world’s financial capital, the export of capital was a major base of the British economy 1880 to 1913, the “golden era” of international finance. Investment was especially heavy in the independent nations of Latin America, which were eager for infrastructure improvements such as railways built by the British, ports, and telegraph and telephone systems. British merchants dominated trade in the region. Not all the investments paid off; the mines in the Sudan, for example, lost money. By 1913 Britain’s overseas assets totaled about four billion pounds.
Imperialism (Colonialism) After the loss of the American colonies in 1776, Britain built a “Second British Empire”, based in colonies in India, Asia, Australia, Canada. The crown jewel was India, where in the 1750s a private British company, with its own army, the East India Company (or “John Company”), took control of much of India. The 19th century saw Company rule extended across India after expelling the Dutch, French and Portuguese. By the 1830s the John Company was a government and had given up most of its business in India, bit it was still privately owned.
Following the Indian Rebellion of 1857 the government closed down the John Company and took control of the British Raj. Free trade (with no tariffs and few trade barriers) was introduced in the 1840s. Protected by the overwhelming power of the Royal Navy, the economic empire included very close economic ties with independent nations in Latin America. The informal economic empire has been called “The Imperialism of Free Trade. ” Numerous independent entrepreneurs expanded the Empire, such as Stamford Raffles of the East India Company who founded the port of Singapore in 1819.
Businessmen eager to sell Indian opium in the vast China market led to the Opium War (1839–1842) and the establishment of British colonies atHong Kong. One adventurer, James Brooke, set himself up as the Rajah of the Kingdom of Sarawak in North Borneo in 1842; his realm joined the Empire in 1888. Cecil Rhodes set up an economic empire of diamonds in South Africa that proved highly profitable. There were great riches in gold as well but this venture led to expensive wars with the Dutch settlers known as Boers.
India—known as the British Raj—was the centerpiece of the Empire, and because of an efficient taxation system it paid its own administrative expenses as well as the cost of the large British Indian Army. In terms of trade, however, India turned only a small profit for British business. There was pride and glory in the Empire, as the most talented young Britons vied for positions in the Indian Civil Service and similar oversees career opportunities. The opening of the Suez Canal in 1869 was a vital economic and military link.
To protect the canal Britain expanded again and again, taking control of Egypt, the Sudan, Uganda, Kenya, Cyprus, Palestine, Aden, and British Somaliland. None were especially profitable until the discover of oil in the Middle East after 1920. Some military action was involved, and from time to time there was a risk of conflict with other imperial powers seeking the same territory, as in the Fashoda Incident of 1898. All the incidents were resolved peacefully. Cain and Hopkins argue that the phases of expansion abroad were closely linked with the development of the domestic economy.
Therefore the shifting balance of social and political forces under imperialism the varying intensity of Britain’s economic and political rivalry with other powers need to be understood with reference to domestic policies. Gentlemen capitalists, representing Britain’s landed gentry and London’s service sectors and financial institutions, largely shaped and controlled Britain’s imperial enterprises in the 19th and early 20th centuries. Industrial leaders played a lesser role and found themselves dependent on the gentlemen capitalists. 1900-1945
By 1900 the United States and Germany, had developed large-scale industries; Britain’s comparative economic advantage had lessened. London did remain the financial and entrepreneurial capital of the world, until challenged by New York after 1918. 1900–1914 By the turn of the 20th century, Britain’s economic fortunes were in relative decline. Germany and the United States were growing faster and became the biggest competitors in terms of world markets. Even with the decline, in 1914 London was still the centre of international payments, and a large creditor nation, owed money by others. First World War
The First World War saw a decline of economic production, with a major reallocation to munitions. It forced Britain to use up its financial reserves and borrow large sums from the U. S. Shipments of American raw materials and food allowed Britain to feed itself and its army while maintaining her productivity. The financing was generally successful, as the City’s strong financial position minimized the damaging effects of inflation, as opposed to much worse conditions in Germany. Overall consumer consumption declined 18% from 1914 to 1919. Trade unions were encouraged as membership grew from 4. million in 1914 to 6. 5 million in 1918, peaking at 8. 3 million in 1920 before relapsing to 5. 4 million in 1923. In Scotland, the shipbuilding industry expanding by a third. Women were available and many entered munitions factories and took other home front jobs vacated by men. Postwar stagnation The human and material losses of the World War in Britain were enormous. They included 745,000 servicemen killed and 24,000 civilians, with 1. 7 million wounded. The total of lost shipping came to 7. 9 million tons (much of it replaced by new construction), and ? ,500 million in financial costs to the Empire. Germany owed billions in reparations, but Britain in turn owed the U. S. billions in loan repayments. With the end of war orders a serious depression hit the economy by 1921-22. Indeed the whole decade was one of stagnation The most skilled craftsmen were especially hard hit, because there were few alternative uses for their specialised skills. In depressed areas the main social indicators such as poor health, bad housing, and long-term mass unemployment, pointed to terminal social and economic stagnation at best, or even a downward spiral.
The heavy dependence on obsolescent heavy industry and mining was a central problem, and no one offered workable solutions. The despair reflected what Finlay (1994) describes as a widespread sense of hopelessness that prepared local business and political leaders to accept a new orthodoxy of centralised government economic planning when it arrived during the Second World War. In 1919 Britain reduced the working hours in major industries to a 48-hour week for industrial workers. Historians have debated whether this move depressed labour productivity and contributed to the slump.
Scott and Spadavecchia argue that productivity was in some ways enhanced, especially through higher hourly productivity, and that Britain did not suffer in its exports because most other nations also reduced working hours. Looking at coal, cotton, and iron and steel, they find that Britain did not suffer any significant relative productivity loss in these industries. By 1921, more than 2,000,000 Britons were unemployed as a result of the postwar economic downturn. By 1926, the economy was still struggling, the general strike of that year doing it no favours.
Industrial relations briefly improved, but then came the Wall Street stock market crash in October 1929, which sparked the worldwide Great Depression. See the Great Depression in the United Kingdom. Unemployment had stood at less than 1,800,000 at the end of 1930, but by the end of 1931 it had risen sharply to more than 2,600,000. By January 1933, more than 3,000,000 Britons were unemployed, accounting for more than 20% of the workforce. The rest of the 1930s saw a moderate economic recovery stimulated by private housing. Unemployment fell to 10% in 1938.
Chancellor of the Exchequer Winston Churchill returned Britain to the gold standard in 1925, which some economic historians blame for the mediocre performance of the economy. Other point to a variety of factors, including the inflationary effects of the World War and supply-side shocks caused by reduced working hours after the war. Baldwin resolved the General Strike of 1. 5 million workers 1926 without violence after nine days. Steel From 1800 to 1870 Britain produced more than half of the world’s pig iron, and was in the lead in devising ways to make steel. In 1880 Britain produced 1. million tons of steel, and in 1893 3 million tons; by 1914 output was 8 million tons. Germany caught up in 1893 and produced 14 million tons in 1914. After 1900 the U. S. dominated global steel production, while the British industry languished. Britain’s steel industry brought in academic experts, such as Professor Oliver Arnold to analyze and make recommendations for improvements in productivity. The industry made significant technical advances in terms of vanadium, phospho-magnetic steels and other specialized high-strength alloys, using the electric furnace and other innovations, the devising of new techniques over the smoke issue.
The industry trained a cadre of experts that made large firms scientifically self-sustaining. Coal Politics became a central issue for the coal miners, whose organization was facilitated by their location in remote one-industry villages. The Miners’ Federation of Great Britain formed in 1888, and counted 600,000 members in 1908. Much of the ‘old left’ of British politics can trace its origins to coal-mining areas. General Strike of 1926 In April 1926 the owners locked out the miners because they had rejected the owners’ demands for longer hours and reduced pay in the face of falling prices caused by demand as oil started to replace coal.
The general strike was led by the TUC for the benefit of coal miners, but it failed. It was a nine-day nationwide walkout of one million railwaymen, transport workers, printers, dockers, ironworkers and steelworkers supporting the 1. 5 million coal miners who had been locked out. The government had provided a nine-month subsidy in 1925 but that was not enough to turn around a sick industry. The TUC hope was the government would intervene to reorganize and rationalize the industry, and raise the subsidy.
The Conservative government had stockpiled supplies and essential services continued with middle class volunteers. All three major parties opposed the strike. The general strike itself was largely non-violent, but the miners’ lockout continued and there was violence in Scotland. It was the only general strike in British history, for TUC leaders such as Ernest Bevin considered it a mistake . Most historians treat it as a singular event with few long-term consequences, but Pugh says it accelerated the movement of working-class voters to the Labour Party, which led to future gains.
The Trade Disputes and Trade Unions Act 1927made general strikes illegal and ended the automatic payment of union members to the Labour Party. That act was largely repealed in 1946. Coal continued as a sick industry as the best seams were used up and it became more and more difficult to mine the rest. The Labour government in 1947 nationalized coal into the National Coal Board, giving miners access to control of the mines via their control of the Labour party and the government. By then, however, the best seams had played out and coal mining was headed downward.
Coal production was 50 million metric tons in 1850, 149 million in 1880, 269 million in 1910, 228 million in 1940, and 153 million in 1970. The peak year was 1913, with an output of 292 million tons. Mining employed 383,000 men in 1851, 604,000 in 1881, and 1,202,000 in 1911. 1929–1939: the Great Depression In 1929, the Wall St Crash affected Britain resulting in leaving the Gold Standard. Whereas Britain had championed the concept of the free market when it was ascendant in the world economy, it gradually withdrew to adopting Tariff Reform as a measure of protectionism.
By the early 1930s, the depression again signaled the economic problems the British economy faced. Unemployment soared during this period; from just over 10% in 1929 to more than 20% by early 1933. However, it had fallen to 13. 9% by the start of 1936. In political terms, the economic problems found expression in the rise of radical movements who promised solutions which conventional political parties were no longer able to provide. In Britain this was seen with the rise of the Communist Party of Great Britain (CPGB) and the Fascists under Oswald Mosley.
However, their political strength was limited and they never posed any real threat to the conventional political parties in the UK. Tourism grew rapidly in the interwar years because of the rapidly rising number of motorized middle-class and lower-middle-class vacationers. However, those tourist sites that catered to the very wealthy or to American tourists, or were located in depressed areas, all experienced a decline in profits, especially during the Great Depression.
Second World War
In the Second World War, 1939–45, Britain had a highly successful record of mobilizing the home front for the war effort, in terms of mobilizing the greatest proportion of potential workers, maximizing output, assigning the right skills to the right task, and maintaining the morale and spirit of the people. Much of this success was due to the systematic planned mobilization of women, as workers, soldiers, and housewives, enforced after December 1941 by conscription. The women supported the war effort, and made the rationing of consumer goods a success.
Industrial production was reoriented toward munitions, and output soared. In steel, for example, the Materials Committee of the government tried to balance the needs of civilian departments and the War Department, but strategic considerations received precedence over any other need. Highest priority went to aircraft production as the RAF was under continuous heavy German pressure. The government decided to concentrate on only five types of aircraft in order to optimize output. They received extraordinary priority.
Covering the supply of materials and equipment and even made it possible to divert from other types the necessary parts, equipment, materials and manufacturing resources. Labour was moved from other aircraft work to factories engaged on the specified types. Cost was not an object. The delivery of new fighters rose from 256 in April to 467 in September—more than enough to cover the losses—and Fighter Command emerged triumphantly from the Battle of Britain in October with more aircraft than it had possessed at the beginning. Starting in 1941 the U. S. rovided munitions through Lend lease that totaled $15. 5 billion After war broke out between Britain and Germany in September, Britain imposed exchange controls. The British Government also decided to sell its gold reserves and dollar reserves to pay for munitions, raw materials and industrial equipment from American factories. By the third quarter of 1940 the volume of British exports was down 37% compared to 1935. Although the British Government had committed itself to nearly $10,000 million of orders from America, Britain’s gold and dollar reserves were near exhaustion.
The American Government decided to prop up Britain as it neared bankruptcy, so on 10 January 1941 they produced a Bill entitled an “Act to promote the defence of the United States” (its number, H. R. 1776, was the year of American independence) which was put before the United States Congress and which was enacted on 11 March 1941. This Act became known as Lend-Lease, whereby America would give Britain cash totalling $31. 4 billion which never had to be repaid. One month later British gold and dollar reserves had dwindled to their lowest ever point, $12 million.
Under this new agreement with the American Government, Britain agreed not to export any articles which contained Lend-Lease material or to export any goods—even if British-made—which were similar to Lend-Lease goods. The American Government sent officials to Britain to police these requirements. By 1944 British exports had gone down to 31% from 1938. Lend-Lease created problems in reviving Britain’s exports after the war. 1945-1990 In the 1945 general election, just after the end of the war in Europe, the Labour Party was elected, introducing sweeping reforms of the British economy.
Taxes increased, industries were nationalised, and a welfare state with national health, pensions, and social security was created. The next years saw some of the most rapid growth Britain had ever experienced, recovering from the devastation of the Second World War and then expanding rapidly past the previous size of the economy. By 1959, tax cuts had helped boost living standards and allow for a strong economy and low unemployment. By the end of the 1960s, this growth began to slow and unemployment was rising again.
During the 1970s Britain suffered a long running period of relative economic malaise, dogged by severe inflation, strikes and union power as well as inflation, with neither the Conservative government of 1970-1974 (led by Edward Heath) nor the Labour government which succeeded it (led by Harold Wilson and from 1976 James Callaghan) being able to halt the country’s economic decline. Unemployment exceeded 1,000,000 by 1972 and had risen even higher by the time the end of the decade was in sight. This led to the election of Margaret Thatcher, who cut back on the government’s role in the economy and weakened the power of the trade unions.
The latter decades of the 20th century have seen an increase in service-providers and a drop in industry, combined with privatisation of some sections of the economy. This change has led some to describe this as a ‘Third Industrial Revolution’, though this term is not widely used. 1945–1951: Age of Austerity After World War II, the British economy had again lost huge amounts of absolute wealth. Its economy was driven entirely for the needs of war and took some time to be reorganised for peaceful production.
Anticipating the end of the conflict, the United States had negotiated throughout the war to liberalise post-war trade and the international flow of capital in order to break into markets which had previously been closed to it, including the British Empire’s Pound Sterling bloc. This was to be realised through the Atlantic Charter of 1941, through the establishment of the Bretton Woods system in 1944, and through the new economic power that the US was able to exert due to the weakened British economy. Immediately after the war in the Pacific had ended, the U. S. alted free Lend-Lease, but did give the UK a long-term low-interest loan of USD 4. 33bn. The winter of 1946–1947 proved to be very harsh curtailing production and leading to shortages of coal which again affected the economy so that by August 1947, when convertibility was due to begin, the economy was not as strong as it needed to be. When the Labour Government enacted convertibility, there was a run on Sterling, meaning that Sterling was being traded in for dollars, seen as the new, more powerful and stable currency in the world. This damaged the British economy and within weeks it was stopped.
By 1949, the British pound was over valued and had to be devalued. The U. S. began Marshall Plangrants (mostly grants with a few loans) that pumped $3. 3 billions into the economy and forced businessmen to modernize their approach to management. Nationalisation The Labour Governments of 1945–1951 enacted a political programme rooted in collectivism including the nationalisation of industries and state direction of the economy. Both wars had demonstrated the possible benefits of greater state involvement. This underlined the future direction of the post-war economy, and was supported in the main by the Conservatives.
However, the initial hopes for nationalisation were not fulfilled and more nuanced understandings of economic management emerged, such as state direction, rather than state ownership. Throughout though, the basis remained the same: applying the economic theories of Keynes and continued state involvement. The concept of nationalizing the coal mines had been accepted in principle by owners and miners alike before the elections of 1945. The owners were paid ? 165,000,000. The government set up the National Coal Board to manage the coal mines; and it loaned it ? 150,000,000 to modernize the system.
The general condition of the coal industry has been unsatisfactory for many years, with poor productivity. In 1945 there were 28% more workers in the coal mines than in 1890, but the annual output was only 8% greater. Young people avoided the pits; between 1931 and 1945 the percentage of miners more than 40 years old rose from 35% to 43%, and 24,000 over 65 years old. The number of surface workers decreased between 1938 and 1945 by only 3,200, but in that same time the number of underground workers declined by 69,600, substantially altering the balance of labour in the mines.
That accidents, breakdowns, and repairs in the mines were nearly twice as costly in terms of production in 1945 as they had been in 1939 was probably a by-product of the war. Output in 1946 averaged 3,300,000 tons weekly. By summer 1946 it was clear that the country was facing a coal shortage for the upcoming winter with stock piles 5 million tons too low. Nationalization exposed both a lack of preparation for public ownership and a failure to stabilize the industry in advance of the change. Also lacking were any significant incentives to maintain or increase coal production to meet demand.
During 1955, unemployment reached a postwar low of just over 215,000 – barely 1% of the workforce. The loss of the Empire and the material losses incurred through two world wars had affected the basis of Britain’s economy. First, its traditional markets were changing as Commonwealth countries made bilateral trade arrangements with local or regional powers. Second, the initial gains Britain made in the world economy were in relative decline as those countries whose infrastructure was seriously damaged by war repaired these and reclaimed a stake in world markets.
Third, the British economy changed structure shifting towards a service sector economy from its manufacturing and industrial origins leaving some regions economically depressed. Finally, part of consensus politics meant support of the Welfare State and of a world role for Britain; both of these needed funding through taxes and needed a buoyant economy in order to provide the taxes. 1960–1979: the Sixties and Seventies As these factors coalesced during the 1960s, the slogan used by Prime Minister Harold Macmillan “(most of) our people have never had it so ood” seemed increasingly hollow. The Conservative Government presided over a ‘stop-go’ economy as it tried to prevent inflation spiralling out of control without snuffing out economic growth. Growth continued to struggle, at about only half the rate of that of Germany or France at the same time. However, industry had remained strong in nearly 20 years following the end of the war, and extensive housebuilding and construction of new commercial developments and public buildings also helped unemployment stay low throughout this time.
The Labour Party under Harold Wilson from 1964–1970 was unable to provide a solution either, and eventually was forced to devalue the Pound again in 1967. Economist Nicholas Crafts attributes Britain’s relatively low growth in this period to a combination of a lack of competition in some sectors of the economy, especially in the nationalised industries; poor industrial relations and insufficient vocational training. He writes that this was a period of government failure caused by poor understanding of economic theory, short-termism and a failure to confront interest groups.
Both political parties had come to the conclusion that Britain needed to enter the European Economic Community (EEC) in order to revive its economy. This decision came after establishing aEuropean Free Trade Association (EFTA) with other, non EEC countries since this provided little economic stimulus to Britain’s economy. Levels of trade with the Commonwealth halved in the period 1945–1965 to around 25% while trade with the EEC had doubled during the same period.
Charles de Gaulle vetoed a British attempt at membership in 1963 and again in 1967. In 1973 the Conservative Prime Minister, Edward Heath, led Britain into the EEC. As late as this stage, Britain still effectively had full employment, at a rate of 3% unemployed. However, with the decline of Britain’s economy during the 1960s, the trade unions began to strike leading to a complete breakdown with both the Labour Government of Harold Wilson and later with the Conservative Government of Edward Heath (1970–1974).
In the early 1970s, the British economy suffered more as strike action by trade unions, plus the effects of the 1973 oil crisis, led to a three day week in 1973-74. However, despite a brief period of calm negotiated by the recently re-elected Labour Government of 1974 known as the Social Contract, a break down with the unions occurred again in 1978, leading to the Winter of Discontent, and eventually leading to the end of the Labour Government, then being led by James Callaghan, who had succeeded Wilson in 1976.
The extreme industrial strife along with rising inflation and unemployment led Britain to be nicknamed as the “sick man of Europe”, though the term originally referred to Turkey in the 19th century. Unemployment had also risen during this difficult period for the British economy; some 1,500,000 people were now unemployed by 1978, nearly treble the figure at the start of the decade, at a national rate of well over 5%. It had exceeded 1,000,000 since 1975. Also in the 1970s, oil was found in the North Sea, off the coast of Scotland. 979–1990: the Thatcher (damn dangerous blondie) era The election of Margaret Thatcher in 1979 marked the end of the post-war consensus and a new approach to economic policy, including privatisation and deregulation, reform of industrial relations, and tax changes. Competition policy was emphasised instead of industrial policy; consequent deindustrialisation and structural unemployment was more or less accepted. Thatcher’s battles with the unions culminated in the Miners’ Strike of 1984.
The Government applied monetarist policies to reduce inflation, and reduced public spending. Deflationary measures were implemented against the backdrop of the early 1980s recession. As a result, unemployment began to rise sharply from early 1980, to 2,000,000 people by the end of the year and reaching 2,500,000 people during 1981. By January 1982, 3,000,000 people were unemployed in Britain for the first time in 50 years, though this time the figure accounted for a lesser percentage of the early 1930s figures, now standing at around 12. 5% rather than in excess of 20%.
In areas hit particularly hard by the loss of industry, unemployment was much higher; coming to close to 20% in Northern Ireland and exceeding 15% in many parts of Wales, Scotland and northern England. The peak of unemployment actually came some two years after the recession ended and growth had been re-established, when in April 1984 unemployment rose to nearly 3,300,000. Major state-controlled firms were privatised, including British Aerospace (1981), British Telecom (1984), British Leyland (1984), Rolls-Royce (1987), and British Steel (1988).
The electricity, gas and English water industries were split up and sold off. Exchange controls, in operation since the war, were abolished in 1979. British net assets abroad rose approximately ninefold from ? 12 billion at the end of 1979 to nearly ? 110 billion at the end of 1986, a record post-war level and second only to Japan. Privatisation of nationalised industries increased share ownership in Britain: the proportion of the adult population owning shares went up from 7% in 1979 to 25% in 1989.
The Single European Act (SEA), signed by Margaret Thatcher, allowed for the free movement of goods within the European Union area. The ostensible benefit of this was to give the spur of competition to the British economy, and increase its ultimate efficiency. The early 1980s recession saw unemployment rise above three million, but the subsequent recovery, which saw growth of over 4 per cent in the late 1980s, led to contemporary claims of a British ‘economic miracle’. It is not clear whether Thatcherism was the only reason for the boom in Britain in the 1980s.
However, many of the economic policies put in place by the Thatcher governments have been kept since, and even the Labour Party which had once been so opposed to the policies had by the late 1990s, on its return to government after nearly 20 years in opposition, dropped all opposition to them. By the end of 1986, Britain was enjoying an economic boom, which saw unemployment go into freefall and drop to 1,600,000 by December 1989. United States The American System, originally called “The American Way”, was an economic plan that played a prominent role in American policy during the first half of the 19th century.
Rooted in the “American School” ideas of Alexander Hamilton, the plan “consisted of three mutually reinforcing parts: a tariff to protect and promote American industry; a national bank to foster commerce; and federal subsidies for roads, canals, and other ‘internal improvements’ to develop profitable markets for agriculture. ” Congressman Henry Clay was the plan’s foremost proponent and the first to refer to it as the “American System” A plan to strengthen and unify the nation, the American System was advanced by the Democratic-Republican Party and a number of leading politicians including Henry Clay, John C. Calhoun and John Quincy Adams. The System was a new form of federalism that included:
- Support for a high tariff to protect American industries and generate revenue for the federal government
- Maintenance of high public land prices to generate federal revenue
- Preservation of the Bank of the United States to stabilize the currency and rein in risky state and local banks
- Development of a system of internal improvements (such as roads and canals) which would knit the nation together and be financed by the tariff and land sales revenues.
Clay argued that the West, which opposed the tariff, should support it since urban factory workers would be consumers of western foods. In Clay’s view, the South (which also opposed high tariffs) should support them because of the ready market for cotton in northern mills. This last argument was the weak link. The South was never really on board with the American System and had access to plenty of markets for its cotton exports. Portions of the American System were enacted by the United States Congress. The Second Bank of the United States was rechartered in 1816 for 20 years.
High tariffs were maintained from the days of Alexander Hamilton until 1832. However, the national system of internal improvements was never adequately funded; the failure to do so was due in part to sectional jealousies and constitutional squabbles about such expenditures. The American System did not enjoy universal success, however. In 1830, President Jackson vetoed a bill which would allow the federal government to purchase stock in the Maysville, Washington, Paris, and Lexington Turnpike Road Company, which had been organized to construct a road linking Lexington and the Ohio River, the entirety of which would be in the state of Kentucky.
Jackson’s Maysville Road veto was due to both his personal conflict with Clay and his ideological objections. Actually i talked too much about UK we do not need to talk US (its a same shit) Soviet Union: The economy of the Union of Soviet Socialist Republics (USSR) was based on a system of state ownership of the means of production,collective farming, industrial manufacturing and centralized administrative planning. The economy was characterised by state control of investment, public ownership of industrial assets, and during the last 20 years of its existence, pervasive corruption and socioeconomic stagnation.
After Mikhail Gorbachev came to power, continuing economic liberalisation moved the economy towards a market-oriented socialist economy. All of these factors contributed to the final dissolution of the Soviet Union in 1991. The stagnation that would consume the last years of the Soviet Union was caused by poor governance under Leonid Brezhnev and inefficiencies within the planned economy. When the stagnation began is a matter of debate, but is normally placed either in the 1960s or early 1970s. Beginning in 1928, the entire course of the economy was guided by a series of Five-Year Plans.
By the 1950s, the Soviet Union had, during the preceding few decades, evolved from a mainly agrarian society into a major industrial power. Its transformative capacity—what the United States National Security Council described as a “proven ability to carry backward countries speedily through the crisis of modernization and industrialization”—meant communism consistently appealed to the intellectuals of developing countries in Asia. Impressive growth rates during the first three Five-Year Plans (1928–40) are particularly notable given that this period is nearly congruent with the Great Depression.
Nevertheless, the impoverished base upon which the Five-Year Plans sought to build meant that, at the commencement of Operation Barbarossa, the country was still poor. While legitimate strictly in terms of growth and industrialisation, the death toll attributable to Stalinist economic development has been estimated at 10 million, much of which comprises famine victims. The complex demands of the modern economy and inflexible administration overwhelmed and constrained the central planners.
Corruption and data fiddling became common practice among the bureaucracy by reporting fulfilled targets and quotas, thus entrenching the crisis. Nonetheless, from the Stalin-era to the early Brezhnev-era, the Soviet economy grew as fast as the Japanese economy and significantly faster than that of the United States. The USSR’s relatively small service sector accounted for just under 60% of the country’s GDP in 1990, while the industrial and agricultural sectors contributed 21. 9% and 20% respectively in 1991. Agriculture was the predominant occupation in the USSR before the massive industrialization under Joseph Stalin.
The service sector was of low importance in the USSR, with the majority of the labor force employed in the industrial sector. The labor force totaled 152. 3 million people. Major industrial products include petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, lumber, mining, and defense industry. Based on a system of state ownership, the Soviet economy was managed through Gosplan (the State Planning Commission), Gosbank (the State Bank) and the Gossnab (State Commission for Materials and Equipment Supply).
Beginning in 1928, the economy was directed by a series of five-year plans, with a brief attempt at seven-year planning. For every enterprise, planning ministries (also known as the “fund holders” or fondoderzhateli) defined the mix of economic inputs (e. g. , labor and raw materials), a schedule for completion, all wholesale prices and almost all retail prices. The planning process was based around material balances – balancing economic inputs with planned output targets for the planning period.
Although nominally a “centrally-planned” economy, in reality formulation of the plan took place on a more local level of the production process Industry was long concentrated after 1928 on the production of capital goods through metallurgy, machine manufacture, and chemical industry. In Soviet terminology, the capital goods were known as group A goods, or means of production. This emphasis was based on the perceived necessity for a very fast industrialization and modernization of the Soviet Union. After the death of Stalin in 1953, consumer goods(group B goods) received more emphasis.
Soviet planners had very little reliable feedback that they could use to determine the success of their plans. This meant that economic planning was often done based on faulty or outdated information, particularly in sectors with large numbers of consumers. As a result, some goods tended to be underproduced, leading to shortages while other goods were overproduced and accumulated in storage. Low-level managers often did not report such problems to their superiors, relying instead on each other for support.
Some factories developed a system of barter and either exchanged or shared raw materials and parts without the knowledge of the authorities and outside the parameters of the economic plan Heavy industry was always the focus of the Soviet economy, even in its later years. The fact that it received special attention from the planners, combined with the fact that industrial production was relatively easy to plan even without minute feedback, led to significant growth in that sector. The Soviet Union became one of the leading industrial nations of the world. Industrial roduction was disproportionately high in the Soviet Union compared to Western economies. However, the production of consumer goods was disproportionately low. Economic planners made little effort to determine the wishes of household consumers, resulting in severe shortages of many consumer goods. Whenever these consumer goods would become available on the market, consumers routinely had to stand in long lines (queues) to buy them. A black market developed for goods that were particularly sought after but constantly underproduced (such as cigarettes)
Drafting the five-year plans Under Stalin’s tutelage, a complex system of planning arrangements had developed since the introduction of the first five-year plan in 1928. Until the late-1980s and early-1990s, when economic reforms backed by Soviet leader Mikhail Gorbachev introduced significant changes in the traditional system (see Perestroika), the allocation of resources was directed by a planning apparatus rather than through the interplay of market forces. Time frame From the Stalin era through the late 1980s, the five-year plan integrated short-range planning into a longer time frame.
It delineated the chief thrust of the country’s economic development and specified the way the economy could meet the desired goals of the Communist Party. Although the five-year plan was enacted into law, it contained a series of guidelines rather than a set of direct orders. Periods covered by the five-year plans coincided with those covered by the gatherings of the CPSU Party Congress. At each CPSU Congress, the party leadership presented the targets for the next five-year plan. Thus, each plan had the approval of the most authoritative body of the country’s leading political institution.
Guidelines for the plan The Central Committee of the CPSU and, more specifically, its Politburo, set basic guidelines for planning. The Politburo determined the general direction of the economy via control figures (preliminary plan targets), major investment projects (capacity creation), and general economic policies. These guidelines were submitted as a report of the Central Committee to the Congress of the CPSU to be approved there. After the approval at the congress, the list of priorities for the five-year plan was processed by the Council of Ministers, which constituted the government of the USSR.
The Council of Ministers was composed of industrial ministers, chairmen of various state committees, and chairmen of agencies with ministerial status. This committee stood at the apex of the vast economic administration, including the state planning apparatus, the industrial ministries, the trusts (the intermediate level between the ministries and the enterprises), and finally, the state enterprises. The Council of Ministers elaborated on Politburo plan targets and sent them to Gosplan, which gathered data on plan fulfillment.
Combining the broad goals laid out by the Council of Ministers with data supplied by lower administrative levels regarding the current state of the economy, Gosplan worked out, through trial and error, a set of preliminary plan targets. Among more than twenty state committees, Gosplan headed the government’s planning apparatus and was by far the most important agency in the economic administration. The task of planners was to balance resources and requirements to ensure that the necessary inputs were provided for the planned output.
The planning apparatus alone was a vast organizational arrangement consisting of councils, commissions, governmental officials, specialists, etc. charged with executing and monitoring economic policy. The state planning agency was subdivided into its own industrial departments, such as coal, iron, and machine building. It also had summary departments such as finance, dealing with issues that crossed functional boundaries. With the exception of a brief experiment with regional planning during the Khrushchev era in the 1950s, Soviet planning was done on a sectoral basis rather than on a regional basis.
The departments of the state planning agency aided the agency’s development of a full set of plan targets along with input requirements, a process involving bargaining between the ministries and their superiors. Planning ministries Economic ministries performed key roles in the Soviet organizational structure. When the planning goals had been established by Gosplan, economic ministries drafted plans within their jurisdictions and disseminated planning data to the subordinate enterprises. The planning data were sent downward through the planning hierarchy for progressively more detailed elaboration.
The ministry received its control targets, which were then disaggregated by branches within the ministry, then by lower units, eventually until each enterprise received its own control figures (production targets).
Enterprises were called upon to develop in the final period of state planning in the late-1980s and early-1990s (even though such participation was mostly limited to a rubber-stamping of prepared statements during huge pre-staged meetings). The enterprises’ draft plans were then sent back up through the planning ministries for review.
This process entailed intensive bargaining, with all parties seeking the target levels and input figures that best suited their interests. Redrafting the plan After this bargaining process, Gosplan received the revised estimates and re-aggregated them as it saw fit. Then, the redrafted plan was sent to the Council of Ministers and the Party’s Politburo and Central Committee Secretariat for approval. The Council of Ministers submitted the Plan to the Supreme Soviet of the Soviet Union and the Central Committee submitted the plan to the Party Congress, both for rubber stamp approval.
By this time, the process had been completed and the plan became law. Approval of the plan The review, revision, and approval of the five-year plan were followed by another downward flow of information, this time with the amended and final plans containing the specific targets for each sector of the economy. Implementation began at this point, and was largely the responsibility of enterprise managers. State budget The national state budget was prepared by the Ministry of Finance of the USSR by negotiating with its all-Union local organizations. If the state budget was accepted by the Soviet Union, to then get adopted.
Agriculture was organized into a system of collective farms (kolkhozes) and state farms (sovkhozes). Organized on a large scale and highly mechanized, the Soviet Union was one of the world’s leading producers of cereals, although bad harvests (as in 1972 and 1975) necessitated imports and slowed the economy. The 1976-1980 five-year plan shifted resources to agriculture, and 1978 saw a record harvest followed by another drop in overall production in 1979 and 1980 back to levels attained in 1975. Cotton, sugar beets, potatoes, and flax were also major crops.
However, despite immense land resources, extensive machinery and chemical industries, and a large rural work force, Soviet agriculture was relatively unproductive hampered in many areas by the climate (only 10 percent of the Soviet Union’s land was arable), and poor worker productivity since the collectivization in the 1930s. Lack of transport infrastructure also caused much waste. A view of poor performance of Soviet collective farms is provided by two historians, M. Heller and A. Nekich (“Utopia in Power, History of the Soviet Union from 1917 to Present,” Simon & Schuster, Inc. , 1986).
The authors report that in 1979, 28% of the Soviet agricultural production was from small plots of private citizens, which represented less than 1% of the cultivated land. So according to them, collective farms operated very inefficiently. Foreign trade and currency Largely self-sufficient, the Soviet Union traded little in comparison to its economic strength. However, trade with noncommunist countries increased in the 1970s as the government sought to compensate gaps in domestic production with imports. In general, fuels, metals, and timber were exported. Machinery, consumer goods, and sometimes grain were imported.
In the 1980s trade with the Council for Mutual Economic Assistance(COMECON) member states accounted for about half the country’s volume of trade. Although often associated with alcohol production, such as that of vodka, none of these were leading Soviet exports. The Soviet currency (ruble) was non-convertible after 1932 (when trade in gold-convertible “chervonets”, introduced by Lenin in NEP years, was suspended) until the late eighties. It was impossible (both for citizens and state-owned businesses) to freely buy or sell foreign currency even though the “exchange rate” was set and published regularly.
Buying or selling foreign currency on a black market was a serious crime until the late eighties. Individuals who were paid from abroad (for example writers whose books were published abroad) normally had to spend their currency in a foreign-currency-only chain of state-owned “Beryozka” (“Birch-tree”) stores. Once a free conversion of currency was allowed, the exchange rate plummeted from its official values by almost a factor of 10. Overall, the banking system was highly centralized and fully controlled by a single state-owned Gosbank, responsive to the fulfillment of the government’s economic plans.
Soviet banks furnished short-term credit to state-owned enterprises. Forms of property There were two basic forms of property in the Soviet Union: individual property and collective property. These differed greatly in their content and legal status. According to communist theory, capital (means of production) should not be individually owned, with certain negligible exceptions. In particular, after the end of a short period of the New Economic Policy and with collectivizationcompleted, all industrial property and virtually all land were collective.
Land in rural areas was allotted for housing and some sustenance farming, and persons had certain rights to it, but it was not their property in full. In particular, in kolkhozes and sovkhozes there was a practice to rotate individual farming lots with collective lots. This resulted in situations where people would ameliorate, till and cultivate their lots carefully, adapting them to small-scale farming, and in 5–7 years those lots would be swapped for kolkhoz ones, typically with exhausted soil due to intensive, large-scale agriculture.
There was an extremely small number of remaining individual farmsteads , located in isolated rural areas in the Baltic states, Ukraine, Siberia and cossack lands. Individual property To distinguish “capitalist” and “socialist” types of property ownership further, two different forms of individual property were recognized: private property , chastnaya sobstvennost and personal propert, lichnaya sobstvennost. The former encompassed capital (means of production), while the latter described everything else in a person’s possession. This istinction has been a source of confusion when interpreting phrases such as “socialism (communism) abolished private property”; one might conclude that all individual property was abolished, when this was in fact not the case Collective property There were several forms of collective ownership, the most significant being state property, kolkhoz property, and cooperative property. The most common forms of cooperative property werehousing cooperatives (жилищные кооперативы) in urban areas, consumer cooperatives and rural consumer societies
Both the Russian Soviet Federative Socialist Republic and later, the Soviet Union, were countries in the process of industrialization. For both, this development occurred slowly and from a low initial starting point. Because of World War I, the Russian Revolution and the ensuing Russian Civil War industrial production had only managed to barely recover its 1913 level by 1926. By this time about 18% of the population lived in non-rural areas, although only about 7. 5% were employed in the non-agricultural sector. The remainder were stuck in the low productivity agriculture.
According to David A. Dyker, the Soviet Union of the 1930s can be regarded as a typical developing country, characterized by low capital investment and most of its population resident in the countryside. Part of the reason for low investment rates lay in the inability to acquire capital from abroad. This in turn, was the result of the repudiation of the debts of the Russian Empire by theBolsheviks, as well as the world wide financial troubles. Consequently, any kind of economic growth had to be financed by domestic savings.
The economic problems in agriculture were further acerbated by natural conditions, such as long cold winters across the country, droughts in the south and acidic soils in the north. However, according to Dyker, the Soviet economy did have “extremely good” potential in the area of raw materials and mineral extraction, for example in the oil fields in Transcaucasia, and this, along with a small but growing manufacturing base, helped the USSR avoid any kind of balance of payments problems. New Economic Policy (1921–9)
The two major economic policy makers of the USSR, Lenin (left) created the NEP while Stalin (right) created the planned economy By early 1921 it became apparent to the Bolsheviks that forced requisitioning of grain had resulted in low agricultural production and widespread opposition. As a result, the decision was made by Lenin and the Politburo to try an alternative approach. The so-called New Economic Policy (NEP) was approved at the10th Congress of the Russian Communist Party (Bolsheviks) Everything except “the commanding heights”, as Lenin put it, of the economy would be privatized. The commanding heights” included foreign trade, heavy industry, communication and transport among others. In practice this limited the private sector to artisan and agricultural production/trade. The NEP encountered strong resistance within the Bolshevik party. Lenin had to persuade communist skeptics that “state capitalism” was a necessary step in achievingcommunism, while he himself harbored suspicions that the policy could be abused by private businessmen (“NEPmen”). As novelist Andrei Platonov, among others, noted, the improvements were immediate.
Rationing cards and queues, which had become hallmarks of war communism, had disappeared. However, due to prolonged war, low harvests, and several natural disasters the Soviet economy was still in trouble, particularly its agricultural sector. In 1921 widespread famine broke out in the Volga-Ural region. The Soviet government changed its previous course and allowed international relief to come in from abroad, and established a special committee chaired by prominent communists and non-communists alike.
Despite this, an estimated five million people died in the famine. Stalinism Starting in 1928, the five-year plans began building a heavy industrial base at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. The country now became industrialized at a hitherto unprecedented pace, surpassing Germany’s pace of industrialization in the 19th century and Japan’s earlier in the 20th century.
After the reconstruction of the economy (in the wake of the destruction caused by the Russian Civil War) was completed, and after the initial plans of further industrialisation were fulfilled, the explosive growth slowed down, but still generally surpassed most of the other countries in terms of total material production (GNP) until the period of Brezhnev stagnation in the 1970s and 1980s. Led by the creation of NAMI, and by the GAZ copy of the Ford Model A in 1929, industrialization came with the extension of medical services, which improved labor productivity.
Campaigns were carried out against typhus, cholera, and malaria; the number of physicians increased as rapidly as facilities and training would permit; and death and infant mortality rates steadily decreased. 1930–1970 The State Quality Mark of the USSR, introduced in 1967, was used to certify that goods met quality standards, and to improve the efficiency of production As weighed growth rates, economic planning performed very well during the early and mid-1930s, World War II-era mobilization, and for the first two decades of the postwar era.
The Soviet Union became the world’s leading producer of oil, coal, iron ore, and cement; manganese, gold, natural gas and other minerals were also of major importance. However, information about the Soviet famine of 1932–1933 was suppressed by the Soviet authorities until perestroika. In 1933 workers’ real earnings sank to about one-tenth of the 1926 level Common and political prisoners in labor camps were forced to do unpaid labor, and communists and Komsomol members were frequently “mobilized” for various construction projects.
The German invasion of WWII inflicted punishing blows to the economy of the USSR, with Soviet GDP falling 34% between 1940 and 1942. Industrial output did not recover to its 1940 level for almost a decade. In 1961, a new redenominated Soviet ruble was issued. It maintained exchange parity with the Pound Sterling until the dissolution of the USSR in 1991. After a new leadership, headed by Leonid Brezhnev, had come to power, attempts were made to revitalize the economy through economic reform.
Starting in 1965, enterprises and organizations were made to rely on economic methods of profitable production, rather than follow orders from the state administration. By 1970, the Soviet economy had reached its zenith and was estimated at about 60 percent of the size of the USA in terms of the estimated commodities (like steel and coal). In 1989, the GDP of the Soviet Union was $2,500 Billion while the GDP of the United States was $4,862 Billion with per capita income figures as $8,700 and $19,800 respectively. 1970–1990
The Era of Stagnation in the mid-1970s was aggravated by the war in Afghanistan in 1979 and led to a period of economic standstill between 1979 and 1985. Soviet military buildup at the expense of domestic development kept the USSR’s GDP at the same level during the first half of the 1980s. The Soviet planned economy was not structured to respond adequately to the demands of the complex modern economy it had helped to forge. The massive quantities of goods produced often did not meet the needs or tastes of consumers. The volume of decisions facing planners in Moscow became overwhelming.
The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. During 1975–85, corruption and data fiddling became common practice among bureaucracy to report satisfied targets and quotas thus entrenching the crisis. Awareness of the growing crisis arose initially within the KGB which with its extensive network of informants in every region and institution had its finger on the pulse of the nation.
Yuri Andropov, director of the KGB, created a secret department during the 1970s within the KGB devoted to economic analysis, and when he succeeded Brezhnev in 1982 sounded the alarm forcefully to the Soviet leadership. Andropov’s remedy of increased discipline, however, proved ineffective. It was only when Andropov’s protege Gorbachev assumed power that a determined, but ultimately unsuccessful, assault on the economic crisis was undertaken.
However, with the ascent of Mikhail Gorbachev as General Secretary of the Communist Party and the economic reform duringPerestroika, Soviet Nominal GDP rose sharply from $900 billion to $1. 5 trillion in a period of five years. According to CIA estimates by 1989 the size of the Soviet economy was roughly half that in the United States of America. According to the European Comparison Program, administered by the U. N, the size of the Soviet Economy was 36% of that in the United States in 1990 Conclusion Is Economic History Necessary?
Scientific economic history is sometimes said to be merely applied economics using historical data, but with most of the history removed. As graduate curricula in economics become more sophisticated in the mathematical theories they use, and in econometric and statistical techniques, economic history may be left to be picked up along with applied economics in general, and economic history in the traditional sense will be squeezed out of the curriculum altogether to make room for more and more high-powered mathematics.
Economic historians for the most part resist this development, claiming that the past has useful economics, and that broad economic history, as opposed to narrow cliometrics, develops more facts, better facts, better economic theory, better economic policy and better economists (McCloskey, 1976). A panel of theorists and historians went beyond this in insisting that economic history honed the intuition, needed, along with analytical skill, in making an economist, helping develop alertness in allowing for the contingent as well as the systematic.
Economic history, it was concluded, while certainly not sufficient to train an economist, was surely necessary to the education of one But the way of understand the what will be happen in the future we must look the previous time. But in my point of wiev it’s not looking good. Because world getting brutal day by day because of economic capitalistic approaches. World getting collapse. Worst thing; i m changing (damn i had to die in my 27th birthday)
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