British Siege Economy 1970's

What does that mean. Think about it. Economy is a science about a number of activities humans does to satisfy material and other needs. People grow stuff to eat. They build houses to to protect them from the nature. All such activities are the economy. And the purpose of all those actieties are consuption, wheather it is to avoid strvation, freezing to death or trade stuff to get what you want/need.

Most of our modern economy satisfy needs that isn't directly linked to life or death but it still is about satisfy needs of humans. Ie consuption.

But this certainly does not call for the instant gratification of these wants . The Economy might be about Counsumption at the end of the day , but not neccesarrily Immediate Consumption . Certainly , mindless and wasteful ( ofcourse , the definition of wasteful is arguable)consumption at the expense of investment for future Consumption is counterproductive.
 
But this certainly does not call for the instant gratification of these wants . The Economy might be about Counsumption at the end of the day , but not neccesarrily Immediate Consumption . Certainly , mindless and wasteful ( ofcourse , the definition of wasteful is arguable)consumption at the expense of investment for future Consumption is counterproductive.

Which I never argued about anyway.
 
Just been thinking about this, and perhaps ElectricMonk or someone similar who seems to know more about the economic side of this could help me (I know a fair bit about the political side but only have a rudimentary knowledge of the economic side).

Now I know that the IMF bail-out included a loan to the UK etc in return for policy reforms, ie. more responsible monetary policy, lower inflation, etc. But what exactly was the reason for the IMF bail-out being required. I have found it hard to find an easy to understand explanation of this.

Also was their any other at least half-way plausible option for the UK to take?

You mean if the IMF bailed them out? It would because the UK was no longer to able to pay their bills—i.e. defaulting on existing debt, and being unable to secure additional funding to cover the deficit they're presuambly running in such a situation. At that point they can either find a financial backer (and the USA through the IMF is the likely one) or…:

It's possible that a defaulting UK also institutes large tax increases and major program spending cuts to achieve a balanced budget, but that would introduce yet another destabilizing factor in the UK's economy.

So while balancing the budget would be possible the large shock from tax increases and spending cuts would probably make another such tax raise/spending cut required for the following year and, politically, it would mean whatever government that did such a thing was finished.

Even if they somehow passed their program through as a National Emergency type deal with the other parties consent (and the House of Lords went along) I suspect the very next confidence motion would see them go down. This way the opposition not only dodges blame for the required action, but also gets to be the government and take credit for the (if any) success of it.
 
I've been doing a bit of reading about this subject lately and I did come across some information about when such a siege economy policy was actually countenanced (and I mean seriously considered, not just promoted by the Bennite hard-left).

In 1968, after the 67 devaluation of the pound and continuing balance of payments problems, the Wilson Labour Government did consider a plan known as Operation Brutus, which would have implemented many measures similar to a siege economy. There were 3 stages to this plan and Stage 3 was the most severe to be only implemented if Stages 1 and 2 were unsuccessful. Rather suprisingly Brutus 1 and 2 contained some rather (for their time) free-market ideas such as floating the pound, in order to restore an acceptable balance of payments situation. Only if this didn't work would Brutus 3 be considered.

One of the main features of Brutus 3 was an abolition of the distinction between Sterling and Non-Sterling areas. This would have been most noticeable for the average person in the fact that the very strict rules that applied for exporting currency to non-sterling areas would also be applied to sterling areas. The UK bank accounts of non-residents would be frozen. Special permission from the UK govt would be required for non-residents to gain access to these funds. Although there would be no explicit ban, this would institute a de facto ban on overseas travel for UK citizens resident in the UK at the time of Brutus 3. Currency would be alloweed to be used for expenses related to the conduct of international business, however personal travel expenses would only be permitted for compassionate reasons. It was suggested that the UK govt use the existing restrictions on monetary exchange with Rhodesia as a template for the implementation of Brutus 3.

The UK Cabinet had already got the Bank of England to investigate the ways international business transactions could be performed in a way that would allow the govt to maintain control over the broader balance of payments situation. It was envisaged that there would be some accounts that would be have no convertibility, some with limited convertibilty and a few which would allow complete exchange freedom.

Sorry if some of the above terminology is a bit unwieldy, but as said, I have more understanding of the political side of these things, rather than the exact financial terminology.

Whilst the Wilson govt was fully prepared to implement these strategies if necessary, they were also aware of the political implications. Even if the Tories had supported Operation Brutus (which probably in the short-term would have been necessary in order for the domestic British business community to accept it), Wilson did realise that ultimately it would destroy the Labour Party for at least a generation. However, he also felt at the time that there may be no other option.

LINKS:

news.bbc.co.uk/1/hi/special_report/1999/01/99/1968_secret_history/244316.stm

www.nationalarchives.gov.uk/documents/new_years_1999_pt4.pdf
 
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