political and economic change in the united kingdom
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Political and Economic Change in the United Kingdom. Why Privatization and why it worked. Post World War II. 1945-1979. Nationalized Industries. 1945-1977: Socialist leaders in Labour party nationalized industries Public state bought out private corporations - PowerPoint PPT PresentationTRANSCRIPT
Political and Economic Change in the United KingdomWHY PRIVATIZATION AND WHY IT WORKED
Post World War II1945-1979
Nationalized Industries1945-1977:
Socialist leaders in Labour party nationalized industries
• Public state bought out private corporations– Coal, Steel, Aerospace, Banks, Communication
• Protected worker rights and employment
ManagementIt is hard to attract good management
into nationalized industries
• Public sector does not pay well• Does not provide incentive schemes– Bonuses and shareholding
• Culture of public sector is service, not profit
Government InterferenceGovernment intervention led to
inefficient performance and diluted market interests
• Nationalized industries had to gain approval of government
• Good decisions may not be made because other industries took precedence on national priorities
The International MarketPolitical issues prevent a nationalized
industry to make international alliances
• Many industries cannot survive without international allies– British Telecom– British Airways
General Problems Regarding A Socialist Economy
• Industries did not have to run at a profit• Financial maintenance soared due to
increased government subsidies• Strong labor unions covered manual
workers under a collective bargaining agreement
Privatization: Moving Toward a Mixed Economy1979-PRESENT
UK Primary Objective: To introduce competition and market
forces whenever possible
• Fragmented the electricity industry• Fragmented Aero-space industry• Broke up National Freight Company• Attempting to break up British Telecom
and gas industries
UK Secondary Objective: To create a sense of ownership among
UK population
• Encouraged people to buy real estate• Increased stock market transactions• Ultimately increased shareholders
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100
0.5
1
1.5
2
2.5
3
3.5
4
Percentage Total Equity (Public Sector)
Cameron et al. 1999
Financial Management Initiative• Contract independent agencies to carry
out services once held by the government– Automobile licensing– Patents– Social security benefits
• Buy services from the private sector– Building toll bridges
***Government Multiplier in GDP
Money FlowGovernment Private
Sector
Suppliers
Labor
Luxuries
1920 1930 1940 1950 1960 1970 1980 1990 2000 20100
200000
400000
600000
800000
1000000
1200000
1400000
Gross Domestic Product (rGDP) In the United Kingdom
Year
Mill
ion
of P
ound
s St
erlin
g
ReferencesNATIONAL STATISTICS ONLINE. 2007 TIME SERIES DATA. DIRECT GOV. 23 SEPTEMBER 2007 <HTTP://WWW.STATISTICS.GOV.UK/STATBASE/TSDINTRO.ASP>
CAMERON, GAVIN. “WHY DID UK MANUFACTURING PRODUCTIVITY SLOW DOWN IN THE 1970S AND SPEED UP IN THE 1980S?” (1999) NUFIELD COLLEGE, OXFORD
POMEROY, BRIAN. “AN ASSESSMENT OF PRIVATIZATION IN THE UK.” (1991) CARNEGIE COUNCIL
ALMOND ET AL. “COMPARATIVE POLITICS TODAY.” SEVENTH EDITION (2003) LONGMAN
THEEN ET AL. “COMPARATIVE POLITICS” FOURTH EDITION (2001) PRENTICE HALL
J. H. CLAPHAM; AN ECONOMIC HISTORY OF MODERN BRITAIN: THE EARLY RAILWAY AGE, 1820-1850 CAMBRIDGE UNIVERSITY PRESS, 1926
G. C. PEDEN, BRITISH ECONOMIC AND SOCIAL POLICY: LLOYD GEORGE TO MARGARET THATCHER (1985)
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