The Age of Austerity
What does austerity mean?
• In economics, austerity is a policy of deficit-cutting,
lower spending, and a reduction in the amount of
benefits and public services provided.
• Austerity policies are often used by governments to
reduce their deficit spending while sometimes coupled
with increases in taxes to pay back creditors to reduce
debt.
• "Austerity" was named the word of the year by
Merriam-Webster in 2010
• http://www.bing.com/search?q=austerity&src=IESearchBox&FORM=IE8SRC
• http://www.youtube.com/watch?v=W1fXvxuI3Tg
• In August 1945 American
loans (known as LendLease) were ended. This
produced an economic
crisis. The economist John
Maynard Keynes was sent
to America to negotiate a
loan from the US. In 1946,
the US agreed to a loan of
3.75 billion at 2% interest.
• British exports had
collapsed. Heavy
taxation was
introduced by the
chancellor of the
exchequer, Hugh
Dalton. This was meant
to encourage firms to
export.
• By December 1946 there
were serious fuel shortages
affecting the whole
economy and in
January/February 1947
there was a very bad winter
of Siberian proportions.
The Conservatives coined
the phrase ‘shiver with
Shinwell’. Manny Shinwell
was the Minister of Fuel
and Power.
http://www.youtube.com/watch?v=jkVuOSo
uQR8
• Rationing continued well after
the war finished. In 1947
rations were cut further than
they had been during
wartime. In November, 1947
even potatoes were rationed.
This never happened in
wartime. Tea rationing did not
end until 1952. Sweet
rationing ended in 1953.
• The government asked
the trade unions to
impose a wage freeze.
This meant they would
not demand higher
wages for workers. If
they did this could lead
to inflation. In April
1948, the TUC agreed to
a wage freeze.
• The cost of creating the
welfare state and
maintaining Britain’s
defence commitments
was huge. In 1951
prescription charges
were introduced.