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WESTERN CULTURE AND SOCIETY: THE UNITED KINGDOM (UK) -
The British Economy
History of the British Economy:
The British economy used to rule the world. In the late 1800's it produced
one third of the worlds manufacturing goods, half the worlds coal and iron
as well as half its cotton. The amount of British shipping was greater than
the rest of the world put together. By 1900 it was overtaken by America and
Germany. The UK economy has continued to grow, but at a more steady rate
than some other counties. The second world war cost the country a lot of
money - the country was in debt in order to finance the war, and sold many
of its overseas assets. Also India gained its independence in 1947. India
had previously provided raw materials, as well as a big market for British
goods. After the rest of the British Empire left to form independent
countries Britain was left as a small European country.
Britain spent a long
time rebuilding its economy after the war. Then in the 1970's because of the
rise in the price of oil, the rate of inflation increase, at one point up to
25%. This resulted in many workers going on strikes for higher pay. The
economic problems led to a change of government in 1979 when the British
people voted in the conservative party, with Margaret Thatcher as the
Through the 1980's many
economic changes took place. Firstly foreign exchange controls were lifted
and rules governing banks were loosened. Many state owned businesses were
sold to the private sector. These services include Steel, Gas, Electric,
Telephone, Aerospace, Rail etc. this resulted in inflation coming under
control, and businesses made bigger profits. But the negative impact was
high unemployment (12%). Companies were running efficiently, therefore
needing less workers.
The 1990's had steady
growth, with a better economy than the rest of Europe. Unemployment was
reasonably low, inflation is low, investment grew due to low interest rates.
Britain's membership of the European Union (EU) makes it attractive for
foreign investment. By 1995 Britain was the second largest international
investor in the world, investing in many other countries.
China has a "planned economy", whilst the countries in the Western
world have a "market orientated economy" - Britain's economy
changes according to the business environment and current conditions which
may change very quickly. Economic activity takes place in a society such as
Britain in order to satisfy the needs of the society. wealth is created and
distributed, so that the members of the society can share the wealth.
There are three main
types of economic system:
(Capitalist) - No government interference
in the workings of the economy. The price of goods and services is
decided by the demands of the consumers, different levels of demand and
supply exist at different price levels. If demand rises, the price will
also rise. Advantages of the free market system are that people are
encouraged to work harder, because they have the chance to gain personal
wealth. People can spend their money how they want. Also because of
increased competition, less efficient producers are priced out of the
market. Disadvantages include uneven distribution of wealth, the rich
become richer, but the poor stay poor. Public services can suffer, such
as education and health.
Planned (Command) -
A planned economy is controlled fully by the government. The government
decide what is made and how it is made. price levels are not directly
decided by supply and demand - the government fixes the prices.
Advantages of this system include large scale production and good public
services. The main disadvantages are lack of incentive to work, less
international trade and inefficiency.
most economies are not entirely mixed or planned, they contain elements
of both systems. The UK has become increasingly free market based, due
to the privatisation of state owned services, such as gas, electric,
telephone, transport etc.
Private / Public Sector
Organisations: The UK economy is a mix of
private and public sector organisations. Private sector firms are owned by
individuals, not by the state. These firms can be large or small, owned by
one person or by thousands. By producing goods or services they intent to
make a profit for their owners. Public sector organisations are run by the
government for the benefit of the general public.
A country needs to produce goods and services which the consumers demand.
The wants of the consumer are unlimited, however the resources in production
are limited, as follows.
Capital - Money
available for investment in new machines, building etc.
Enterprise - Refers
to the people who take the risk of setting up in business and making
Land - Used for
agriculture, housing developments, leisure etc.
Labour - the number
of men and women available for work, and wanting to work.
In advanced economies
such as the UK, production tends to be indirect rather than direct. This
means that people do not produce only for themselves but instead work with
others in order to produce goods and services which are then sold to all.
They specialise in what they do best, which leads to greater efficiency and
higher economic output.
Firms take advantage of
this specialisation and a "division of labour takes place."
Employees gain skills and allows firms to divide their business into
different functions, such as personnel, sales, purchasing etc.
Types of Production:
This type of production involves some form of extraction - Mining,
Fishing, Farming, Forestry etc.
Firms taking part in secondary production are either involved in
Manufacturing or in Construction. They manufacture the finished
article, or parts for further assembly and manufacture. They construct
buildings such as houses and shops as well as building roads etc.
These involve things such as transport, banking, advertising, export
etc. - Tertiary industries involve passing the goods from the producer
to the consumer.
sector is small, but efficient. The agricultural industry has been damaged
in recent years with various problems, such as BSE (Mad cow disease) and
Foot and Mouth disease. Energy production is a large part of the UK economy.
Oil and gas were discovered under the North Sea in the 1970's. since then
some of the worlds largest companies have been established, such as British
In the secondary sector
of the economy, manufacturing has reduced by a large amount in recent years,
however one area which is particularly strong is the pharmaceutical and
chemical industries - Glaxo Wellcome and Smithkline Beecham are the worlds
largest drug companies, as well as ICI which produces paint.
There is a huge car
industry in Britain, Ford, Nissan, Toyota etc., with many of these being
foreign owned businesses. Former state owned businesses which were
privatised include British Steel.
Like most developed
economies the secondary sector becomes reduced, whilst service industries
grow at a large rate. The service industry includes things such as tourism,
The economy of the UK is
split differently in various regions in the UK. The North-East of England
was traditionally a coal mining and ship building area. With the decline of
these industries many new companies have moved in. Scotland benefits from
the oil industry.
The Financial Sector:
The financial sector is an important part of the UK economy. London is one
of the top three financial centres in the world. It has a large number of
foreign banks and foreign exchanges. Insurance is also big business in the
UK. "The city" is the name used to refer to the area in the centre
of London where the London Stock Exchange is situated. This is one of the
largest share dealing centres in the world.
The European Union (EU):
In 1973 Britain joined the European Economic Community (EEC, now the
European Union), which was established in 1957, the European Union was set
up to promote trade between its member countries. The EU also makes rules
and regulations to govern business in Europe. EU regulations or laws are
normally called "Directives" - they are normally to control things
such as pollution, levels of production, etc. Due to the increasing role of
the EU many people in the UK do not want the British government to get any
further involved in Europe. - Britain is not going to adopt the European
The British government
began subsidizing the prices paid for agricultural products after World War
II as a way to make farming profitable. Since then agricultural policy has
been determined primarily by the EU's Common Agricultural Policy (CAP). This
policy seeks to keep the agricultural market stable, ensure that farmers
earn a fair living, and provide consumers with affordable food supplies. As
a result of EU policies, products coming into Britain from non-EU countries
are taxed, surplus products are bought and stored for later sale, and the
cost of exports is subsidized if prices are low. The British have criticized
CAP, primarily because the British farming sector is smaller than the
farming sectors of most EU nations. British farmers receive less monetary
support from the EU than British taxpayers and consumers pay into CAP, and
some British taxpayers and consumers feel they are supporting inefficient
A multinational company is one which produces in more than one country.
There are many benefits to the UK in allowing multinationals to set up
business in the UK. Reduced unemployment, the introduction of new
technologies, training and up to date skills etc.
The British Workforce:
The total British labour force in 1997 was 29,527,500.0 million people. The
structure of employment has undergone significant changes in the past 40
years. There has been a significant increase in self-employment: More than 3
million people, or close to 12 percent of the workforce, were self-employed
in 1997, and there has been a corresponding growth in the number of small
businesses. Almost three-quarters of employees in the 1990s worked in the
services sector, compared with about one-third in 1955.
Manufacturing was once
the largest employer. It employed 42 percent of workers in 1955, but now
accounts for only about 20 percent of employees. This change is due in part
to a shift from manual to non-manual occupations. The number of women
working outside the home has increased since the 1950s, and in 1997 women
accounted for about 47 percent of the full-time workforce and about 80
percent of the part-time workforce. Nearly two-thirds of women between the
ages of 15 and 65 are employed, giving the United Kingdom the third highest
employment rate for women in Europe. Other recent trends include an
expansion of part-time employment and a rise in the number of employees
working on short-term contracts instead of on permanent jobs. Unemployment
rates vary from region to region, with eastern England having the lowest
rate and Northern Ireland the highest.
The trade union movement
has a long and important history in Britain, but since 1980 the influence of
trade unions has declined dramatically. Trade union membership has fallen
because of changes in the structure of employment, including privatisation,
the shift away from manufacturing, the rise in smaller firms, the increase
in part-time employment, and the contracting out of work. Membership
decreased from a total of 12.2 million in 1975 to 7.2 million in 1996, or
about a third of the workforce. The Conservative government restricted
unions' ability to launch strikes and made unions legally responsible for
the actions of strikers; this has considerably reduced union power and
substantially decreased the number of strikes, called stoppages. In 1986
there were more than a thousand work stoppages; in 1996 there were less than
250. Still, the Trades Union Congress (TUC), an independent association of
trade unions, had an affiliated membership of 74 trade unions in 1997,
representing about 6.8 million trade union members in Britain.
The history of manufacturing in Britain is unique because of Britain's role
as the birthplace of the Industrial Revolution. During the Middle Ages the
production of woolen textiles was a key industry in Britain. In the 16th and
17th centuries, new industries developed. These included silk weaving,
garment making, and the manufacturing of hats, pottery, and cutlery. All of
these operations were generally conducted in small craft shops and were
In the 18th century a
number of changes in British society prepared the way for the Industrial
Revolution. Colonial and commercial expansion created markets in North
America, Africa, and parts of Asia. Coal and iron mining developed as
Britain's dwindling forests created the need for another energy source, and
new smelting techniques made iron implements cheaper to produce. An
agricultural revolution in the 18th century introduced new crops and crop
rotation techniques, better breeding methods, and mechanical devices for
cultivation. This coincided with a rapid increase in population, in part due
to better hygiene and diets, providing both consumers and workers for the
new manufacturing operations.
During the Industrial
Revolution new methods of manufacturing products were developed. Instead of
being made by hand, many products were made by machine. Production moved
from small craft shops to factories, and population shifted to urban areas
where these factories were located. Cotton textile factories using newly
developed steam-powered machines produced more goods at a lower cost per
item. Textiles, shipbuilding, iron, and steel emerged as important
industries, and coal remained the most important industrial fuel. The
Industrial Revolution dramatically raised the overall standard of living.
The structure of industry changed substantially in the last half of the 20th
century. The coal mining and cotton textile industries declined. As coal
production declined, oil production replaced it as a major industry.
became a significant part of the industrial base but was subject to severe
foreign competition. As incomes increased, consumer demand rose for durable
goods such as cars and kitchen appliances. British industrial production
also expanded into communications equipment, including fiber optics,
computers, computer-controlled machine tools, and robots. Britain now
manufactures approximately 40 percent of Europe's desktop computers.
Scotland is also a major
producer of computers. The so-called Silicon Glen between Glasgow and
Edinburgh employs about 40,000 people in the electronics industry and is the
site of many overseas computer firms. Scotland and Northern Ireland are
still noted for their production of whiskey and textiles, especially linen
from Northern Ireland and tweed from Scotland.
Britain remains an
important manufacturing country, although it imports large quantities of
manufactured goods from overseas, particularly vehicles and electronic
equipment. About 4 million workers, about 20 percent of the workforce, were
engaged in manufacturing in 1997. In 1996 manufacturing accounted for about
21 percent of the gross domestic product (GDP). The leading traditional
manufacturing regions of England are Greater London and the cities and
regions around Manchester, Birmingham, Leeds, and Newcastle upon Tyne.
Britain is one of the world's most popular travel destinations, and tourism
is an essential part of Britain's economy. It employed 1.8 million British
people and contributed more than 5 percent to the GDP in 1996. The British
Tourist Authority, which is supported by the government, promotes tourism in
Britain and maintains more than 800 Tourist Information Centres to assist
visitors. England, Scotland, Wales, and Northern Ireland have their own
government-supported tourist boards as well.
Visitors to Britain come
from all over the world, attracted by Britain's heritage and arts, historic
buildings, monuments, museums, and galleries. In 1998, 25.8 million overseas
visitors traveled to Britain. An estimated 67 percent were from Europe and
15 percent from North America, with more visitors from the United States
than any other single nation.
Among the sites
regularly visited by millions are the Tower of London, the Houses of
Parliament, the exterior of Buckingham Palace, and Westminster Abbey. At
night visitors enjoy the hundreds of theaters and pubs in London. Northwest
Wales has many excellent castles, among them Conwy, Caernarfon, and Harlech.
In Scotland, historic Edinburgh Castle looms over the capital. Great
cathedrals from the Middle Ages still dominate the skylines of many English
cities, including Salisbury, Durham, and Canterbury. In Wales the remains of
Tintern Abbey and the small but beautiful Saint David's Cathedral are
outstanding. Stately homes are abundant throughout Britain. Among the more
famous is Blenheim Palace, the home of the Churchill family. Hampton Court
Palace, just outside of London, was one of the homes of Henry VIII. The
Palace of the Holyrood House in Scotland was once the home of Mary, Queen of
Scots. Among other worthwhile places to visit are Oxford and Cambridge, both
university towns with many ancient buildings, and the Tudor home in which
William Shakespeare was born in the town of Stratford-upon-Avon.
New markets have been established in the telecommunications industry and in
Technology sectors. Internet companies have grown very quickly, with huge
share values. Because of the change from manufacturing to service industries
many skilled workers are unemployed. To overcome this there are many
training schemes and government incentives.
The UK is one of the
world's great trading powers and financial centers, and its essentially
capitalistic economy ranks among the four largest in Western Europe. Over
the past two decades the government has greatly reduced public ownership and
contained the growth of social welfare programs. Agriculture is intensive,
highly mechanized, and efficient by European standards, producing about 60%
of food needs with only 1% of the labour force. The UK has large coal,
natural gas, and oil reserves; primary energy production accounts for 10% of
GDP, one of the highest shares of any industrial nation. Services,
particularly banking, insurance, and business services, account by far for
the largest proportion of GDP while industry continues to decline in
importance. The government has put off the question of participation in the
euro system but still says that it is committed to preparing the British
economy for eventual membership.