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British Economic Growth 1856-1973The Post-War Period in Historical Perspective$
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R. C. O. Matthews, C. H. Feinstein, and J. Odling-Smee

Print publication date: 1982

Print ISBN-13: 9780198284536

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198284535.001.0001

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The Relationship Between International Transactions and Economic Growth

The Relationship Between International Transactions and Economic Growth

(p.445) Chapter Fifteen The Relationship Between International Transactions and Economic Growth
British Economic Growth 1856-1973

R. C. O. Matthews

C. H. Feinstein (Contributor Webpage)

J. C. Odling‐Smee

Oxford University Press

The adverse effect of foreign competition on the growth of TFP in the pre‐1914 period is estimated to have been larger in agriculture—still an important industry—than in manufacturing. However, the growth of real disposable income (as opposed to GNP) was depressed by the downward pressure of foreign competition on export prices. Major adverse developments in the 1913–37 period included war‐induced shocks and consequent depression in most of Northern Europe, the world depression of the 1930s, and industrialization in a growing number of export markets. In addition, the continuing deterioration of the balance of trade was no longer offset by an upward trend in property income from abroad. Matters were made worse by the return to gold at the prewar parity, but it is doubtful if any policy would have produced a satisfactory outcome. Overseas developments had a less unfavorable effect across World War II than across World War I. There was no post‐war slump, and competitors (other than the US) suffered more of a setback. The balance of payments does not appear in retrospect to have been so great a constraint on growth in the post‐war period as was widely believed at the time although fluctuations in the balance were more difficult to accommodate than formerly, hence the famous stop‐go cycles. In the post‐war period, Britain experienced a more favourable environment for economic growth than formerly, because of fast‐growing world demand, increased scope for learning from abroad, and the absence of export‐led slumps. Trends in foreign trade within the post‐war period are mainly explicable by the relative growth rates of supply at home and abroad, but exchange‐rate policy for a time made things worse in the 1960s, as it had done in the 1920s.

Keywords:   competitiveness terms of trade, foreign competition, foreign demand, international transactions

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