Transcript Relative decline

The UK Economy
Teaching content
Teaching objectives
Teaching
difficulties
Teaching time
1. The economy in
history
2. The current
economy
1. historical and cultural
perspectives
2. The comparative
study
1. The rise of the
UK
2. The current
economy of the
UK
2 periods
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Ⅰ Absolute Decline or Relative Decline
Ⅱ The Recent History
Ⅲ The Current UK Economy
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Ⅰ Absolute decline & relative decline
A. The Rise of the UK
B. Relative decline or Absolute decline?
C. Reasons for relative decline
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A. The Rise of the UK
1. Development of the UK’s economy
2. Development of the UK’s politics
3. Development of the UK’s culture
4. Glory of the Empire
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1. Development of the UK’s economy
a. Towards A Modern Society
(16-17th century)
b. Industrial Revolution
(18-19th century)
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a. Towards A Modern Society
 (1) early glory of the reign of Elizabeth I, (1558-1603) the
last of the Tudor monarchs
 Religion: Protestantism firmly established
 Economy: Enterprise and commerce encouraged
 Military: The defeat of Spain in 1588 established the glory
of the English navy (the Spanish Armada /A:"mA:d@/)
 Colony: overseas trade and adventures encouraged and
merchants and explorers toward colonization of a wider
world inspired. (1600 East India Company and North
America colonies)
 Culture: the English Renaissance (Shakespeare)
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 (2) After the English Civil War and Glorious Revolution
 The divine right of kings abolished
 Constitutional Monarchy established
 Transformation to modern society completed
 Political stability achieved for economic development
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b. Industrial Revolution
 the widespread replacement of manual labor by
machines
 It began in Britain in the 18th century.
 It spread through regions of Europe and to the United
States during the following century.
 It brought a shift from the agricultural societies to modern
industrial societies.
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(1) Agricultural development
(2) Scientific development
(3) Industrial development
(4) Commercial development
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(1) Agricultural development
 Beginning in the mid-17th century, the agricultural
improvement enabled fewer farmers to feed more people
with the same land.
 Over the 18th century the agricultural changes including
enclosure and new techniques, had a profound impact on
British society.
 Result: Agriculture became a business rather than a
means of subsistence, and the owners of small lands
gradually became agricultural laborers rather than
independent farmers.
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(2) Scientific development
 Invention and discovery encouraged
 The first Patent Law in the world established to ensure the
property rights, such as those for patents on mechanical
improvements
 Scientific spirit popularized
 Isaac /"aIz@k/ Newton formulated laws of universal
gravitation and motion — laws that explain how objects
move on Earth as well as through the heavens
 Political system science
 The predictable and stable rule of law in the UK
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(3) Industrial development
 Steam engine, the most important machine technology
 Scottish inventor and mechanical engineer James Watt
made the most significant improvements of the steam
engine
 The steam engine was used in many industrial settings,
such as steamboats and railroads, not just in mining.
 Textile industry
 starting from the flying shuttle
 most often associated with the Industrial Revolution
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(4) Commercial development
 Free-market Economy (invisible hand )
 Great Britain’s government pursued a relatively hands-off
economic policy.
 This free-market approach was made popular through
Scottish philosopher and economist Adam Smith and his
book The Wealth of Nations (1776).
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 The key to British prosperity – commerce through
colonization
 The importation of goods from British colonies and the
exportation of these goods all over the world
 Britain became a nation of shopkeepers, with exports
higher than imports, and its capital reserves grew steadily.
 Colonies were established as of the sources of raw
materials or as markets for products home country.
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2. Glory of the Empire
 Background
 The economic development of Britain in the 18th century made
possible its military successes and the expansion of its empire.
 Historical progress
 By 1820s the British economy was expanding at a rate that was
more than twice the pace before the Industrial Revolution.
 By the 1880s the British economy was dominant in the world. (⅓
of goods; ½ of coal and iron; ½ of cotton; shipping amount
greater than all the rest)
 Significance
 Britain is the oldest industrial country in the world and once was
known as the factory of the world.
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British Empire, Early 20th Century
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Supplementary video clips
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《大国崛起》－ CCTV 2006
Documentary “Rise Of The Great Powers”
第 一 集 海洋时代（开篇暨葡萄牙 西班牙）
第 二 集 小国大业（荷兰）
第 三 集 走向现代（英国·上）
第 四 集 工业先声（英国·下）
第 五 集 激情岁月（法国）
第 六 集 帝国春秋（德国）
第 七 集 百年维新（日本）
第 八 集 寻道图强（沙俄）
第 九 集 风云新途（苏联）
第 十 集 新国新梦（美国·上）
第十一集 危局新政（美国·下）
第十二集 大道行思（结篇）
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B. Relative or Absolute decline?
 Overtaken by other powers
 By 1900 overtaken by both the USA and Germany
 From 1945 until the present, the UK entered the post-war
era with a major economic problem – decline.
 Relative decline
 Britain is not poorer, or producing less than it was in 1945,
just relatively other countries improved more rapidly.
 So the decline is relative to some other economies rather
than absolute.
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C. Reasons for relative decline
 1. Firstly, serious war debt crisis and loss of overseas assets.
 2. Secondly, the era of empire was over
 The UK lost its raw material providing places and markets.
 India, once the largest element in the empire, provided raw
materials and a big market for the British goods.
 In 1947, the Jewel in the Crown, India gained its
independence.
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 3. Thirdly, large amount of military expenditure over the
process of decolonization, and later as the shaper of the
post-war world, the UK is one of the several top powers.
(UN; NATO)
 4. Fourthly, the oldest industry survived the war but left
long-term problems, that is less modern equipment and
new products. (compared with Japan and Germany)
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 5. Fifthly, low rate of domestic industrial investment but
high rate of overseas investment.
 lack of a close relationship between industry and Banks in
the UK
 The oldest industrialized economy grew used to financing
themselves, not from banks.
 Britain is the largest investor in China and European nations,
with fewer goods sold to China.
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Ⅱ The Recent History
A. Bad period in the 1970s
B. Privatization in the 1980s
C. Brighter future in the late 1990s
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A. Bad period in the 1970s
 Background
 After 1945 the nationalization in the UK brought series
problems.
 Negative economic facts
 Inefficiency in nationalized enterprises, large-scale public
services, oil price rise
 increasing imports relative to exports → high rate of
inflation → fall in the value of the UK Pound → workers
strike for more pay → change of government in 1979
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B. Privatization in the 1980s
 Background
 In the 1980s the conservative party carried out reforms
focusing on the privatization (steel, telecom, gas,
aerospace).
 Positive aspect
 bureaucracy reduced, inflation controlled and businesses
made profitable
 Negative aspect
 rapid increase in unemployment, continuing lower rates of
economy growth, and even a recession (1990-1992)
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C. Brighter future in the late 1990s
 1. Steady economic growth
 2. Low level of unemployment and inflation
 3. Investment has increased
 Low interest rates/membership of the EU
 The second destination for international direct investment
and the second biggest international investor in the world
in 1995
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Ⅲ The Current UK Economy
A. General features
B. Primary industries
C. Secondary industries
D. Tertiary industries
E. Economic crisis of 2008
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A. General features
 Economic feature
 An important manufacturing and trading nation
 the world's sixth-largest national economy
 Analysis
 British Empire practice
 The UK’s farms produce only about 2/3 of the food needed.
 The UK has few natural resources, except for coal, natural
gas, and oil.
 The country must import about 1/3 of its food and many of
the raw materials it needs for manufacturing.
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B. Primary industries
1. Agriculture
2. Fishing
3. Energy production
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1. Agriculture
 Small but Highly efficient agriculture:
 1.4% of national wealth → 58% of the UK’s food → with only 2%
of its workforce → covering ¾ of its land (the best land in the
southeast of England)
 Classification:
 Crops ¼ : wheat and barley (the commonest)
 Animal grazing ¾ : sheep, the most numerous livestock; cattle
 Problems
 Some diseases causing great damage to human beings and
economy, especially the product exports reduced dramatically.
(BSE disease / mad cow disease; Bird flu/ avian influenza)
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2. Fishing
 The fishing industry
 providing 55% of the UK demand for fish.
 Exports are significantly less than imports.
 Angling, or sport fishing
 one of the more popular hobbies in Britain
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3. Energy production
 an exporter of energy
 which accounts for 5% of its national wealth
 Energy industry
 a. oil and natural gas
 b. coal ¼
 c. nuclear power
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a. oil and natural gas
 Background
 Discovery of oil and gas under North Sea since the 1970s
 By the 1980s oil exports increased during a period of high
oil prices.
 a strong position in the offshore oil industry in the world
 The high technology required to extract offshore oil
 In 1997 Britain had more than 80 offshore oil fields.
 Shell (half Dutch); BP; British Gas
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 Shell is a global group of
 a global energy group
energy and petrochemical
companies
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b. coal ¼
 Significance in history
 Britain’s traditional source of energy for about 300 years
 the main source of fuel during the Industrial Revolution,
 Current situation
 far less important to the British economy
 Cheaper overseas provider/ oil and gas/ growing concern about the
environmental pollution from the burning of coals.
 Reflection in literature
 the most significant of D. H. Lawrence’s early fiction, Sons and Lovers
(1913), deals with life in a mining town.
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c. Nuclear power
 a pioneer in the development of nuclear power plants
 the world’s first commercial-scale power station in
northwestern England in 1956.
 A big share of the UK power
 By 2002 nuclear power provided 23 percent of the
electricity produced in Britain.
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C. secondary industries
 Manufacturing industries 22%
 Pharmaceutical (Glaxo-Wellcome, now GSK,
GlaxoSmithKline, the biggest drug company in the world 葛
兰素史克公司)
 Chemical (ICI, 2nd largest paint manufacturer in the world
→ Dulux paint)
 Aerospace 3rd in the world (jet engines, Concorde, Airbus
←→ Boeing)
 Food and drink (Scotch whisky, a major export)
 Electronics, 4th largest in the world
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 British Steel, privatized and the 4th largest in the world.
 The fall of the car industry
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Rolls-Royce → Volkswagen AG
Rover → Nanjing Automobile Group; Shanghai Automobile
Group
 the rise of the high-technology engineering industry

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Developed around the motor-racing business
Racing cars of F1 and American Indycar series designed and built
in Britain (McClaren and Williams)
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 Rolls-Royce Motor Cars
 The world’s premier maker of luxury cars for much of the
20th century
 It fell on hard times beginning in the early 1970s
 It was split off as an independent company from RollsRoyce PLC (public limited company), a major manufacturer
of jet engines.
 In 1998 German automaker Volkswagen AG bought RollsRoyce Motor Cars.
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 Rover
 A British automobile manufacturer
 In recent years it was part of the MG Rover Group.
 However, in April 2005, production stopped when the
company became insolvent.
 In July 2005 the Nanjing Automobile Group acquired the
assets.
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 Motor-racing business
 Formula One


Maclaren and Williams
Ford / BMW/ Mercedes/
Honda/ Toyota / Renault /
Porsche
 the American Indycar
series
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 F1: Formula racing, or single-seat automobile racing
 The sophisticated vehicles used in Formula One (F1) racing
are the most technologically advanced in racing.
 Designed for road racing, F1 cars can accelerate and brake
quickly.
 Slower and less advanced single-seat cars competitions
are Formula Two (F2), Formula Three (F3), and Formula
3000 (F3000).
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D. tertiary industries
 Significance
 65% of its national wealth and 81% of its workforce in this
sector
 Classification
 1. Retailing
 2. Tourism
 3. international provider of services

10% of the world service exports, e.g. majordomo: someone in
charge of the servants in a large house
 4. Financial sector
 5. Advertising
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4. Financial sector
 a. London
 One of the top three financial centers in the world
 b. The City of London
 The historic area at the centre of London where all financial
business is concentrated.
 It is one of the biggest financial centers in the world with
the greatest concentration of banks, insurance companies
and business dealing in commodities.
 At the heart of the City is the London Stock Exchange.
 c. London Stock Exchange
 One of the world’s largest foreign exchange market
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 The City is a small part of the Greater London metropolitan
area and is called the Square Mile (about one square mile).
 Its name is sometimes used to mean the people who work
there and make important financial decisions.
 There is a similar area in New York City called Wall Street.
 Lord Mayor of the City of London
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 www.cityoflondon.gov.uk
 www.londonstockexchang
e.com
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 Euro vs. Pound
 The European Union established the Euro as its unit of
currency, and other EU members made the transition to the
Euro between 1999 and 2002.
 However, the British government elected not to do so and
instead retained the pound as its currency.
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British Pound Notes
Euro Coins and Bills
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E. Economic crisis of 2008
1. Background
2. Impact on the UK
3. UK’s rescue plan
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1. Background
Subprime Mortgage Crisis
Bankruptcy of investment banks and commercial banks
Stock market downturn fall
Global economic recession
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2. Impact on the UK
Virtual economy
• Stock value lost
• Confidence lost
Real economy
• Unemployment
• Sales slump
• Bankruptcy
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3. UK’s rescue plan
 On the October 8, 2008 the British Government
announced a bank rescue package of around £500 billion.
 First, £200 billion will be made available to the banks in the
Bank of England's Special Liquidity scheme.
 Second, the Government will increase the banks' market
capitalization.
 Third, the Government will temporarily underwrite any
eligible lending between British banks up to around £250
billion.
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 On 24th, November 2008, Pre-Budget report by
Chancellor Alistair Darling
 biggest shake-up of Labour's economic policy since it came
to power in 1997
 The main rate of VAT will be reduced from 17.5pc to 15pc
temporarily from December 1 until December 31 2009.

This will create the equivalent of £275 a year for the average
household to spend
 There will be a new rate of income tax of 45pc for those
who earn £150,000 a year or more. It will be effective from
2011.
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Queen’s Speech 2008
 official state opening of Parliament:
 The Queen has outlined the Government’s priorities for the
coming Parliamentary year in the Queen’s Speech.
 The stability of the British economy in a period of economic
downturn was highlighted as a key area for Government
action.
 Legislation will be introduced to strengthen the financial
sector and protect businesses and families through, for
example, a Banking Bill and a Welfare Reform Bill.
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 The Queen said:
 “My Government is committed to helping families and
businesses through difficult times.
 “The strength of the financial sector is vital to the future
vibrancy of the economy. Therefore, legislation will
continue to be taken forward to ensure fairer and more
secure protection for bank depositors and to improve the
resilience of the financial sector.”
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Bank cuts UK rates to 57-year low
 In December, 2008
 The Bank of England cut interest rates by one percentage
point, from 3% to 2% - the lowest level since 1951.
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Brown unveils mortgage help plan
 Many people hit by the downturn will be able to defer
part of their mortgage interest payments for up to two
years under plans unveiled by Gordon Brown.
 The plan is designed to give those who lose their jobs or
suffer a big cut in income extended breathing space if
they are facing repossession.
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PMQs December, 10, 2008
 Gordon Brown’s slip of tongue: “saved the world”
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Economy through the recession
 The UK entered its worst recession since World War II in
Q2 of 2008 and exited it in Q4 of 2009.
 The UK economy has grown 2.8% since the end of the
recession.
 The UK economy has recovered twice as fast as expected
so far.
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