Economy: Past and Present
The UK was the first country in the world to industrialize in the 18th and 19th centuries, and for much of the 19th century possessed a predominant role in the global economy. However, by the late 19th century, the Second Industrial Revolution in the United States meant the US had begun to challenge Britain's role as the leader of the global economy. The extensive war efforts of both World Wars in the 20th century and the dismantlement of the British Empire also weakened the UK economy in global terms, and by that time Britain had been superseded by the United States as the chief player in the global economy. At the start of the 21st century however, the UK still maintains an important role in the world, due to its large Gross Domestic Product and the financial importance that its capital, London, possesses in the world.
Following the end of World War II, there was a long interval without a major recession (1945 – 1973) and a growth in prosperity in the 1950s and 1960s. However, following the severe shock of the 1973 oil crisis and the 1973–1974 stock market crash, the British economy went into recession in 1974. A new period of neo-liberal economics began with the advent of the government of Margaret Thatcher of 1979. Most state-owned enterprises in the industrial and service sectors, which since the 1940s had been nationalised, were privatised. As a result, the British Government owned very few industries or businesses. According to the IMF, GDP rose to 5% at its peak in 1988 as banks and other financial institutions in the UK enjoyed the liberalisation of the regulatory structures and greater freedom to explore new investment vehicles with less oversight.
After a mild recession in the early 1990s, there followed the longest period of sustained economic growth Britain had seen for more than 150 years, achieving growth in every quarter between 1992 and 2007, one of the highest economic growth rates of major developed economies during that time.
This boom ended in 2008 when the United Kingdom entered a recession brought about by the global financial crisis. Beginning with the collapse of Northern Rock, which was taken into public ownership in February 2008, major banks failed and were nationalised.
During August 2008 the IMF warned that the UK economic outlook had worsened due to a twin shock: financial turmoil as well as rising commodity prices. Both developments harm the UK more than most developed countries, as the UK obtains revenue from exporting financial services while recording deficits in finished goods and commodities, including food.
In 2008, the UK had the world's third largest current account deficit, despite significant oil revenues, according to the IMF. This was mainly the result of a large deficit in the trade in manufactured goods.
In May 2009 the European Commission (EC) stated: "The UK economy is now clearly experiencing one of its worst recessions in recent history." The EC expected GDP to decline and projected that growth would remain negative in 2009. It predicted "virtual stagnation" in early 2010, followed by a gradual return to "slight positive growth by late 2010".
Today the United Kingdom is one of the world's most globalised countries. The capital, London, is a major financial centre for international business and commerce and is one of three "command centres" for the global economy (along with New York City and Tokyo). The British economy is made up (in descending order of size) of the economies of England, Scotland, Wales and Northern Ireland. In 1973, the UK acceded to the European Economic Community which is now known as the European Union after the ratification of the Treaty of Maastricht in 1993.
The United Kingdom is also a member of the G8, the Commonwealth of Nations, the Organisation for Economic Cooperation and Development, the World Trade Organisation, and the European Union.
2. Answer the questions to the text:
1) When did the UK possess a predominant role in the global economy?
2) Why did the position of Great Britain in the world economy weaken in the 20th century?
3) What factors allow Great Britain to maintain an important role in the modern world ?
4) Describe main economic and political trends that took place after World War II.
5) Describe the state of the British economy in the 1990s.
6) What trends characterize the UK economy at the present period of its development?
3. Agree or disagree with the statements.
1) The UK was the first country in the world to industrialize in the 18th and 19th centuries.
2) The extensive war efforts of both World Wars in the 20th century improved the UK economy in global terms.
3) A new period of neo-liberal economics began with the advent of the government of Tony Blair.
4) In 2003 the UK entered a recession brought about by the global financial crisis.
5) In 2008 the UK had the world’s second largest current account deficit.
6) Today the UK is one of the world’s most globalised counties.
Text 6
1. Read the text and be ready to say what makes London the world’s largest financial center.