UK Economy: UK Economic History

By: EconomyWatch   Date: 29 June 2010

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The United Kingdom of Great Britain and Ireland was once the largest economy in the world. It was the birthplace of modern democracy, the Industrial Revolution, and many of the financial and capital markets that are the foundation of the capitalist economic system.

At its peak during the nineteenth century, the British Empire covered one quarter of the world’s surface. Using its dominant merchant navy, protected by the royal navy, it developed a global merchantile system that transported people, resources and capital, generating vast profits for the Empire and its key companies, such as the East India Company, who in effect ran much of India and South East Asia.

The development of the empire was driven both by competition between European powers and the development of science and technology. In the early part of the twentieth century, those two forces combined disastrously to lead to World War I and World War II. Although the UK was on the winning side in both conflicts, it exacted a heavy price. The economy was devastated, the British Empire came apart and the Republic of Ireland withdrew from the UK, leaving Great Britain (consisting of England, Scotland, Wales and Northern Ireland) to the union.

During this period, the United States of America firmly established itself and the leading economic power of the world. Although still a key global player, Britain has seen its influence decline steadily as other powers overtake it economically.

During this period, the United States of America firmly established itself and the leading economic power of the world. Although still a key global player, Britain has seen its influence decline steadily as other powers overtake it economically.

In recent times, there have been two periods of change that have delayed or (briefly) reversed that decline. The first resulted from the Prime Ministership of Margaret Thatcher, who famously broke the unions and ushered in free market reforms that helped the UK to shed its ‘Sick Man of Europe’ mantle.

The second came about when the ‘New Labour’ government came to power in 1997. Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown (who became Prime Minister in June 2007) presided over a period of unbroken GDP growth from 1992 to 2008, the longest period of uninterrupted expansion on record.. This period coincided with a resurgence of cultural and sporting gains that came to be known as ‘Cool Britannia’.

The UK economy has become one of the biggest losers in the Financial Crisis that started in 2007 however, leading some to believe that much of those gains were artificially inflated.

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