Abstract

British people remember the 1950s as a dull decade. They began with post-war austerity, and were notable for social stability, high employment, rising living standards and inward-looking complacency. The welfare state became established and Britain tried – though it failed – to resume its earlier role as an independent power in world politics.

Yet the government was bankrupt. Its debts in 1951 were greater, relative to national income, than those of Greece, Portugal, Ireland, Italy and Spain are today. Now such debts would be considered unsustainable and debt relief, organised by the European Union or the International Monetary Fund, would be prescribed, to be accompanied by fiscal austerity. No such solution was available then, yet the debt was managed. The story of British monetary policy in the 1950s – superficially a rather arcane subject – is largely the story of how it was done. Strangely, the national debt was rarely mentioned in contemporary discussions of monetary policy. It was accepted as a fact of life but its implications were not fully analysed. The people responsible for monetary policy simply got on with their jobs to the best of their abilities, but always in its shadow.

I was stimulated to investigate these issues when, during a discussion about government debt management, Jagjit Chadha asked me how the British government had maintained its credit standing during the 1950s. I am grateful to him for asking the question, and this book is the answer.