Tavares, E. M. (2014) “A New Age Of IMF Bailouts – Great Britain In The 1970s“, ΘZeroHedge, 12 October.
Hearing of IMF interventions generally conjures up images of developing nations (and the occasional Eurozone peripheral economy of late) facing some kind of financial difficulty. But it was actually Great Britain, the cradle of the industrialized world, which in 1976 became one of the first countries ever to be “bailed out” by the IMF in the modern sense of the term.
Now, previously the IMF had already provided financial assistance plenty of times, including to several advanced countries. Out of the 22 countries which were part of the OECD in the 1960s, no less than 8 negotiated new IMF programs during that decade, including France (1969), Japan (1962, 1964), Great Britain (1961-64, 1967, 1969) and even the US (1963-64). But these had been mostly to address short-term balance of payment issues.
Britain’s bailout in 1976, on the other hand, had strict conditionality elements with deep repercussions on the prevailing political ideology, sparking an intense private and public debate at the time as to whether the country should actually accept it. This episode inaugurated a much more interventionist approach by the IMF, anticipating many features of modern assistance programs.
The bailout arguably marked the culmination of a secular decline which had begun decades earlier. With the emergence of America and the Soviet Union as the global ideological and de facto superpowers at the end of World War II, the sun was setting fast upon the British Empire, which would fade away not long after. Still, in the postwar decades Great Britain offered plenty of prosperity, along with a free and vibrant society (who can ever forget the swinging sixties?), world-class music bands, abundant energy supplies and a respectable manufacturing sector.
Then came the 1970s. And things got bad pretty quickly.
Relevant posts:
- Boskin J. Μ. (2014) “Europe’s Options“, Project Syndicate, 22 July.
- Dell’Ariccia, G. and Ratnovski, L., (2013) “Bailouts and Systemic Insurance“, International Monetary Fund, WP/13/233, November.
- Stevis, M., (2013) “Statistics Show Bailout Countries’ Slide Away from EU Targets“, The Wall Street Journal, 29 October.