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Book of the week: A look back at Britain's currency crisis
Book review: When Britain Went BustThis is an extremely readable account of a moment when domestic politics and global finance collided.
Nothing epitomised the breakdown of the post-war economic order more than Britain's 1976 currency crisis, but there have been few detailed studies of the events that culminated in Britain requiring a loan from the International Monetary Fund. OMFIF, a think tank, has attempted to fill the gap with When Britain Went Bust: The 1976 IMF Crisis, a monograph by Richard Roberts, a financial historian at King's College London, that analyses what happened during those momentous months.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
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The crisis had its roots in structural problems, including chronic deficits, poor labour relations and unproductive industry. However, it started when government budget plans were defeated in March 1976. Within a few months the value of sterling had plunged by a quarter. As money flowed out of the country, international lenders demanded large cuts to state spending in exchange for the loans that were seen as necessary in order to stop further falls. In contrast, a rebel cabinet faction called for import controls and mass nationalisation of Britain's leading companies instead. Ironically, as Roberts points out, all sides underestimated the amount of money that Britain would subsequently get from oil revenues.
Roberts draws on many sources, including cabinet papers, press reports and biographies, but also takes advantage of recent literature on currency crises. The result is an extremely readable account of a moment when domestic politics and global finance collided. While it is aimed at financial economists, it will also appeal to those who enjoy reading about British political history.
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