The Debacle of 1955

Abstract

By late 1954, inflationary pressures had become well established after the quick recovery from the slowdown of 1952 and the rapid domestic demand growth of 1953 and 1954 (Chapter 4), and despite a considerable improvement in the public finances (Figure A2). These pressures continued into 1955. Domestic demand growth was unabated in the first half of the year, the labour market continued to tighten, retail price inflation continued to rise (Figure A3), and the current account of the balance of payments went into deficit (Table A1). Moreover, the Churchill administration was notably accommodating of wage demands. Butler commented that ‘Churchill … with unhappy memories of the General Strike to live down, was determined to pursue a policy of industrial appeasement, even at the cost of highly inflationary wage settlements’.¹ Such a policy, combined with a commitment to high employment, was likely to have inflationary results.