The UK economy
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At the time of the 1908 Olympics, the UK, at the heart of the largest empire in the world, was only just beginning its decline from being the world’s economic superpower.
There was increasing competition, chiefly from the US, France and Germany, for the title of most industrialised and powerful country. However, the UK was still booming, and including the output of its colonies, it remained (just) the largest economy in the world. Though the benefits were far from evenly distributed, industrialisation over the previous century had led to increasing affluence for some households. This in turn strengthened the demand for British manufactured goods at home, while the preferential trade arrangements with the rest of the Empire kept exports high and imports cheap.
By 1948, two world wars later, the UK was no longer the economic or political superpower it had once been. The economy was emerging from a severe recession, contracting in each of the four years prior to the Games. At home, rationing meant that even when money was available, spending was subdued. Overseas, the UK could no longer rely on demand for its products from the Empire to shore-up the home economy. It had lost the ‘jewel in the crown’ of its Empire, India, the year before, and the Atlantic Charter (1941) had promised its colonies the rights to self determination.
Even if the political will to hold on to Empire had existed, it would not have been possible as the UK no longer had the resources to enforce it. As Keynes put it to government ministers shortly after the war, Britain’s world role was a burden which ‘there is no reasonable expectation of our being able to carry.’
1948 was a turning point for the UK economy: grants from the United States worth $2.7bn under the Marshall Plan may not have saved face, but are estimated to have saved 1.2m jobs and raised national income by 10%. It seems unlikely that 2012 will prove to be the same. Following the global economic downturn of 2008-09, when the economy contracted by 7.3%, the UK entered the 2012 Olympic year by returning to technical recession, and output remains 4% below its pre-recession peak.
Games theory: 1948 was a turning-point for the UK economy, but it is unlikely 2012 will prove to be the same
The chart shows the year-on-year change in UK economic output (gross domestic product) in the periods before and after the London Olympics.
Note: Figures for 2012 and 2013 are forecasts.