The immediate decades after the second world war are often characterised as a ‘golden age’ of capitalism, where high rates of economic growth underpinned a significant improvement in living standards.[1] This article provides a brief overview of what this ‘golden age’ looked like for the UK in the 1950s: how the economy developed, the government’s approach to managing that development, and what it meant for households across the country.

1. The transition to a peacetime economy

Emerging from the second world war, the UK economy was subject to “widespread controls on consumption (through rationing), investment (principally through the allocation of materials), imports, and prices”.[2] By 1950 most controls were on their way out; however, their lifetime was extended by the Korean war and the rearmament that followed.

The rearmament process led to acute shortages of raw materials and steep price rises for all kinds of primary commodities.[3] These events significantly increased the cost of imports, leading to a balance of payments crisis. Controls were revived to manage the situation and a succession of import cuts were made in late 1951 and early 1952.[4] This action, as well as similar action taken by trade partners who also acted to restrict imports, checked the momentum of the economy.[5] Inflation increased sharply in 1951 (table 1), with a growth slowdown and rise in unemployment following in 1952 (figure 1).

Table 1. Retail price index inflation, 1950–59

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959
Inflation (%) 3.1 9.1 9.2 3.1 1.8 4.5 4.9 3.7 3.0 0.6

(Source: Office for National Statistics (ONS) data series ‘CZBH’, 15 November 2023)

2. Stop-go growth

Following the 1952 downturn, growth reaccelerated, inaugurating the so-called ‘stop-go’ pattern of UK economic growth which would persist through to the 1960s. During these years fiscal and monetary policy were used very actively with the intention of keeping the economy ‘fine-tuned’ within certain limits. If the economy was running too hot, with prices rising too quickly and the economy pulling in more imports than it could sustainably afford, policy would aim to ‘deflate’ the economy to reduce inflation and return imports and exports to balance. If the economy was running too cold and unemployment was rising beyond an acceptable level, policy would aim to stimulate demand to boost growth and reduce unemployment. As described by economic historian Jim Tomlinson, “stops came when the [foreign exchange] reserves fell to ‘unacceptable’ levels, goes followed when the deflation raised unemployment to an unacceptable level”.[6]

The outcome of this approach can be clearly observed in figure 1. The growth slowdown and unemployment spike of 1952 gave way to a three-year upswing, with growth over 4% per annum and unemployment falling each year from 1953 to 1955. By 1956 prices were increasing at what was judged to be an unsustainable rate, thus leading to a more contractionary macroeconomic stance (higher taxation and higher interest rates). Growth then slowed to under 2% for the 1956 to 1958 period, with unemployment rising each year. The decade then ended with another upswing, with growth increasing back up to over 4% in 1959, this time supported by the relaxation of consumer credit controls. (Unemployment would fall back down to near 2% the following year as growth accelerated further.)

Figure 1. GDP growth and unemployment, 1950–59

Figure 1: The figure illustrates the pattern of GDP growth and unemployment described in the previous paragraph.
Sources: ONS data series ‘IHYP’, 10 November 2023; and Bank of England, ‘Research datasets: A millennium of macroeconomic data’, 2016

3. Public investment and fiscal sustainability

Investment underlaid the expansion of the economy, but the nature of that investment changed significantly over the course of the decade. As illustrated in figure 2, public investment was predominant in the early part of the decade, averaging almost double the level of private investment during these years. This partly reflects the various controls that private investment was subject to during this time, which were motivated in part by scarcity of physical resources.[7] However, it also reflects the ambitious nature of the public investment drive. At 7.3%, public investment as a share of national income during the 1950s was almost three times as much as it was during the interwar years (2.7%), for example.[8] Private investment did significantly increase in the latter half of the decade as controls on investment were removed, and because public investment remained relatively high, this saw total investment increase, from 10.9% of GDP in 1950 to 16.1% in 1959.

Figure 2. Investment (% GDP), 1950–59

Figure 2: This figure shows public and private investment as a share of national income during the 1950s. In the early part of the decade public investment is around 7 to 8% of GDP with private investment only around half of that. However, the figure shows a significant rise in private investment from 1954 onwards. By the end of the decade private investment is about 9% of GDP, ahead of public investment which settles at around 7% of GDP.
Sources: ONS data series ‘NPQS’, 10 November 2023; ONS data series ‘ANSQ’ , 21 November 2023; and ONS data series ‘BKTL’, 10 November 2023

Public debt had increased rapidly during the war and by the start of the 1950s the government’s debt-to-GDP ratio was around 200%—about double what it is today. However, favourable fiscal dynamics saw the ratio rapidly fall over the course of the decade. Despite the high rate of public investment and the use of fiscal policy to ‘fine-tune’ the economy, public borrowing remained low throughout the decade, which ensured the government did not add too much to its existing debt burden in absolute terms. And because the economy was growing fairly quickly, the debt burden declined in relative terms. By 1959 the debt-to-GDP ratio had fallen to 112%, as illustrated in table 2. Interest rates did ratchet up over the course of the decade (as part of the ‘stop’ policy cycles), but the rapidly declining debt-to-GDP ratio ensured that the government’s debt interest costs remained under control.

Table 2. Fiscal dynamics

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959
Public sector net lending(+)/borrowing(-) (% GDP) 4.7 0.7 -1.8 -3.2 -1.6 0.3 -0.8 -0.2 0.1 -2.1
Public sector debt

(% GDP)

200.6 178.5 165.1 156.5 150.5 139.3 128.3 121.7 116.6 112.4
Public sector debt interest (% GDP) 5.0 4.9 4.9 4.8 4.7 4.7 4.4 4.3 4.5 4.4
Bank rate (%) 2.0 2.1 3.7 3.9 3.2 4.3 5.4 5.6 5.4 4.0

(Sources: Bank of England, ‘Research datasets: A millennium of macroeconomic data’, 2016; and ONS data series ‘BKTL’, 10 November 2023)

4. Having it so good

Taken together, the macroeconomic developments of the 1950s saw real-terms incomes rise. Although prices rose to a considerable extent over the course of the decade, real-terms wage gains were underpinned by strong productivity growth, with a system of industrial relations in place which ensured that productivity gains were passed on to workers in the form of higher wages.[9] By 1959 real-terms household disposable income was 22% greater than it was in 1950.

Figure 3. Household income and the price level, 1950–59 (1950=1)

Figure 3: This figure shows the relative rise of gross disposable household income and the retail price index over the course of the 1950s. The two variables move in line with each other for the first few years of the decade, but then the gross disposable household income variable starts to move significantly ahead of the retail price index variable by the end of the decade.
Sources: Bank of England, ‘Research datasets: A millennium of macroeconomic data’, 2016; and ONS data series ‘CZBH’, 15 November 2023

Towards the end of the decade the then prime minister, Harold Macmillan, remarked that “most of our people have never had it so good”, a comment which has been invoked to capture the spirit of the decade.[10] Macmillan supplemented this by claiming that the prosperity being generated during this period was amongst the most widespread the country had experienced, inviting people to “go around the country, go to the industrial towns, go to the farms” to see the evidence. On this specific point, Macmillan appears to be supported by recent evidence. Economic historians Frank Geary and Tom Stark have described the decades after the second world war as a “golden age of economic growth for regions outside the South East” and estimated that regional inequality was lower during this period than at any other point during the 20th century.[11]

Cover image by Allan Hailstone/Vintage Everyday. Image shows Piccadilly and Piccadilly Circus, February 1956.


  1. For example, see: Stephen A Marglin and Juliet B Schor, ‘The Golden Age of Capitalism: Reinterpreting the Postwar Experience’, 1992; and Eric Hobsbawm, ‘The Age of Extremes’, part 2, 1994. Return to text
  2. G C Peden, ‘The Treasury and British Public Policy, 1906–1959’, 2000, p 362. Return to text
  3. Alec Cairncross, ‘The British Economy Since 1945’, 1992, p 55. Return to text
  4. As above, pp 102–4. Return to text
  5. United Nations, ‘World economic report: 1951–52’, April 1953. Return to text
  6. Jim Tomlinson, ‘Public Policy and the Economy Since 1900’, 1990, p 257. Return to text
  7. Marvin E Rozen, ‘Investment control in post-war Britain, 1945–1955’, Canadian Journal of Economics and Political Science, May 1963, vol 29, issue 2, pp 185–202. Return to text
  8. Author’s calculations drawing on data from: Bank of England, ‘Research datasets: A millennium of macroeconomic data’, 2016. Return to text
  9. William Brown, ‘Industrial relations and the economy’, in Roderick Floud and Paul Johnson (eds), ‘The Cambridge Economic History of Modern Britain’, 2004, pp 399–423. Return to text
  10. BBC, ‘On this day: 20 July 1957’, accessed 17 November 2023; and Peter Hennessy, ‘Having it So Good: Britain in the Fifties’, 2007. Return to text
  11. Frank Geary and Tom Stark, ‘What happened to regional inequality in Britain in the twentieth century?’, Economic History Review, 2016, vol 69, issue 1, pp 215–28. Return to text