Dynamics of a Non-Decision: the ‘Failure’ to Devalue the Pound, 1964–7
Harold Wilson's delay in devaluing the pound until November 1967 is still widely thought of as a fatal mistake, despite recent work which has emphasized the economic case for not surrendering sterling's parity with the dollar. This paper re-examines not just the economic but also the political reasons behind the Labour government's defence of the national currency and does so in order to explain both the initial rejection of devaluation and its eventual acceptance. It concludes that the government tried to avoid devaluation in order to avoid disruption to the worlds financial system and because it believed it would not solve Britain's long-term economic problems. The government also knew that it would be electorally damaging, and that the attack on public and private spending that would have to accompany it would threaten its parliamentary survival. Devaluation occurred in 1967 because of a complex series of contingent events. But devaluation also took place because the government could convincingly argue to the outside world that it had done its utmost, because its alternative approach failed to deliver the goods in time, and because, having an increased majority, it decided to face down rather than pander to its own parliamentary supporters.