Dynamics of a Non-Decision: the 'Failure' to Devalue the Pound, 1964-7

Harold Wilson's delay in devaluing the pound until November1967 is still widely thought of as a fatal mistake, despiterecent work which has emphasized the economic case for not surrenderingsterling's parity with the dollar. This paper re-examines notjust the economic but also the political reasons behind theLabour government's defence of the national currency—anddoes so in order to explain both the initial rejection of devaluationand its eventual acceptance. It concludes that the governmenttried to avoid devaluation in order to avoid disruption to theworlds financial system and because it believed it would notsolve Britain's long-term economic problems. The governmentalso knew that it would be electorally damaging, and that theattack on public and private spending that would have to accompanyit would threaten its parliamentary survival. Devaluation occurredin 1967 because of a complex series of contingent events. Butdevaluation also took place because the government could convincinglyargue to the outside world that it had done its utmost, becauseits alternative approach failed to deliver the goods in time,and because, having an increased majority, it decided to facedown rather than pander to its own parliamentary supporters.