England's Economy

England’s Economy

        The English economy has a colorful and interesting history of development. Between 1688 and 1815, a trade stimulus was affecting the British Empire in a way that had never happened before, and it was a powerhouse of trade (Morgan). At the peak of their rule in the 19th century, the British Empire had dominated trade and stimulus in every way possible by using their merchant navy and transporting their goods to key areas such as the East India Company, which effected and ran through much of South Asia and India ("UK Economy: UK Economic History" 1). Although, during the time period of World War I, World War II, and following these, the United States of America established itself as the main economic power in the world ("UK Economy: UK Economic History" 2).

        The current economic policy of England includes certain aspects such as a rollback of public spending to control the deficit. There are also significant tax cuts that have occurred that included corporation tax as well as progressive tax cuts on income taxes (Peacock 1). There are also highlighted portions that show that there are enterprise schemes to invest into the infrastructure itself, which is largely due to their deficit ranging around the USD equivalent of $2,764 billion (Peacock 2). As for their controlled exchange policies, the Bank of England does not have a specific policy to target the exchange rate, however, the MPC does consider these rates (Exchange Rate Policies 1). The MPC keeps an eye on the competitiveness of exports for this to make sure rates do not become too high, because the UK will then become uncompetitive in the market (Exchange Rate Policies 2). England’s exchange rate system has changed from being fixed to floating over the years from 1944 to 1992. Following 1992, this became a floating exchange rate (Fixed and Floating Exchange Rates 1). Their currency is then determined by the market demand for the supply and demand for it, which then in the long run is the macroeconomics perspective that drives the value of the currency and thereby is no pre-determined official target exchange rate that the government sets (Fixed and Floating Exchange Rates 2).

        The U.S. trade balance with England is that of a negative number. In the year 2014, the total exports numbered 53,865.1 and the total imports were 54,048.5, with a total balance of -183.5 (Foreign Trade 1). The way that this was influenced through the currency policy is the higher return on interest when investors receive a higher return for their exports in England, and this makes their assets more attractive (“How Monetary Policy Works”). Just like there are implications for everything, there are possible implications of trade between England and the United States. From this, there can be a possible trade deficit, which is when a country is importing more goods than they are exporting. Since the numbers of the previous 2014-year were very close together in exports and imports, there could be a possible problem with this that could affect trade if England were to export more than they were importing in the future (Foreign Trade 2).