15. trade, commerce and economic impact of war 1914-1947 Flashcards
general economic impact of the war on Britain
- required the whole economy to be placed on a war footing
- huge amounts of public finances were directed towards the war effort, leaving Britain in severe debt
- much of the capital investment overseas had been wiped out
- the pound sterling had to be removed from the gold standard as reserves ran so low
- left Britain with a massive national debt, amounting to around £7 billion
- as the economic burden of the Empire grew, Britain’s ability to pay for it diminished
impact of the war on the gold standard
- suspended during the war to finance military spending and was considered a measure of last resort
- led to devaluation of the point and made it harder to control inflation
- Britain struggled to return to the gold standard
- led to a loss of confidence in the economy
impact of the war on export industries
- production for the war was prioritised over making goods for export to traditional overseas markets
- meant competitors were able to win markets traditionally dominated by British exports
- not all markets were won back after the war
impact of the war on industries
- traditional industries such as textiles, shipbuilding,coal and iron experienced difficulties between the wars as they faced new overseas competition
- Japan in textile production
- struggled to maintain pre-war output
impact of the Great Depression
- the 1930s Great Depression intensified these problems
- saw a collapse of international trade and markets for British industrial exports
- a financial crisis in 1931 forced the country off the gold standard again, reducing earnings from investments
economic impact of the war on India
- contributed £140 million to the war effort, experiencing inflation and shortages as a result
- exports such as cotton and tea were redirected to support the war, and the economy faced strain as a result
- in 1914, 2/3s of India’s imports came from Britain but this began to fall due to wartime disruption to trade and because of the growing strength of foreign competition
- manufacturers began to capture more of the domestic market
- Britain placed high taxes on Indian imports after the war for revenue
- this gave Indian industry protection against its competitors
economic impact of the war on Canada
- emerged as an industrial power
- British manufactures lost ground
- increasingly looked to the US for investments and markets as the inter-war period progressed
- sent over 61,000 soldiers
- the manufacturing sector grew rapidly to supply munitions and war-related goods
economic impact of the war on Australia and New Zealand
- as exporters of food, they heavily relied on the British market
- were harshly impacted by the disruption of trade caused by the war
- caused economic challenges with rising inflation and wages stagnating, creating social unrest
phases of imperial trade during the inter-war period
- in the 1920s, tried to recreate the economic system that had existed before 1914 and so returned to the gold standard in 1925 to stabilise its international trade
- an exception to this policy was the Colonial Development Act of 1929 which provided Treasury funds to support colonial development projects
impact of the Great depression on policy
- a much greater emphasis was placed on the importance of Empire for commerce and imports increased
- forced to abandon the gold standard in 1931
- trade with the Empire in sterling proved a great asset
the Sterling Area
-most countries of the Empire fixed the value of their currencies to sterling and some kept their national reserves in sterling, reflecting close ties with Britain
-gave access to the British market for countries in the Sterling Area as they agreed to hold their reserves in sterling and trade with Britain in British currency
- allowed Britain to have more control over foreign trade and manage its national debt more effectively
- meant Britain could use the Empire to soften the impact of the damaging effects of the Great Depression
value of imperial trade and commerce for Britain
- still an important part of the economy but its importance was gradually declining
- by the 1930s, 45-50% of Britain’s total exports went to the Empire, compared to 60% pre-WW1 due to competition from other powers
- primary exports to the empire included manufactures goods such as textiles and machinery while raw materials such as minerals and oil came from the colonies
- the promotion of imperial trade rather than its total volume marked the British change in policy
statistics of British exports
- total value of British exports the world in 1913= £525 million, 1934= £378 million
- total value of exports to the Empire in 1913= £195 million, 1934= £166 million
exports to the Empire
- cotton textiles were prominent, especially to markets of Asia and India
- these began to fall as competition from Japan and other emerging economies began to be encountered
- until the 1930s, the Empire remained important for cotton textile exports
imperial preference and Lord Beaverbook
- imperialists argued for a return of imperial preference to exclude competitors
- this was opposed by the Dominions which wished to protect their own growing industries and seek their own trade deals with other nations, particularly the US
1932 Ottawa Conference
- Britain introduced a 10% tax on all imports but the Crown Colonies were exempt
- Britain and the Dominions gave each other’s exports preferential treatment in their own markets
- reinforced the important role of the Empire in supplying foodstuffs and raw materials to Britain
- resulted in greater trade unity within the Empire but exposed the growing economic dependence of the Dominions
imperial trade not being uniform
- certain parts of the Empire increased their commercial links more than others
- the Dominions became an important link for British exports and a more significant supplier of imports
-while India remained an important supplier of tea and jute, and grew in importance in supplying cotton, it absorbed fewer British exports as markets were won by the Japanese and by emergent Indian cotton textile producers - Canada and Australia became more economically independent
economic problems for the Dominions
- Australia and New Zealand experienced severe economic problems as the cost of their imports from Britain outstripped the income from their exports
- both ran up debts with Britain
- Canada was heavily impacted by the Great Depression and so sought trade deals with the US which became its main trading partner
- Australia suffered due to falling demand for its primary exports like wool and wheat
- rising competition for Australian markets made it harder to rely on the Empire for economic stability
general impact of WW2
- Britain faced an enormous military expenditure, a severe reduction in industrial output and the destruction of infrastructure
- caused massive debt for Britain
- gold reserves were severely depleted and Britain was unable to export goods, relying heavily on imports
- economic disruption led to widespread economic measures to reduce government spending as well as rationing
impact on British trade
- trade patterns were drastically affected by the war
- most of Britain’s shipping capacity was destroyed and trade routes were disrupted
- the empire trade struggled to this disruption
German U-boart attacks
- attacks on sea traffic caused a loss of 11.7 million tons of shipping
- lost 54% of the country’s merchant fleet strength
- was a major threat to trade as merchant shipping was regularly targeted
- significant portions of the supply chain for goods and military resources were destroyed
loss of colonies in South East Asia
- the loss of colonies to the Japanese from 1942 disrupted trade and cut off supplies of vital raw materials such as rubber from Malaya and oil from Burma
- the loss of these meant Britain could no longer rely on its colonies for vital raw materials
- marked a shift in Britain’s imperial dominance in South East Asia as Japanese occupation undermined British influence in the region
diversion of industrial production
- the diversion of production to producing weapons of war meant less was produced for export
- much of its industrial capacity was redirected towards military production
- Britain tried to reduce imports by campaigns to increase home production and food rationing but its balance of trade was heavily in deficit during the war
- labour shortages in key industries became a problem
overseas assets sold
- to finance the war, Britain was forced to sell significant amounts of its overseas assets
- 1/3 were sold to pay for the war
- major foreign investments were liquidated, and Britain’s holdings in countries like Argentina and South Africa were sold to generate funds
- these sales reduced Britain’s global financial influence, and so it found itself less economically powerful than prior to the war
- the loss of international reserves meant its ability to trade and maintain its economic position on the global stage was diminished
- borrowed from the US from 1941 in the form of Lend-Lease, emerging with massive debts from the war
increased dependence on Empire for imports
-there was considerable investment by colonial governments, such as in Africa to help increase the supply of foodstuffs and raw materials
- Empire became more crucial for supplying goods
colonial reserves used to pay for war effort
-colonial reserves such as gold, rubber and minerals were used to help finance the war effort
- these were depleted during the war and many colonies experienced economic strain as their natural resources were redirected to support the British military
- India and Africa saw their raw materials diverted to Britain at the expense of local economies and infrastructure development
ending of Lend-Lease
- in 1945, Britain’s economic position was worsened when the US ended Lend-Lease as it wasn’t prepared to financially support a revived Empire
- placed financial pressure on Britain as it could no longer rely on American aid to maintain its economy or war effort
- Keynes negotiated a US loan in 1945 of around £900 million but conditions were tough as the pound sterling had to be made freely convertible to dollars by 1947
1947 Sterling Crisis
- free convertibility would require the Bank of England to be able to exchange sterling for dollars, at a fixed rate
- the US dollar loan was supposed to enable Britain to build sufficient reserves to do this by 1947
- Britain almost ran out of its dollar reserves within 6 weeks, largely because of imperial demands, and so had to suspend free convertability
- revealed how weak the economy had become
emergence of the dual approach
-where the costs of controlling a colony massively outstripped its actual or potential value, imperial control was abandoned such as with India and Burma
- where colonies were regarded as of economic benefit to Britain, a new emphasis was placed on colonial economic development
- rubber and tin industry of Malaya which could command major industrial markets received heavy government investment as it was hoped this would earn large amount of foreign currency and benefit Britain’s international trading position
1940 Colonial Development and Welfare Act
-wrote off some colonial debts
- provided colonial loans or grants of up to £5 million per year
- a key part of the postwar recovery strategy
- aimed to promote economic development and social welfare in the colonies by providing financial aid
- represented an effort to modernise and reinvest in its colonies
1945 Colonial Development and Welfare Act
- increased financial aid by allocating £120 million over 10 years for development and welfare projects
- encouraged colonies to develop long term development plans
- funding was to be used for infrastructure projects, education, healthcare and agriculture to improve living conditions
- aimed to strengthen the Empire as a trading partner
extent economic effects of ww1 did damage the empire
- came out of the war in huge amounts of debt, reducing investment
- lost overseas markets in its empire which allowed the colonies to become more independent
- growing opposition meant the empire was more costly to control and Britain struggled to pay to maintain order
- less informal empire with loss of investment
extent the economic effects of WW1 didn’t damage the empire/ strengthened it
- gained access to oil in the Middle East
-economic rivals such as Germany were economically shattered - managed to maintain most of its overseas trade
- new territories in Africa gave access to raw materials
overall impact of ww1 on the economy
- Britain remained the economic superpower with the largest foreign trade, the largest foreign income, the largest share of international services and the largest merchant fleet
- the war brought a critical change, though it took time for the effects to become obvious
significance of the impact of ww2 in changing the Empire
- cost of the war led Britain to have to sell its overseas assets, reducing its informal empire
- forced to prioritise its resources and had no choice but to leave territories when they were no longer economically beneficial
- had huge debts to the US and the sterling crisis showed the weakness of the Sterling especially compared to the dollar
