(15) Trade, commerce and the economic impact of war Flashcards
Economic impact of WW1 (General)
Cost over £35,000 million (13x Boer War) = $4 billion just from US
Pound Sterling had to be removed from the gold standard as gold reserves ran so low
Britain lost its traditional markets to competitors to produce for the war, some of which were never recovered
British textiles faced great competition from Japan
The Great Depression in the 1930s collapsed international trade for British markets and forced the country off the gold standard again
Economic impact of WW1 on India
India contributed almost £146 million and experienced inflation and shortages
The decrease in British exports from the 1/3 ratio in 1914 however gave rise to Indian domestic industrial growth, accelerated by the increase of Indian import taxes in the UK to 25% in 1931
Canada in the interwar years
Example of failure of protectionism - imports fell from $1272 million in 1929 to $368 million in 1933
Payment of interest and dividends increased from $240M in 1926 to $348 at its peak in 1930
1930 - deficit 6% of GDP
1931 merchandise exports earned only $601M, less than half their 1926-8 average
Hit worst of all dominions by 1929 slump GDP per capita was $5000 in 1929 but was $3600 by 1932 and recovered the worst to $4100 by 1937
Australia in the interwar years
1929/1930 deficit averaged £52 million per year - 7% of GDP
International markets deteriorated in 1929 and Australia experience funding difficulties and a sharp rise in short-term debt
South Africa in the interwar years
Enjoyed economic expansion after price of gold increased in 1933 from American devaluation
Was the only dominion to increase in British imports
Britain’s policy straight after WW1
In the 1920s Britain tried to recreate the trade system which existed in 1914 and thus returned to the gold standard in 1925
The Great Depression however made Britain realise the importance of its Empire to sustain its trade and was forced to abandon the gold standard in 1931.
Most Empire countries fixed their currency to the value of the sterling
This created the Sterling Area which Britain could trade and soften the blow of the Great Depression
Britain growing reliance on the Empire
British exports to Empire: 37.2% in 1913 – 44% in 1934
Motor vehicle exports to Empire: 67.4-71.7%
Railway carriage exports to Empire: 58.4-68.3
Imperialists such as Lord Beaverbrook, the newspaper magnate asked for the return of ‘imperial preference’
It was decided at the Ottawa Conference of 1932 that:
A general 10% tax on all imports except from the Crown Colonies
Britain and Dominions gave each others imports preference
Imperial imports: 1913-24.9%, 1934-35.3%
Cocoa imports from Empire: 1913-50.9%, 1934-90.7%
New Zealand and the Slump
Actually had growth
GDP per capita dropped in 1929 to $4,300 but grew to $6,200 by 1937
WW2 economic issues during the war
Lost 11.7M tons of shipping in the war, 54% of its merchant fleet at the start of its war
The loss of colonies in South East Asia to the Japanese from 1942 cut off supplies of vital materials such as rubber from Malaya
Britain’s balance of trade was heavily in deficit during the war despite campaigns to reduce imports (“dig for victory”)
A third of British overseas assets were sold during the war and Britain borrowed from the USA from 1941 using Lend-Lease
Britains dual approach
A dual approach was created where Britain abandoned imperial control of colonies which were not cost effective to run but invested heavily in colonies such as Malaya for its rubber and tin industry which could benefit the Britain’s international trading system and bring in foreign currency like the much needed dollar.
The Colonial Development and Welfare Act of 1940:
o Wrote off some colonial debts
o Provided colonial grants or loans of up to £5 million a year
• Second Colonial Development and Welfare Act of 1945
o Increased aid to £120 million over ten years
o Required colonies to produce a ten year development plan to show how they would use the funds
Sterling Crisis
In August 1945 the USA ended Lend-Lease and John Maynard Keynes negotiated a massive US loan ($900 million) but the conditions were tough and the dollar had to be freely convertible to dollars by the spring of 1947
Britain had run out of its dollar reserves within six weeks of 1947 and had to suspend the free convertibility thus revealing how weak the British economy had become
Positive of Empire after WW1
Was able to use colonies to soften blow
Took 59% of its investment and 43% of its exports in 1927
Increased Canadian trade due to protectionism and slump, from 3.9% in 1929 to 8.8% (exports)
Britain imports rose 2.1% from 1929 to 1931 which meant primary producers were reliant on sales to Britain and with tariffs it meant the colonies had something to bargain for
British weakness after WW1
Imports rising (2.1% from 1929-1931) but exports falling International trade grew by 37.5% from 1913 to 1929 but Britain had not regained its 1913 levels British global manufactured goods fell from 30.2% in 1913 to 20.4% by 1929 Merchandise deficit - 1924 imports above 1913 levels but exports 25% below Slump depressed government revenues but led to extra social expenditure
British imports and exports to Dominions in inter-war years?
Exports 1909-1913 - 17.5% 1925-29 - 20.6% 1934-38 - 25.9% Imports 1909-13 - 14.3% 1925-29 - 16.9% 1934-38 - 24.4%
British imports and exports to India and Burma in inter-war years?
Exports 1909-1913 - 11.9% 1925-29 - 11.6% 1934-38 - 8.0% Imports 1909-13 - 7.3% 1925-29 - 6.1% 1934-38 - 6.5%
