18.3 Labour's post war BoP problems

Question 1

Why did Britain face a post war financial crisis? (4)

Answer 1

• £4198m debt
• 1945-46 spent £750m abroad more than it received
• 60% fall in exports
• Military overseas spending (Korean and Cold War + NATO)

Question 2

Why was the US both of help and a problem from 1945-46?

Answer 2

• US cancelled the Lend-lease scheme (£27bn)
• Keynes negotiated loans BUT there were conditions like

   - End preferential trading with countries in British 
     Empire
   - Accept free trade policies with America
   - £ convertible to $ within a year (made $ very 
     strong

Question 3

What impact did the 1947 Winter Crisis have on Britain? (4)

Answer 3

• Terrible winter
• Food shortage
• Fuel crisis which hindered manufacturing
• US loan ran out, people converted £ to $ but ran out of $

Question 4

Which year was the Winter Crisis?

Answer 4

1947

Question 5

What were two main aspects of British recovery from 1947?

Answer 5

• American Aid. From 1947 America feared the spread of communism as a result of poverty and led to the Marshal Aid Plan $2.7 to Britain (more than any other beneficiary)
• Drive for exports increase of 80% 1946-50 and by 1950 exports were 50% higher than in 1937

Question 6

What economic setbacks did Britain face after 1949? (3)

Answer 6

• American recession reduced the demand for British exports = BoP crisis 2.0
• Cripps (Chancellor after Dalton) devalued £ from $4.03 to $2.80. Whilst it made British exports cheaper allowing BoP to be in surplus in 1950 it affected morale
• Korean War (1950-53) also caused BoP crisis 3.0 but it still was in a better condition than it had been in 1945.

Question 7

Where was ‘we cannot hope to increase our standard of living – or even maintain it’ said?

Answer 7

Economic survey 1947

Question 8

What was the Winter Crisis of 1947?

++What were key repercussions?

Answer 8

There was a fuel crisis in 1946-47 in which all transport was halted because of heavy snowfall. Coal could not be transported to power stations and Minister of Fuel Emanuel Shinwell had failed to stockpile enough.

++ Industries temporarily closed alongside 2m people unemployed draining American loans faster than anticipated

Question 9

Which industry was particularly booming in the drive for exports post-war?

++ and why

Answer 9

Motor vehicles was very successful x2 of pre-war peak

++ Reduced competition as other countries like Germany and Japan had been impacted by war

Question 10

How was Attlee’s government successful / not successful in the recovery of BoP problems?

Answer 10

GOOD

• Boosted agriculture as they produced more domestic good keeping imports lower so BoP good BUT expensive subsidies
• Boosted industry and regional equitability. ½ of all new factories 1945-51 were created in ‘depressed areas. Staples and new industries were kept on an export drive
• Kept interest rates, inflation and wage rates low so it was easier to invest, expand and import
• Wages kept down through talks with TU – cheaper to produce

NOT GOOD

• Real wages rose only 1% 1945-50
• Government controls began to hinder production despite some relaxation in 1951 there were strict restrictions