1b: Responding to economic challenges Flashcards
outline the economic overview between 1920-21
- after a brief post war boom, a devastating economic slump led to a huge increase in unemployment and poverty from 1920-21
where were the hardest hit areas in britain
the hardest hit areas were the regions associated with heavy industry, the south Wales coal fields, the shipyards of Tyne and Clydeside and the mining areas of northern England
how did areas associated with heavy industry suffer more than the rest of the country
during the 1930s the depressed regions suffered disproportionately to the rest of the country . The National Unemployed Workers’ Movement organised several hunger marches, protesting against poverty and the means test
in more affluent parts if the country the 1930s were a time of ?
- in more affluent parts if the country the 1930s were a time of growing living standards, jobs and consumer goods
outline the major parties approach to the economy in the post war period
- the Labour party wished to continue government intervention in the economy after the war and pursued a policy of nationalisation
- during the same period both Labour and Conservative parties had a broad agreement over the management of the economy, with a commitment to full employment, nationalisation and tolerance for a degree of price inflation
what enabled an increase in consumer spending in the 50s
- the 1950s saw a relaxation in consumer credit and an increase in new products available to buy, leading to a dramatic increase in consumer spending
what were signs of the consensus being challenged
- in the late 1950s the first sign that the consensus on the economy was being challenged came from within the Conservative Party senior treasury ministers resigned, arguing that Macmillan should adopt monetarist policies
summarise what was happening with inflation and the impact on unemployment throughout the 1960s
- throughout the 1960s inflation began to gradually increase and by 1970s so did unemployment
harold wilson and the economy
- Harold Wilson’s attempt to modernise the British Economy were undermined by his high spending plans, his refusal to devalue the pound and relative economic decline
britains economic status after ww1
emerged from the war economically damaged for many reasons
- war lasted longer than they thought and commanded more resources as a result
industries forced to switch to war production instead of supplying export markets
- by 1918 lost >3/4m men which impacts on production
- total financial cost was £3.25b
what percent of ships did german u boats sink and how did this affect income
had been cut off from valuable export markets by German U-boats; sank 40% of our merchant shipping, in 1914 exports were 1/3 of income but by 1918 only 1/5
debt after ww1
by 1920 total debt was £8b, budget was £800m and £300m went straight on paying off debts
income tax rose by how much in 1924
- 1908 standard rate of income tax was 5% but rose to 25% by 1924
summarise the short lived boom, 1918-20
- lack of wartime restrictions meant everyone started buying; war meant that many had accumulated considerable savings in cash and bonds
- throughout 1919 consumers and businesses spent their savings; individuals buying items like coffee, soap and cigarettes and businesses bought and sold stocks/shares
- amount of shares issues: 1918=£65m by 1920=£384m
- investors bought old industries: shipyards, cotton mills, coal mines; poor investment choices as the monopoly that GB once had prewar had vanished due to new competitors, USA, Japan, South America; industries outdated and had received little wartime investment
- 1919 there was a surplus of ships
- wartime industries returning to civillian use couldn’t keep up with demand; goods in short supply were expensive which meant demand declines and the boom ended
summarise the effects of the 1920-21 recession ->
unemployment levels
cost of living
unemployment levels u to 12%;by 1921 2 million workers unemployed; areas such as south Wales and Tyneside effected the worst as old industries collapsed
- crisis in coal industry led to a wave of strike action
- cost of living increased by 25%, 1918-20; wages stagnated
-recession was caused by
- deflation:
- loss of export trade:
- underinvestment
-recession was caused by
deflation
government cut spending by 75% 1918-20; bank of england raised interest rates to 7% (expensive to borrow); drained available money to spend on the economy; by end of the decade debt had rose from 120% of GDP to 160%
- recession was caused by
- loss of export trade:
global economy no longer dominated by GB; competitors had taken advantage of GB disruptions during the war (i.e. u boats); e.g. loss of textiles, Japan supplied India and South East Asia with cotton and silk during WW1 which meant the industry in the north west of england declined
- recession was caused by
- underinvestment
: in the steel industry output was lower than rivals during war and by 1920 a growing number of GB manufactures began to import USA steel for its superior quality and price; by 1937 GB steel foundaries produced 83000 tonnes pa by USA were producing 210000 tonnes and Germany produced 125000 tonnes
attempts to solve problems, 1921-4 ->
- geddes axe:
1921 DLG appointed Sir Eric Geddes to implement cuts; high taxes were blamed on high spending so wanted to cut tax; Geddes recommended £87m cuts 1922-3 budget, came from military and health/welfare/housing (£205.8m 1920-1 to £182.1m 1922-3)
attempts to solve problems, 1921-4 ->
- tariffs and free trade:
pre war GB used free trade, post war used tariffs; free trade means domestic industries have to compete with foreign competitors;tariffs (protectionism) means adding tariffs to certain goods that are imported into the country to protect struggling domestic industries who can’t compete with foreign prices.
ramsey macdonald and the economy in 1924
- had campaigned on the issue of unemployment and critised Baldwin’s failed attempts
- when he was president however he was unable to make any real improvements and blamed it on the complexities of government
- MacDonald lacked a parliamentary majority which meant he required support from other parties which he didn’t receive
ramsay macdonald and unemployment/inflation
- between 1921-4 unemployment declined from 12%-6.5% but rose during MacDonald’s premiership to 8%
in 1925; meant there was a fall in inflation from 15%in 1920 to <1% in 1924 ;
inflation fell because spending had collapsed due to unemployment not because of MacDonald
- Baldwin’s second administration, 1924-9 ->
gold standard
- value of the pound was decided by the Gold Standard, used prewar when economy was booming;
Gold Standard was suspended during the war but in 1925 Churchill returned to the Gold Standard because it would look bad for GB if we didn’t and he thought a competitive economy could not be built if the government made it easy.
