A level exam: Chapter 14-Economic issues Flashcards
Why was Britain so affected by the Wall Street crash?
`Going back on the gold standard in 1925 made it difficult to sell goods abroad and America put up tariff barriers to protect its goods. Trade with the USA provided income to pay off debts after WW1 but the loss of trade stopped this income and the USA called in all loans. Countries like Italy were also affected and were unable to pay back war loans. By 1931 unemployment was at 3 million and foreign investors began to withdraw gold after losing confidence in the banks. This caused a financial crisis.
What were the different views on how to deal with the economic crisis?
Snowden-He believed they should keep to free trade, cut spending and keep the gold standard.
Keynes-He believed there should be money spent to increase jobs and productivity, boosting the economy.
Mosley-He wanted to borrow money to spend on public services, introduce tariffs and increase benefits.
Conservative view-Protection and tariffs instead of free trade.
Socialist view-State control and ownership of industry to create a socialist economy.
What happened to the economy just after the National government took over in 1931?
In September 1931 there was another run on the pound after the Invergordon mutiny. This depleted gold reserves and meant that the gold standard had to be suspended. The 30% devaluation tuned out to make exports easier to sell but many countries had protective tariffs which made exporting difficult.
What happened after Britain was taken off the gold standard?
Interest rates were reduced from 6% to 2% which meant there was cheap money. This made it easier for industries to borrow money to invest in modern machinery and for mortgages. This resulted in a housing boom and 2 million houses were built in the 1930s.
What happened to tariffs and taxes?
Conservatives were united with the belief that tariffs could improve the economy and in 1932 Chamberlain introduced the Import Duties Bill into Parliament, which imposed a general duty of 10% on all goods entering Britain. Goods from the British Empire were exempt from this. At the Ottawa Conference, Dominions such as Australia expressed concern that free trade would mean their industries would be uncompetitive. A series of trade agreements were made and meant that taxes on other countries were raised to give preference to British exports. This move back to protecitonism caused the Liberals to resign.
What happened to industry under the National Government?
Cutting spending helped to maintain international confidence but retrenchment also lowered the demand for goods. Government schemes to close down uncompetitive shipyards, mills and mines meant that there was more investment into those kept. However, in places like Jarrow this pushed unemployment up. In Jarrow the rate of unemployment was more than 70%. Britain’s economy was beginning to recover and this was most obvious in the midlands and south-east. New industries were growing, with output of cars doubling and output of electricity quadrupling. Recovery also began in the staple industries and by 1938 more steel was being produced than in 1928.
What were the reasons for economic recovery?
Lower prices meant that those who had jobs found their wages were worth more and although therre was unemployment, there were almost more people in work than out of it. Social trends were changing towards smaller families and so people had more money to spend. Rising consumer demand meant that there was an expansion in market and this helped to offset government cuts.
What happened to the housing market under the national government?
Rising consumer demand led to an expansion in the housing market which helped to offset cuts in government spending. This stopped the depression getting worse and helped with recovery.
What happened to trade under the national government?
The value of international trade was only 1/3 of its level at the start of 1929. the protection measures to improve trade by allowing quotas from imports, had very little effect but world trade began to recover after 1933.
What happened to agriculture under the national government?
Cereal farmers were hit hard during the Depression and the already low price of wheat fell by 50%. The amount of arable land continued to decline and so Britain was more dependent on food imports. The government assisted by setting up land drainage and soil improvement schemes as well as credit facilities and marketing boards. Rural wages were 1/3 of the pay of urban workers and conditions were poor. It was not until 1936 that agricultural workers were included in the National Insurance Scheme.
