Britain 14 economic issues Flashcards
why was returning to the gold standard in 1925 a reason why Britain was the first country affected by the Wall Street crash?
going back on the gold standard (1925) already made it difficult to sell British goods abroad but now USA put high tariff barriers to protect its own good so British manufacturers could no longer sell goods to America
how did the loss of trade with the USA mean Britain was one of the first countries to be affected by the Wall Street crash?
trade with the USA provided income which Britain used to pay of debts from WWI so this income was stopped by loss of trade and also America withdrew loans
how did the Wall Street crash’s affect on other countries mean that Britain was one of the first to be affected?
countries such as Italy were unable to pay back the money Britain had given during the war
what did unemployment reach by 1931?
nearly 3 mill
what happened to govt expenditure and revenue as a result of the WSC/ depression?
govt revenue fell sharply as less people were paying taxes while govt expenditure rose due to costs of unemployment benefits
what two events worsened the economic crisis in the 1930s?
the recommendations of the May report and there was a ‘run’ on the bank of England
how did foreign investors worsen the economic crisis? and when?
July 1931- foreign investors started to withdraw gold at a rate of £2.5 mill a day
what did the failure to deal with the economic crisis and the divisions within the Labour party ultimately lead to?
the crisis of July 1931 and the formation of the National Govt
what was the orthodox view held by Snowden on how to deal with the economic crisis?
govt should:
-heep to traditional economic policies like free trade, balanced budgets and gold standard
-maintain the confidence of international bankers and traders by cutting govt spending to prevent it exceeding income
-keep value of pound based on gold
what were Mosley’s views on how to deal with the economic crisis?
govt should:
-borrow money + spend more or schools, roads, hospitals and services giving the unemployed jobs and community better facilities at low cost
-introduce tariffs to protect jobs
-increase pensions and benefits increased to boost consumer spending
what was the conservative view on how to deal with the economic crisis?
believed in the orthodox view but argued for protection instead of free trade
when did the NG take over?
Sept 1931
what happened after the NG took over as a result of a mutiny among naval troops?
naval troops mutinied in protest to pay cuts at Invergorden in Scotland, and there was another run on the pound when investors heard of this
what was the result of the run on the pound after the naval mutiny, 1931?
depleted the country’s gold reserves so that the Bank of England decided the Gold Standard would have to be suspended. pound fell to $3.40 from $4.86
what positive impact did the Bank of England suspension of the gold standard have on Britain?
the 30% devaluation made British exports cheaper and easier to sell.
why was the positive impact of the Bank of England suspension of the gold standard limited?
other currencies also left the GS and they depreciated in value too. also many countries introduced protective tariffs making exporting difficult.
what impact did coming off the gold standard have on interest rates?
no longer needed high interest rates to attract investors to put money into Britain so they were reduced from 6% (1931) to 2% (1932): known as ‘Cheap money’
how did the policy of cheap money help British economic recovery?
-made it easier for industries to borrow money to invest in modern machinery
-made it easier for consumers to borrow money on mortgages to buy new houses
what aspect of the economy did the policy of ‘cheap money’ boost?
house-building boom with 2 mill homes built in the 1930s.
how did the house-building boom benefit other aspects of the economy?
not only improved work, increased demand for furniture and fittings-> revival of the construction industry. also boosted electricity and radio industries
what did Chamberlain pass in 1932 associated with trade?
import duties bill which imposed a duty of 10% on all goods entering Britain. Goods from the British empire would be exempt from this
what was discussed at the Ottawa conference and when?
July and August 1932, Dominions like Australia and Canada expressed concern that free trade would mean their own industries suffered in the face of comp from British goods so as a result the Britain gave preference (with lower taxes) to imports from the dominions and vice versa
did everyone agree with the move back to protectionism?
it caused the Liberal ‘free-traders’ to resign in protest
how did govt schemes aim to improve particular industries/ factories?
closed down uncompetitive shipyards, mills and mined meaning that those that survived could attract new investment
