Chapter 15: Trade, Commerce and the Economic Impact of War Flashcards
what was the impact of WW1 on India?
India contributed about £146m to the to the war effort. India had become less dependent on Britain as
a result of the war as the previous 2/3 of Indian imports from Britain in 1914 fell because of wartime
disruption to trade and the growing strength of foreign competition. Indian manufactures captured more of the
domestic market. Britain paced high taxes on Indian imports rising from 11% in 1917 to 25% in 1931 after the war which gave Indian industry protection against competition leading to growth
How did WW1 affect Canada?
– It emerged from the war as an industrial power meaning British manufactures lost their influence.
Canada increasingly looked to the USA for investment and markets. It had the most industrialised economy of
any empire country, it sent the largest contingent of dominion manpower and it supplied the large fraction of the munitions Britain needed by 1917, between ¼ and 1/3 of Britain’s artillery ammunition was produced in
Canada. Britain also borrowed $1bn from Canada during the war
how did WW1 impact New Zealand and Australia?
As exporters of food, relied heavily on the British market and consequently were hit hard by the disruption of trade caused by war.
What distinct phases did British policy towards imperial trade go through in the inter war period?
-In the 1920s, Britain tried to recreate the economic system which had existed before 1914. Thus Britain returned to the gold standard in 1925 in order to stabilise its international trade. One exception to this policy was the Colonial Development Act of 1929 which provided Treasury funds to support colonial development projects.
-In the aftermath of the Great Depression a much greater emphasis was placed on the importance of the Empire for British commerce and imports from the Empire increased. Britain was again forced to abandon the gold standard in 1931 but trade within the Empire in sterling provided a great asset.
what was the sterling era?
Most of the countries of the Empire fixed the value of their currencies to sterling and some kept their national
reserves in sterling – reflecting the close ties to Britain. The Sterling Area arrangement was formalised under
the Exchange Control Act of 1947
* This gave access to the British market for countries in the Sterling Area while ensuring a profitable outlet for
British overseas investment at a time when most other international opportunities were closed down
* Britain was able to use the Empire to soften the impact of the damaging effects of the collapse of the
international economy in the wake of the Great Depression
Why did support for ‘imperial preference’ increase by 1931?
There was increasing competition from the USA, Japan, and other emerging economies
-As world trade shrank, imperialists such as Lord Beaverbrook, the newspaper magnate, argued for a return of
the idea of ‘imperial preference’ ending the policy of free trade
-The was opposed by the Dominions who wanted to protect their own growing industries and eventually a compromise was reached at the 1932 Ottawa Conference
What was the outcome of the Ottawa Conference (1932)?
The British introduced a general 10% tax on all imports – exempting the Crown colonies
-Britain and the Dominions gave each other’s exports preferential treatment in their own markets
-It reinforced the important role of the Empire in supplying foodstuffs and raw materials to Britain
What economic problems did the Empire face in the inter-war period?
Some Dominions, particularly Australia and New Zealand, experience serious economic problems in the interwar period
* The cost of their imports from Britain outstripped the income from their exports. Especially after the Great
Depression because the prices of their main exports (wheat, dairy, and other food) fell faster than the
manufactured commodities that they imported
* Both countries ran up debts to Britain but New Zealand suffered less that Australia as it was developing more
slowly
* Imperial preference became especially important for these countries when international trade declined sharply
in the 1930s
* Some Australians thought there were being exploited by financiers in London which led to resentment and a
rising desire for independence from the Australian Labour Party
-Colonies in Asia and Africa suffered as a result of the collapse of world trade. Burma and Malaya were hit
especially hard as Malaya relied on exports of tin and rubber; Burma on exports of rice
-African colonies also suffered from tumbling prices in the 1930s of their food and raw materials. Incomes fell
bringing poverty and starvation and a feeling of dissatisfaction with colonial rule
To What Extent Did Trade with the Empire/ Commonwealth Help Britain Through Difficult Economic Times in the Period 1919-39?
In the 1920s Britain traded more with the outside world than the Empire
-Efforts to introduce imperial tariff protection in the 1920s failed
-An Empire Marketing Board was set up in 1926
-The introduction of the Sterling Area attempted to defend the value of the pound (£) after leaving the gold
standard
-Britain introduced an Import Duties Act in 1932
-The Ottawa Conference (1932) established the principle of ‘imperial preference’
* By 1939 nearly 50% of British exports went to the Commonwealth/Empire
-Many British industries were uncompetitive through the 1920s and 1930s
-Britain had a serious balance of payments surplus in the late 1930s
Why did the Second World War affect the British economy more than the first?
The British economy had to be geared entirely to the war
-The economy had been a far weaker condition in 1939 than in 1914
-Major defeats in the West and the Far West in the first three years of war proved cripplingly expensive
-German U boat attacks of British sea traffic were devastating especially in the early years of the war. Britain
lost 11.7m tons of shipping or about 54% of the country’s merchant fleet strength at the beginning of the war
-The loss of the major colonies in South East Asia from 1942 disrupted trade and cut off supplies of vital raw
materials such as rubber from Malaya
* Less was produced for exports because of the diversion of production to weaponry
-Britain promoted home production and food rationing to reduce imports but the balance of trade was still heavily in deficit during the war
* 1/3 of Britain’s overseas assets were sold to pay for the war. -Britain borrowed from the USA from 1941 in the form of a Lend Lease – by which the US supplied Britain
with weapons, food and other necessities – meaning Britain emerged from the war with massive debts
-Britain increased dependence on the Empire for imports. There was considerable investment by colonial
governments, for example in Africa, to help increase the supply of foodstuffs and raw materials
* Colonial reserves held in Britain were used to help Britain pay for the war effort
How was Britain’s economic situation made worse after worse after the Second World War?
In late 1945, the USA ended the Lend-Lease – largely because it was not prepared to support a revived British Empire financially
* John Maynard Keynes negotiated a massive US loan (approx. £900m) in 1945
* The pound had to be made freely convertible to dollars by the spring of 1947 meaning that the British economy
was not as strong as it had been
* Free convertibility would require the Bank of England to be able to exchange sterling for dollars at a fixed rate
* The US dollar loan was supposed to enable Britain to build sufficient reserves to do this by 1947. However,
Britain almost ran out of its dollar reserves within 6 weeks, largely due to imperial demand, and had to suspend free convertibility
* This was the Sterling Crisis of spring 1947 which revealed how weak the British economy had become
The weakening of the pound reduced the appeal of being in the British empire
meaning it was more likely places would want to be free from colonial rule
What was the dual approach that the British took towards the Empire after the Second World War and how did this lead to the colonial development acts?
The cost of re-establishing its world power threatened to exceed the potential economic or political benefits
-When the costs of controlling a colony massively outstripped its actual or potential value imperial control was abandoned e.g. India, Burma and Palestine
-Where the colonies were regarded as of economic benefit to Britain, new emphasis was placed on colonial
economic development
-The rubber and tin industry of Malaya which could command major international markets received heavy
government investment since it was hoped that this would earn large amounts of foreign currency (especially
dollars) and benefit Britain’s international trading position
The Colonial Development and Welfare Act of 1940 formed the foundation for the new approach. This:
» Wrote off some colonial debts
» Provided colonial grants or loans of up to £5m per year
* A further Colonial Development and Welfare Act of 1945:
» Increased the aid available to colonies to £120m over 10 years
» Required each colony to produce a ten-year development plan showing how it would use such funds
