Economic Developments 1914-39 (complete); Flashcards
How did the state start to increase its control of the wartime economy?
-Defence of the Realm Act 1914; legality to unprecedented powers for gov to introduce restrictions on civilian population at any time GB was in war
-Measures introduced slowly as need arose. State started to exercise control over industry, as control of railways & dockyards was given to Board of Trade
-Income tax x2 in budget of November 1914
-Press censorship → newspapers restricted in info they were allowed to print
What was done to gain trade union cooperation in the war and why was this a concern?
-State intervention necessary to gain cooperation of TUs; anxiety in gov to whether/not organised labour would support what some deemed as ‘capitalist war’
-Few anti-war demonstrations in 1914 but was soon clear fears of union awkwardness were unfounded
In what ways did trade unions cooperate with the government and how did this help improve their status?
-As minister of munitions from May 1915, DLG made dilution agreements w/ TUs (allow semi-skilled workers & women to train to carry out jobs prev reserved for skilled workers) to maximise war material output
-TUs expected to work closely w/ employers to avoid strike action. In turn, demanded state controls on profits & rents + safeguards that workers could return jobs after war
-Overall war enhanced status of TUs as gov came to acknowledge their importance
Why was there a move away from laissez faire to almost complete state control of the economy from 1914-18?
-GB had to control massive increase in production of weapons; eg shell production rose from 2m in early 1915 to 187m by 1918
-Demands to provide extra transport, safeguard provision & distribution of food & ensure adequate supplies of fuel, esp coal
-Heavy demand pushed up prices & created shortages of essential materials
-Workforce depleted due to successful army recruitment campaign
-Private industry unable to cope on its own, state step & began fixing prices + commandeering stocks of vital war material
What actions were taken by the Ministry of Munitions during WW1?
-Established central purchasing system for buying essential war materials; engaged scientists to develop new weapons eg mortars & tanks
-Existing factories converted to deal w/ higher wartime production levels
-New national factories built solely for munitions production
-Women encouraged to take on jobs prev carried out by men
-Controlled wages, prices & profits; purchased 90% all imports & had control of transport & fuel
What were the results of state control?
-British Summer Time introduced
-Strength of alcoholic drinks reduced
-Opening hours for public houses limited
What actions did the Department of Food Production take during WW1?
-Maintained steady supply of home-grown food & made sure assembling troops were fed
-Women employed on land, replacing male farm workers
-Later in war, when German u-boat campaign sunk merchant ships & threatened food supplies, food rationing was introduced
Why was the cost of the war staggering and what did this result in?
-Gov spending rose from £200m in 1913 to £2,600m in 1918
-Had to raise loans at home & abroad (particularly from US) & increase income tax to help pay forward
How did Britain’s share of world export trade fall after the war and what was the result of this?
-Fell from 18% to 11%
-Impacted severely on great staples (coal, iron, steel, engineering, shipbuilding, textiles) as demand fell & unemployment rose
Why was foreign competition a reason for problems in the old staple industries?
By 1914, staple industries were already being threatened by foreign competition, esp from USA & Germany
Why was lack of investment a reason for problems in the old staple industries?
-Resulted in low productivity
-Issue masked by extra demands on industry for duration of war, but in 1919 gov contracts for war materials came to sudden end
-As result, there was over-production, stagnation & inevitable loss of jobs
Why was outdated technology a reason for problems in the old staple industries?
-Absence of pre-war investment meant by 1920s, staples were stuck w/ outdated technology, pushing up production costs
-In GB coal mines, coal seams still worked by miners w/ pickaxes; >1/5 coal made was cut by machine
-Machinery in textiles was second-rate & shipbuilding held back by restrictive practices
-All these made staples less competitive, there was no consistent gov policy to help those declining industries to restructure & modernise
Why were poor industrial relations a reason for problems in the old staple industries?
-Made matters worse, esp in coal industry in early 1920s
-Strikes & disputes, most notably in General Strike led to lost output & markets
-Decline of staples created structural unemployment (due to changes in economy make-up, deeper causes & lasts longer than cyclical), esp bad in old industrial areas of N & W GB
-Added on top was cyclical unemployment (from slumps in trade cycle, usually short-term) as trade cycles created 2 major slumps, 2nd from 1939+
Why were loss of markets and failure to recapture them after a reason for problems in the old staple industries?
-In 1929, vol of trade still below that of 1913
-Foreign competition intensified in 1920s. Customers prev long GB’s trade customers either found new markets/started to develop own technical skills + manufacture own goods. Eg, Japan emerged as new industrial powerhouse w/ capacity & drive to tie over former GB markets, particularly w/ expansion of cotton industry
-Introduction of tariffs by other countries, particularly US, to protect developing industries damaged by GB export market
-Trade restrictions & tougher foreign competition hit staples hard as traditionally were great exporting industries
Why was the situation in the coal industry difficult after the war?
-After war there was fall in demand for coal worldwide, as industry began to use electric power & shipping used oil, but at same time there was an increased capacity to produce coal
-GB coal mines were old, w/ narrow winding underground passages making both cost & logistics of mechanisation difficult, w/ result that industry lost out to modernising foreign competitors like Poland & Germany
What were the iron and steel industries like following the war?
-In great demand during war but had tailed off after
-Again issues of old-fashioned plants increased production costs & made industry less competitive
-Although production of pig-iron & steel halved during depression (early 1939s) steel industry recovered to extent in late 1930s w/ revival in engineering, shipbuilding & growth of motor industry
-Intro of tariffs on imported iron + steel goods & quota agreements assisted recovery; still, export figures remained below 1929 level
-Only rearmament in 1937 boosted industry
Why was the war disastrous for Britain’s shipbuilding industry?
-Up until then GB yards built & launched most of world’s ships
-By 1922, w/ decrease in overseas trade, most of merchant fleet was laid up
-No call for new naval vessels as war-weary world called for disarmament
-Demand for new oil-fueled ships & oil tankers couldn’t be met in GB’s outdated shipyards
-Depression of early 1930s left order books empty & majority of shipbuilding workers jobless
What were the structural problems in the coal industry at the root of the General Strike?
-Demand for coal fell due to intense foreign competition & growing use of substitutes like oil
-Many GB coal mines were old, inefficient & short of investment. Plus, there was a constant struggle betw miners & management
-Coal mines had been handed back to owners in April 1921 after being under gov control for duration of war
-To combat falling prices, owners cut wages. Miners thought they were being exploited → result was constant disputes, w/ strikes & lock-outs in 1919, 1920 & 1925
Why was the situation in the coal industry made worse in 1925 and what was done to rectify this?
-Decision to return GB to gold standard, making exports more expensive
When owners planned further wage cuts & longer working hours, miners objected & owners threatened lock-out
-Baldwin’s gov intervened, offering financial support to subsidise both miners’ wages & owners’ profits for 9 months. Also set up Samuel Commission to report on issues in the coal industry
What did the Samuel Commission say and what did it result in?
-Rejected nationalisation but recommended restructuring of industry w/ gov help
-Argued wage cuts were essential to save jobs, but working hours shouldn’t be longer → led to deadlock betw miners & owners
-When miners appealed for TUC backing, they responded by calling on TUists to support miners’ cause
-Miners adopted slogan ‘Not a penny off the pay, not a minute on the day.’
What occurred in The General Strike of 1926?
-Trains on main lines & London Underground stopped running
-Few bus services operated
-In the docks, there was no loading/unloading of ships
-Coal, iron, steel, chemical & newspaper industries ceased production
-Gov called in army to take up key positions in London
-World’s newspapers turned their attention to GB, anticipating outbreak of violence, or worse, revolution
What were the results of the 1926 General Strike?
-Proved disaster for miners
-Gov had upper hand from start; Baldwin set up Organisation for Maintenance of Supplies & volunteers assisted army in keeping country moving
-Via speeches & newspaper articles, Baldwin suggested strike threatened constitution & gained public approval by turning issue round to q of who ruled GB; gov or TUC
-Miner leaders’ refusal to compromise turned public opinion against them 8 upset TUC, who suddenly called off General strike
-Miners abandoned & finally had to give in + accept owners’ conditions of less pay & longer hours
What were the effects of the 1926 General Strike?
-Weaknesses in TUC leadership & organisation were exposed; had no national system for coordinating strike action & had counted on merely threat of strike action persuading gov to back out down
-When this failed, TUC was left struggling to find a way out
-Quarrels within TUC on who was to blame enabled moderate leaders like Ernest Bevin to come to fore; didn’t believe in confrontation/politically-motivated strikes but in securing better deal for members by negotiating w/ employers. Ramsay MacDonald refusing to involve Labour Party in condoning strike & successfully projected idea of moderation & firmness; image helped Labour win in 1929
What did the Trades Disputes Act of 1927 do?
Placed limitations on unions & outlawing sympathy strikes
Why was there a slump following the brief post-war boom and how did the government deal with this?
-Prices fell & unemployment rose
-Value of GB overseas trade declined, vol of industrial output fell, as did profits
-As result of falling-off of business & increasing bill for unemployment benefit, gov revenue fell
-Acting on 1922 Geddes Report, gov imposed several spending cuts. Another measure was the Safeguarding of Industries Act of 1921, designed to allow imposition of duties on imported goods threatening key GB industries; hugely controversial as propelled end of free trade + move to trade protection
Why did Britain return to the Gold Standard in 1925 and why wasn’t it before?
-Winston Churchill, chancellor of the exchequer in Baldwin’s Cons gov, took decision to return GB to Gold Standard (currency tied to gold)
-Had been for much of 19th century but came off it in 1914 as precautionary measure to stop people hoarding gold sovereigns & to protect GB’s gold reserves
-In 1919, gov decided to stay off it for further 6 years to aid financial recovery
Why were there arguments for and against a return to Gold Standard in 1925?
-Economy had stabilised & although prices still falling, wages overall were steady. Return to gold standard was perceived as return to normality after war, w/ benefit it would stimulate competition & encourage new industries
-But, economist J.M Keynes argued it’d be deflationary & increase unemployment + industrial unrest. Real issue was return to pre-war status, meaning £ was overvalued making GB goods expensive to buy, crippling export market & slowing post-war recovery in trade
-In 1929, when Wall Street Crash occurred, one consequence was foreign investors withdrawing gold from GB, threatening collapse of banking system
What caused the 1929 Wall Street Crash and what happened?
-Most dramatic event of inter-war Depression
-USA experienced boom in 1920s, accompanied by rash speculation on stock market
-American manufacturers were over-producing for home market while European trade was stagnating → caused difficulties for European countries to pay back loans to USA
-Question of confidence led some investors to sell shares, then others followed & panic set in
-Stock market crashed, banks collapsed, demand for goods evaporated & unemployment soared
-Loans called in → collapse of some European banks
-Crisis reverberated around the world, including Britain
How did the Wall Street Crash affect Britain?
-Value of exports fell by half
-Unemployment, which was already standing at 1m+, continued to rise until reaching 2.5m by end of 1931 & almost 3m by end of 1932
What were the effects of the Great Depression of the 1930s which followed the Wall Street Crash?
-Intensified existing econ issues from 1920s, esp decline of staple industries
-From 1930, world trade shrank & so did demand for GB exports; fell by 1/3 in vol & 1/2 in value. Didn’t fully recover until after 1937
-Cotton exports hit particularly badly; total output already falling by 1930; by 1932 it was less than 1/2 1913 figure
-Coal output fell from 238m to 208m tonnes
-Tonnage of new ships launched fell from av 1m/year in 1920s to 133,000 tonnes in 1937
-Unemployment rose to frightening levels in these industries; summer 1932 40% coal miners, 47% steel workers, 63% shipbuilding workers out of work. This persisted to the rest of the decade
What were the depressed areas at the time and why?
-Old staple industries, which had grown up mainly around coal fields, were situated in N of England, S Wales, central Scotland & Belfast
-All these areas were dependent for local economy on some/all of textiles, shipbuilding, coal, iron, steel & all suffered from large-scale + long-term unemployment
-Towns entirely dependent on one declining industry suffered most. In 1934, in Merthyr Tydfil (S Wales) which in 1850 had one of the most successful ironworks in the world, 62% of male population were unemployed
-In 1935, Jarrow on Tyneside was suffering from closure of Palmer’s shipyard & 72% of towns workforce were jobless
What did the National Government do in financial policy to tackle the depression?
-Aimed to balance budget & limit gov spending to match gov income
-Made 10% cut in unemployment benefit & introduced means test
-Implemented cuts in wages of public employees
-Aimed to keep value of £ stable by intervening in currency markets
-Came off Gold Standard
What did the National Government do in trade policy to tackle the depression?
-Set up ‘sterling area’ w/ members, mainly GB Empire & Commonwealth countries, using £ rather than gold to settle trading accounts
-Passed Import Duties Act 1932, ending free trade & imposing tariffs to protect home industries & agriculture
-Made quota agreements w/ other countries
What did the National Government do in industry policy to tackle the depression?
-Granted aid to ‘depressed areas’ via Special Areas Act 1934; but despite high unemployment levels many old industrial areas didn’t qualify
-British Shipping Assistance Act of 1935 to provide gov loans to build new ships
-Set up marketing boards for milk, bacon & potatoes, providing guaranteed prices for farmers & providing subsidies for livestock farmers & sugar beet producers
What is the evaluation of the National Government policies which attempted to tackle the Great Depression?
-Had some success in helping to reduce unemployment & encourage economic recovery
-But, gov failed to grasp underlying nature of difficulties faced by GB’s staple export industries & adopted negative policy of tariff protection + balanced budgets, when perhaps more adventurous approach of investment in industry might’ve been more effective
-Limitations of Special Arrears Act
-Absence of regional policy = short-sighted & missed opportunity to encourage new industry to locate in depressed regions
-Cutting gov spending, eg public sector wages & unemployment benefit, although unpopular, helped maintain internat. confidence + averted banking crisis. But, also reduced demand for goods & services, + unemployment rose sharply in 1932-33
-Leaving Gold Standard in Sep 1931 allowed £ to fall in value, made GB exports cheaper & eased impact of Depression. Effectiveness reduced as other countries also left Gold Standard
-Many countries introduced protective tarifs, which seriously hampered export trade. GB’s exports to empire increased, but didn’t make up shortfall
Where and how did economic recovery after the Depression begin?
-Limited & most obvious in Midlands & SE, where most of new growth industries were, than in older industrial areas of N & W
-New industries less affected by Depression than old staples, & these industries continued to grow throughout 1930s
-Numbers employed in new industries rose, but not enough to absorb all workers shed by the declining staples
-Total unemployment fell by 1/2 betw 1933-39 & av economic growth rates in 1930s were higher than 1920s
-New industries, eg motor vehicles, chemicals & aircraft enjoyed healthy growth. Output of motor cars x2 betw 1929-39, making GB the 2nd largest car manufacturer in the world
How did the staple industries begin to recover?
-Was slow & limited
-Still, coal production was 227,000t in 1938, almost what it’d been in 1928
-By 1938, production in steel industry had risen above 1928 level
Why did consumer demand grow after economic recovery and what did this result in?
-There were always more people in work than out & together w/ lower prices + cheaper borrowing created rising consumer demand in areas eg house building—> led to increase in general consumption
-Rising consumer demand led to expansion in home market; helped offset cuts in gov spending
-Consumption of electricity x2 in 1930s & demand for consumer durables eg radios & cars grew. Home market also encouraged growth of jobs in service industries, eg retailing, transport & banking
-Output of electricity x4 betw 1925-29
Why did spending on rearmament from 1936 onwards assist economic recovery?
-It wasn’t the natural choice of National Government, but was imposed upon them through fear of war w/ Nazi Germany
-Rearmament succeed in directly stimulating both old staple industries eg shipbuilding & steel, plus new industries eg aircraft & chemicals, and breathed new life into some of most depressed areas in Britain
-It was the gradual world recovery & spur of war that helped cure worst of GB’s economic troubles
