Economic policy of the inter-war years 1918-1939 Flashcards
what impact did the war have on the economy?
summary of problems
-payments
-funding of war
-industry
-bonds
-G.S
-govt spending increased with the nationalisation of industries for the war to ensure the home front was fully equipped
-de control was established to return back to the pre war status quo
-balance of payments was off, in debt after increasing amount of loans necessary during the war
-britain came of the gold standard, sold assests abroad that once generated invisible earnings that rebalanced trade figures
-old staple industries failed to generate profit?
-GB relied on taxes,assets/gold sales and borrowing via bonds to finance the war
-the bonds were short term, required payment within 10 or so years and were subject to interest
-huge burden on the economy
what are the three sub sections the economy in the IWYs can be divided into
what problem did the economist pigou describe
-the situation after ww1
-the slump following the wall street crash of 1929
-recovery in the 1930’s
(hungry 30’s- myth or truth)
-‘intractable problem/million’- unemployment remained throughout the period
what was the beachhead effect and how were industries directly after the war
-beachhead effect- foreign competition had established strong positions in the market which was previously dominated by Britain and from here foreign competition could grow
-these competitors market shares grew during the war at the expense of GB
-post war slump , unemployment quickly rose and over capacity became apparent
-war time debt payments exhausted public finances
-staple industries were hit esp hard as export industries faced a slump in demand and greater foreign competition
-concentrated in geographical regions
identitfy the problems faced by GB in chronological order
-foreign competition
-sale of private assets
-balance of payments defecit
-boom followed by a slump and mass unemployment
-return to the gold standard in 1925 (interest rates went up)
-wall street crash 1929
-run on the pound 1931
-gold standard abandoned in 1931- cheap money and rearmament
what economic principles are assocated with the term orthodoxy
-free market
-free trade
-gold standard
-unwillingness to change, stick to old traditional means of fixing the economy which only created more problems
why did the economy experience a balance of payments deficit after the war
sale of 10% of british private assets in 1ww decreased invisible trade which visible trade could not replace
-war debt, loans to fund the war
what is the word that describes excessive industrial supply relative to demand
chronic excessive overcapacity
why did the cotton and shipbuilding industries experience severe problems in teh IWYS
-loss of markets
-foreign comp
-slump in world trade
-closure of indian markets by tariffs on british exports
why did britian fail to make economic progress like other nations in the 1920s
-return to the gold standard
-over dependence on staple industries
-inability to adapt to new demands
pound to dollar exchange rate in 1925 after the return to the gold standard
£1: $4.86
what was the effect of the return to the gold standard on
-capital investment in british industry
-british exports
-capital investment; interest rates increased inhibiting capital investment to modernise industry
-the price of exports increased relative to foreign competitors
what two things did the return to the gold standard aim to lower
(defaltionary policy)
name two acts of parliament and one organisation associated with cartelisation
- what is cartelisation and what industries expeirenced it
why did the bank of england introduce cartelisation
-the british coal mines act 1930
-the cotton industry (reorganisation) act 1936
-the lancashire cotton corporation
-Cartelisation is the combination of enterprises into one large eneterprise to encourage cost savings and promote greater efficiency and productivity .
-to avoid/minise bankruptcy of incolvent enterprises who owed huge sums to banks
why did cartels undermine modernisation and competitivness
-outline the practices that allowed for this
was cartelisation a short term or long term solution
-price fixing
-collusive market fixing
-over capacity
-poor labour relations and skill training leading to complacency
-short term solution to the problems facing the staple industries intened to create dynamic british manufactures ready for success when global trade returned
-british industru had not modernised sufficently enough to meet the demand of foriegn trade when it returned
what did the conservative govt set up in 1928 to encourage labour mobility in GB and was it successful
-Industrial transference boards- 42,000 miners
-largely unsuccesful , covered only 4% of the unemployed, costs borne by local authorties who lacked the funds to implement them
-no govt support
-hostility fro the bank of england and the treasury
what was involved in the special areas act of 1934 and was the act successful
-identified areas of industrial decline and high unemployment e,g jarrow and a regional commissioner responsible for regeneration but limited staff and funds of only 2million
How much did defence spending rise as a percentage of GDP in 1935/6and 1938/9
1935/6- 2.7%
1938/9- 7.7%
what effect did rearmament have on unemployment and the regions of GB
-500,000 new jobs created in 1935 alone (15% of unemployed)
-ship building came back
-by 1938 nearly 1 million jobs in steel, coal and engineering had developed
-there was a partial departure from orthodocy and the govt was placed in contracts to resolve regional variations/ inequalities
how did tariffs affect foreign competition, unemployment and the need for british industry to modernise
-they offered short term protection of declining british indusrty, low prodcucity and poor labour relations inhibited their ability to adapt to foreign comp, strengthened declinng industries which lacked a long term future
how did subsidies affect farming in the iwys
-extended to remains of british farming e.g sugar and milk buy neither output not income grew
what was britains share of the world export trade in manufactured goods in 1911-13 and in 1931-8
1911-13- 27.5%
1931-8- 18.5%
by what percentage did british exports of cotton decline between 1913-1937
43%
by how much did british exports of shipping decline between 1913 and 1932
1913- 11 milliom
1932- 3.9 milllion
decreased by 7.1 million
what was the dollar exchange rate when the pound came off the the gold standard in 1931
$3.40
what was the interest rate when the pound came off the gold standard in 1931
2% which allowed for cheap money and increased borrowing which led to a boom in the housing industry
why did british exports fail to return to their pre 1914 strength following the abanodoment of the g.s
-slump in global trade followimg the wall street crash and foreign comp
why did the governments education policy fail to produce large numbers of british citizens trained or educated for the economic demands of the IWYs
no substantial legislation on education until 1944, lesss than a quarter of the british population received a secondary or vocational education
-germany- skilled, educated workforce= better productivity and efficency
what is meant by the policy of cheap money
-interest rates of 2% rather than 6-7% under the gold standard encouraged house building, cheap mortgages , building employment grew, demand for building supplied grew and employment in sector increased, greater opp for capital investments . cheaper british export prices
what percentage of the increase in GNP did house building contribute to in 1932-4
17%
what are two pieces of legislation that brough in protectionism in 1935
-the abnormal imports act of 1935
-the imports duties act of 1935
which industry benefitted from protectionism
-the car industry
what estimated percentage did tariffs raise british output and reduce unemployment
output-3%
-unemployment-1.5%
