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Britain Transformed 1918-2000 > Economic problems of the interwar years and the National Government > Flashcards

Economic problems of the interwar years and the National Government Flashcards

1
Q

What were the four main causes of the economic problems in the interwar years?

A
  1. Legacy of WW1 and the rise of other nations
  2. Bad economic management
  3. Rise of the Trade Unions
  4. The Great Depression
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2
Q

How many British people died in WW1?

A

900,000. Many of these men had made up the workforce, meaning productivity became poor.

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3
Q

How much did Britain owe after WW1?

A
  • War cost £3.5bn
  • $8 billion, mainly to US banks
  • Debt was 160% of the National GDP by 1924 due to interest
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4
Q

When did Britain abandon the Gold Standard the first time and why?

A
  1. It allowed them to print more money to fund WW1.
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5
Q

Consequences of leaving the Gold Standard in 1914

A
  • Inflation rose to 25% by 1918, so domestic prices increased, less spending power
  • Value of the £ decreased: £1 = $3.19 in 1919
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6
Q

What did the government do to try to decrease inflation and repay war debts?

A
  • Increased taxes and interest rates every year after WW1

- 1919: Tax = £18/capita ; 1922: £24/capita

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7
Q

Rate of unemployment 1920-1921?

A

12%

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8
Q

Loss of trade due to WW1

A
  • 20% ships that could’ve been used for exports sunk

- Couldn’t trade w/’enemies’ e.g. Ottoman Empire, German Empire

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9
Q

Why did Germany and France modernise more quickly than Britain?

A

Forced- many of their factories + farming areas had been destroyed during the war, meaning that foreign industries overtook Britain, which hadn’t been as damaged.

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10
Q

Example of how Germany being forced to modernise benefitted them

A

Despite the weaknesses and instability of Weimar Germany it produced 2x as much steel than Britain in 1918.

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11
Q

How much of the export market did Britain control in mid 1920s?

A

~75% of its 1913 level.

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12
Q

What did the fall in exports mean for businesses?

A
  • Industries which relied on exports suffered, so they had to cut costs which meant job losses.
  • Britain struggled to reclaim its pre-war market dominance
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13
Q

What is the Gold Standard and what is its benefit?

A
  • Gold Standard is tying the value of a currency to that of gold
  • Makes currency more stable
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14
Q

What is Protectionism in economics?

A

Nations implements policies making foreign goods harder to obtain by customers, forcing them to buy domestically/. Theoretically, this leads to a boost in domestic industry.

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15
Q

As part of its protectionist policy, what did Britain do?

A

Put tariffs on exports.

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16
Q

Did the tariffs help the economy?

A
  • Short term, yes.
  • Long-term: lack of incentive to modernise to compete w/foreign markets; industries didn’t introduce policies to be competitive. Failed as foreign markets like US= more dynamic.
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17
Q

Value of exports vs. imports in the interwar years

A

1919- Exports: £799million; Imports: £1626million

1929- Exports: £729million; Imports: £1221million

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18
Q

How did other countries respond to Britain implementing trade tariffs?

A

They elected their own ‘tariff walls’, further limiting international trade. This meant that Britain couldn’t benefit as much from emerging world markets.

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19
Q

Why was Britain’s failure to modernise harmful?

A
  • It led to a decline in traditional industry.

- Newer industries neglected e.g. cars, chemicals

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20
Q

Why did Britain increase interest rates and what effect did this have?

A

Increased interest rates to curb inflation, stunting economic growth as:

  • Businesses have to spend more on debt; can’t invest, expand, or modernise.
  • Ppl more likely to save due to higher return on savings.
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21
Q
  1. What was ‘The Geddes Axe’?

2. When was it passed?

A
  1. Budget cuts to public industries

2. 1922

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22
Q
  1. What was the name of the group established by the Tory party that recommended the Geddes Axe?
  2. Who led them?
A
  1. Committee for National Expenditure; created in response to growth of Anti-Waste League party + middle class complaints about rising taxes
  2. Sir Eric Geddes, appointed by D.L.G
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23
Q

National debt in 1910 vs. National Debt in 1920

A

1910: £677 million, 1/4 of the GDP
1920: £7.81bn, larger than the GDP!

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24
Q

What public spending cuts did the Geddes Axe involve?

A
  • £24 million in cuts to public services
  • Defense budget cut by 42% in 1 year
  • 35% of civil service members fired- mostly women hired during WW1.
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25
Q

What was unemployment usually like in Britain before the 1920s?

A

Never fell below 1 million during wartime- it rose in the 1920s as the economy shifted from a wartime economy to a peacetime one.

26
Q

What was unemployment like in traditional industries in the 1920s?

A
  • 60% in shipbuilding areas

- 49% in steel

27
Q

What happened in 1921 regarding wages?

A

Cut by 8 shillings a week for 6 million workers- a cut of £58 in today’s money. Led to growing anger against the govt.

28
Q

When did Britain return to the Gold Standard?

A

1925 under the Tory Govt. of Stanley Baldwin

29
Q

How was the value of the £ changed by returning to the Gold Standard?

A
  • Had fallen to $3.19 in 1919

- Returned to pre-war value of $4.86, raised price of British exports

30
Q
  1. What was the rate of inflation in 1918?

2. Did returning to the Gold Standard fix this?

A
  1. 25%. This impacted on prices

2. No- it achieved severe deflation, which reduced prices and wages substantially- prices fell by 30%: 1920-23

31
Q

How did returning to the Gold Standard impact on businesses?

A
  • High interest rates made high exchange rates

- Disastrous for trad. industries e.g. coal, shipping, steal, and textiles who exported goods suffered

32
Q

What consequences did returning to the Gold Standard have on the economy in general?

A
  • Severe recession
  • Big increase in public debt : GDP ratio due to high interest rates
  • Severe deflation led to a permanent increase in unemployment- 11.5% in 1921-1922
33
Q

Value of the £ compared to the $ after returning to the Gold Standard and the consequences of this

A
  • Rise of US compounded negative effects of G standard- $ = increasingly attractive
  • US low interest rates- its markets were more advantageous than Brit ones, damaging Brit exports even more.
34
Q

What did Keynes famously say about the value of the £ compared to the value of the $ that could explain why the $ was even more attractive?

A

£ overvalued by 10% compared to $

35
Q

Example of why the effects on trad ind of the return to the pre-war value of the pound due to the G. Standard were significant?

A

Real earnings showed no growth between 1919-1926.

36
Q

What effect did the overall decline in trad. ind. have on businesses within trad. ind?

A
  • Employers forced to cut costs- cut wages, increased working hours, redundancies
  • Firms could be less agile in harsh economy; compounded w/rise of TUs, there was lower productivity and more redundancies…
37
Q

In basic terms, what was the North-South imbalance?

A

North, which had lots of traditional industry, suffered while the South (and Midlands) with newer industries prospered.

38
Q

How did the South and Midlands remain prosperous in the ’20s?

A

Consumer industries enjoyed a boom, and many were based in areas like London and the South East.

39
Q

What are three important things to consider in reference to the Depression and how it worsened Britain’s already dismal economy?

A
  • Fall in exports
  • Bad Govt. decisions at first
  • Importance of National Govt. breaking from the G. standard once again…
40
Q

Fall in exports due to the depression

A

Exports, which were worth 1/3 of the GNP, fell by 50%- especially harmful for traditional industries which relied on exports and were already in decline.

41
Q

Bad govt. decisions at first (Depression)

A
  • Cut spending
  • Maintained high interest rates to maintain value of £ still attached to g. standard
  • Unemployment benefit cuts by 10% split Labour
  • Social reform that stored economic problems for the future
42
Q

Did any strikes succeed in changing govt. policies?

A

Yes, when 12,000 Scottish soldiers mutinied in 1931 against pay cuts

43
Q

Effects of National Govt. breaking from the G. standard once again (Depression)- General

A
  • £ went down from $4.86–>$3.40, resulting in cheaper exports- prices fell 45%, but sales were up by 28%
  • Britain recovered quicker than other nations
  • Industrial production increased by 46%
44
Q

After being removed from the Gold Standard, what happened to unemployment and interest rates between 1932 and 1937?

A
  • Unemployment: 17%–>8.5%

- Interest: 6%–>2% (‘Cheap money’ policy); led to greater borrowing, resulting in housing and mortgage boom

45
Q

Examples of social reform as part of bad economic management in the 1930s

A
  • 1930 Housing Act
  • 1930 Coal Mine Act: allowed mine owners to fix quotas and set min. prices; replaced 8 hour workday enacted in 1926 with 7 1/2 hours
46
Q

How did the depression affect unemployment figures?

A
  • Unemployment rose 35% of the workforce in 1933; higher in the North, trad. ind.
  • Every man in Jarrow, N.E. England made redundant after coal mine, steelworks, and Palmer’s shipyard closed; resulted in Jarrow Crusade
47
Q

How were traditional industries, particularly in the North, affected by the Depression?

A

N. England, S. Wales, textiles industries in Yorkshire, shipbuilding in Scotland and Tyne hit hard:

  • Demand for products like steel and coal fell- coal use fell from 180 million tonnes in 1929 to 155 million in 1935.
48
Q

How did the British National Government attempt to reinstate the faith of American bankers into the pound?

A
  • Cut public workers pay by 10%, initially proposed by Labour in 1931
  • The Special Areas Act
49
Q

What was the Special Areas Act?

A

1934: Identified Tyneside, south Wales, west Cumberland, and Scotland as regions in need of direct govt assistance, but only a trickle of investment came to them.

New steelworks in Ebbw Vale brought jobs to depressed south Wales valleys, but it was too little too late.

50
Q

What did King Edward VIII state rather belatedly when he visited Dowlais in Wales in 1936?

A

When he saw the unemployment and poverty he said: “something must be done”

51
Q

When were the Hunger Marches of the 1920s and 1930s?

A

1921 onwards

52
Q

Why was the National Unemployed Workers’ Movement set up?

A

Desperation of workers & their families in most deprived parts of nation (‘21 onwards) led Commie Party to establish National Unemployed Workers’ Movement.

53
Q

What was the National Unemployed Workers’ Movement?

A

Organisation boycotted by Labour for links to Commies. Organised series of marches to protest the means test throughout 30s, which quickly became christened the hunger marches.

54
Q

Who participated in the hunger marches?

A

Unemployed men from depressed regions. Would walk to London, encountering support + opposition along the route. Most famous hunger march was the ‘Jarrow Crusade’

55
Q

What happened to the rate of long term borrowing by the government after the Pound Sterling was removed from the gold standard?

A

Rate of govt. long-term borrowing cut by 1.5%, slashing cost of debt repayment

56
Q

What caused the 1920-1921 Recession?

A
  • Loss of export trade
  • Long-term nderinvestment in British industries
  • Industrial relations
  • Effects of Spanish Flu- reduced GDP by almost 3%
57
Q

How was the British steel industry performing compared to other countries?

A
  • Growing no. of British manufacturers importing US steel- superior quality + price
  • By 1937: British steel foundries producing 83k tonnes/year, US foundries- 210k, Germany- 125k
58
Q

What was the Special Areas Act 1934, which was introduced by the National Government?

A

Introduced grants for firms to invest in particularly depressed areas of the country. As it happened, this didn’t work in areas of trad industry- low productivity–> unemployment, so businessman moved to more affluent areas

Recovery tended to be in the south-east where newer manufacturing industries were based. These tended to succeed- involved production of light-manufacturing goods that helped service new homes etc.

59
Q

Evidence that Britain recovered from the Depression in 1934-1939?

A
  • Real incomes rose by 19%
  • Industrial production rose by 46%
  • Exports increased by 28%
60
Q

What measures were the National Government able to take because of leaving the Gold Standard?

A
  • Cheap money policy
  • Could afford inflation- increased spending and slight price increases
  • Devaluation of the £
  • Restructured war debts-25% of tax rev au lieu de 40%
61
Q

One example of the post-war boom, 1918-1920?

A

Shipping industry flooded w/orders to replace nearly 8M tonnes of merchant stock that had been destroyed in WW1

62
Q

What was unemployment like during the recession of 1920-1921?

A

Rose to 12% of working population

Britain Transformed 1918-2000 (20 decks)

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