Economic problems of the interwar years Flashcards
What was the pattern of Britain’s economic story during the 1920s?
- 1919-20 saw a short post war boom - fuelled by increase in demand for scarce goods caused by WW1
- 1920-21 saw a severe recession as unemployment rose to 12% of working pop. Particularly, heavy industries e.g coal mining were hit hardest as prices rose by 25% + wages failed to keep up
- Main causes of recession: loss of trade, underinvestment in traditional industries (shipping, mining, textiles, steel etc.) + decline of industrial relations. Attaching pound to Gold Standard in 1924 was Baldwin gov’s signif. econ. mistake
- Spending cuts limited recession from 1922 although unemployment remained high at avrg. 10%
- Great Depression from 1929 was rough as trade collapsed + unemployment soared. National gov. eventually helped by devaluing pound
What were the 4 main factors for economic problems in the inter-war years?
- Legacy of WW1
- Ineffective solutions in managing the economy during 1920s
- Rise of Trade Unions
- The impact on the Depression
Why was the Legacy of WW1 a main factor of economic problems (6 main points)?
- Loss of trade
- Debt
- Value of the pound fell
- Inflation rose to 25% in 1918 which impacted upon prices
- Technological development
- Nearly 900,000 men killed in WW1 - many made up British workforce
Explain in detail why loss of trade was part of the main factor ‘Legacy of WW1’ which caused economic problems
- During WW1 Brit. ships occupied shipping war supplies
with 20% being sunk so ships could not be used for
exports- As Brit. exp. declined economic rivals (US + Japan) took
over Brit. markets. - Unable to trade with countries they were at war with
(these countries became self-sufficient, producing
goods that they previously imported from Brit.)
- As Brit. exp. declined economic rivals (US + Japan) took
Explain in detail why debt was part of the main factor ‘Legacy of WW1’ which caused economic problems
- War costed Brit. £3.25 bil
- Debts of £8 bil by 1920 (mainly to US banks)
- Wartime debts rose to 160% of income by 1924
Explain in detail why the value of the pound falling was part of the main factor ‘Legacy of WW1’ which caused economic problems
Brit. forced to abandon gold standard in 1914 which resulted in a rise in inflation + drop in pound’s value
Explain in detail why the technological development was part of the main factor ‘Legacy of WW1’ which caused economic problems
- Accelerated particularly for medicine, transport + radio
- Use of machine tools + assembly-line techniques
encouraged employment of semi-skilled labour but
took jobs away from skilled workers - Fell behind on tech. dev. to others e.g France +
Germany who were forced to purchase new/modern
machinery (factories were destroyed) - E.g Germany producing x2 amount of steel as Brit.
- Use of machine tools + assembly-line techniques
Why was the ineffective solutions in managing economy during the 1920s a main factor of economic problems (3 main points)?
- Interest rates + value of the pound
- Tax, spending + balancing the budget
- Protectionism
Explain in detail why interest rates + value of the pound were part of the main factor ‘ineffective solutions in managing economy during the 1920s’ which caused economic problems
- Gov set high interest rates to curb inflation + raise value of pound (against other currencies) but it had neg. effect as it stunted econ. growth - businesses have to spend more on debt + individuals more likely to save than spend
- Britain returned to gold standard in 1925 which restored the pound to its pre-war value of $4.86 but this was disastrous for traditional industries - high exchange rates made Brit. exp. more expensive + less competitive (industries e.g coal, steel, shipping textiles found it even harder selling abroad)
- This impact was worsened by “America’s rise” during the time. US dollar became increasingly attractive + USA’s low interest rates made US exports far more advantageous - further damaged Britain’s export market
Explain in detail why tax, spending + balancing the budget were part of the main factor ‘ineffective solutions in managing economy during the 1920s’ which caused economic problems
- To reduce inflation + repay war debts ASAP, taxes were raised each year after 1918 from £18 per capita in 1919 to £24 per capita in 1922 - meant people had less disposable income
- 1922 Geddes Axe led to £24 mil spending cuts (e.g on health, education, housing, benefits etc.) - contributed to growing unemployment as in war years unemployment never fell below 1 mil but now it rose
Explain in detail why protectionism was part of the main factor ‘ineffective solutions in managing economy during the 1920s’ which caused economic problems
- Gov policies of ‘protectionism’ introduced duties + limited tariffs on foreign goods to protect Britain’s traditional industries (which struggled after WW1) - policies may have helped short term but long term it created lack of incentive to modernise to compete with new foreign traders. Industries avoided necessary intro. of new changes to become competitive in long term so failed as other markets e.g US were far more dynamic
- It incited other countries to elect their own ‘tariff walls’ - it further limited international trade so Brit. could not benefit as much from emerging world markets
- Was a huge problem as after WW1 Brit. struggled to reclaim dominance of market - vol. of Brit. exports in mid-‘20s was only about 75% of its 1913 level - industries which relied on exp. suffered + businesses had to make cuts (job losses)
- By 1933 unemployment had fallen to 60% in ship building areas 49% in iron + steel industries - shows how failure to modernise created decline in traditional industry + newer industries e.g chemicals + cars neglected
Why was the rise in Trade Unions a main factor of economic problems (4 main points)?
- WW1’s impact on trade union membership
- Attempts to introduce pay cuts + longer working hours met with harsh resistance from trade unions
- Behaviour of trade unions
- General Strike (1926)
Explain in detail why WW1’s impact on trade union membership was part of the main factor ‘rise of trade unions’ which caused economic problems
Huge growth between 1915 + 1918, membership rose from 4.3 mil to 8.3 mil - TUs had greater power + influence
Explain in detail why harsh resistance from trade unions was part of the main factor ‘rise of trade unions’ which caused economic problems
In ’20s traditional industries were forced to cut costs - attempts of pay cuts or longer working hours met with harsh resistance + impacted productivity which meant businesses could be less agile
Explain in detail why behaviour of trade unions was part of the main factor ‘rise of trade unions’ which caused economic problems
Had a negative effect on the workforce - union aggression meant it was harder for employers to be flexible with wages. Had no choice but to fire many (particularly in traditional industries)
