How Effectively was the Economy Managed, 1918-1939?

Question 1

Economic Problems Facing Britain in the 1920s- Problems

Answer 1

Forced to take on debt of £850 million + German U-boats destroyed Britain’s exports, fallen by 12% by 1918

Question 2

Economic Problems Facing Britain in the 1920s- International Competition

Answer 2

Britain’s rivals capitalised on the war + overtaken overseas markets in Asia
Exports fell, so rising unemployment (12% industrial workers) + decline of heavy industry

Question 3

Economic Problems Facing Britain in the 1920s- Union Militancy

Answer 3

Wages cut + working hours increased- led to increased trade union militancy
32 million working days lost to strikes in 1919

Question 4

Were Gov. Attempts to Tackle Recession Successful- Lloyd George (Lib), Tax Increases

Answer 4

To reduce high inflation + repay war debt, DLG’s government increased taxes every year from 1918-22
Taxes increased by 30% by 1922

Question 5

Were Gov. Attempts to Tackle Recession Successful- Lloyd George (Lib), Spending Cuts

Answer 5

1921- Commission on National Expenditure, Sir Eric Geddes
‘Geddes’ Axe’- deep cuts to education, pensions, unemployment benefit, housing, and health
1922 budget- over £87 million of cuts, social spending fell from £206 million to £182 million (1918-22)
Policy of ‘retrenchment’, attempt to ‘balance the budget’

Question 5

Were Gov. Attempts to Tackle Recession Successful- Lloyd George (Lib), Modernisation

Answer 5

Industry not provided with investment for modernisation.
Prioritisation of spending cuts over investing in economy, so British industry struggled against foreign competition, overseas trade suffered, UK exports barely recovered in 1920s

Question 6

Were Gov. Attempts to Tackle Recession Successful- Lloyd George (Lib), Unemployment + Interest

Answer 6

Job losses + rising unemployment, 1921, 12% (2 million), high in Wales + Tyneside
Wages stagnated + cost of living rose- 25% between 1918-20
Interest raised by 7%, expensive for individuals + industry to borrow money, preferred to save, damaged British industrial production

Question 7

Were Gov. Attempts to Tackle Recession Successful- Ramsay MacDonald (Labour)

Answer 7

Lacked parliamentary majority- weakened ability to inc. spending or raise taxes
Keen to portray Lab as ‘moderate’ + nothing to fear (public + Cons. press), reluctant to introduce radical measures
1924- unemployment at 8%, public spending + demand for goods fell

Question 8

Economic Slump 1920s- Stanley Baldwin (Cons), Context

Answer 8

Elected on protectionist platform in 1924 (after Cons-Lib coalition collapse), aim of protecting British industry from foreign competition

Question 9

Economic Slump 1920s- Stanley Baldwin (Cons), Gold Standard

Answer 9

Baldwin + Chancellor (Churchill) reintroduced ‘Gold Standard’ in April 1925
Increased value of the pound to pre-war, $4.86 ($3.81 in 1919)
Made British goods more expensive abroad, so exports collapsed
Huge blunder, unemployment rose, falling wages, industry worsened

Question 10

Economic Slump 1920s- Stanley Baldwin (Cons), Tariffs + Protectionism

Answer 10

Effort to protect industry + stimulate demand, so introduced tariffs on foreign imports in 1925
Short-term benefits- but artificial boost meant industry didn’t modernise or improve methods.
Stagnated long-term, fell further behind

Question 11

Economic Slump 1920s- Stanley Baldwin (Cons), Tariff Walls

Answer 11

Other nations imposed their own ‘tariff walls’- led to fall in demand overseas + fall in exports, rising unemployment
Unemployment above 1 million from 1924-29, 60% among shipbuilders, 40% among iron industry workers

Question 12

Efforts to Tackle Great Depression 1930s- Context

Answer 12

October 1929- Wall Street Crash, global trade fell by 66% over next 5 years
British exports declined by 50%, unemployment rose to 2.5 million in 1930, economy shrank by 5%

Question 12

Efforts to Tackle Great Depression 1930s- Response

Answer 12

Huge pressure on gov, tax revenue decreased, demand for assistance increased
MacDonald proposed 10% cut to unemployment benefit in 1931, forced to resign, National Government formed

Question 13

The National Government, 1931-35- Public Spending Cuts

Answer 13

Passed National Economy Act (1931)- public sector pay cut by 10%, ‘means test’ introduced for unemployment assistance
Special Areas Act (1934)- identified most impoverished areas as in need of direct gov. assistance

Question 14

The National Government, 1931-35- Devaluing Pound

Answer 14

1931- removed ‘Gold Standard’ + devalued pound from $4.80 to $3.40
Made goods cheaper abroad, so boosted exports
1939, industrial production rose by 46%, exports increased by 28%
Unemployment fell from 17% to 8% by 1939, real wages increased by 19% on average

Question 15

The National Government, 1931-35- Interest Rates

Answer 15

Cut interest rates from 6% to 2%, made borrowing cheaper so encouraged spending + investment, and borrowing to modernise + take on workers
Encouraged spending over saving- consumer boom