Responding to economic challenges Flashcards
What were some post War economic problems?
1) Loss of trade: Outdated industries= expensive
2) Debt: National debt= £8billion
3) Value of pound: Fell from $4.80 to $3.40 after leaving Gold standard
4) Inflation: Reaches 25% by the end of the war
What is meant by Protectionism and why was this ineffective? 1918-39
-Placed tarrifs (tax) on imports, wanted to protect heavy industries e.g steel, ship building
-Helped short term for struggling industries
-Long term it made industries dependent on tariffs, remained outdated
What was Cutting spending and why was this ineffective? 1918-39
- Government wanted to balance books as soon as possible, cut the budget (Geddes Axe. 1922)
- Public spending cut by £87million
- Increased unemployment
What was the Gold standard? 1918-39
- ‘Most catastrophic mistake of inter-war period’
- Churchill decides to return to gold standard to increase value of pound, wanted foreign investors to put money in British banks
-Increased existing issue of uncompetitive exports, British goods more expensive
What impact did the Great Depression have on Britain?
- US introduced high tariffs to keep out foreign goods and recalled foreign loans (Britain could not pay back)
-Could no longer export goods to the US which hurt ability to pay off loans
-Britain couldn’t recall loans
-Unemployment doubled in 1930s, additional pressure on government (more people needed financial support)
-Banks were reluctant to give money for welfare, feared budget was out of balance (Snowden cut spending)
What was the impact of spending cuts?
-Public sector pay was cut
-Impact on heavy industrial regions, unemployment and poverty
- Led to ‘hunger marches’
How did cutting interest rates help Britain to recover?
-Let borrowing become easier which enabled spending and job creation (people could save and invest wealth in properties)
-Housing boom follows to South East and Midlands
-New houses being built increases
How did ending the Gold standard help Britain recover? (Late 1930s)
-Allowed some inflation to ensure spending was stimulated
- British exports became cheaper and competitive
How did economic revolution (WW2) help Britain recover?
-Growth in power state (rationing, conscription, control of wages)
-‘Government new best’ and was responsible for stable employment
What is meant by Balance of payments?
-How much money entering and exiting the country (usually via trade)
What is meant by interest rates?
-Proportion of a loan that is charged as interest to the borrower
