Theme 1 - Economy

Question 1

What impact did WW1 have on Britain?

Answer 1

1920 debt amassed 8 billion
Many many people died
Imports remained at pre war levels but exports rapidly declined resulting in negative balance of payments

Question 2

What caused the 1919-20 boom?

Answer 2

During the war individuals and business couldn’t spend there money meaning they saved vast amounts. After the war they were able to spend these savings

Question 3

What items/products did people invest there money in?

Answer 3

Shares

Rationed luxuries such as coffee, soap and cigarettes

Question 4

What caused the 1920-21 recession?

Answer 4

Heavy industry could not keep up with foreign competition and an underinvestment in industries (Britain producing 83k tonnes of steel compared to USA’s 125k)

Question 5

What effects did the 1920-21 recession have?

Answer 5

Debt rose from 120% of GDP to 160%
Goods were in short supply and therefore became expensive
World economy was no longer dominated by UK -Japan took over textile industry

Question 6

What was retrenchment?

Answer 6

The term used to describe a policy of spending cuts Lloyd George made

Question 7

What was the Geddes axe? And what did it aim to do?

Answer 7

Introduced £87 million cuts in expenditure in 1922-23 budget. Mostly from military but also effected health, welfare and housing

Aimed to stimulate economy

Question 8

What was free trade? +/-

Answer 8

No taxes on foreign goods
+ can trade internationally without fear of other countries imposing taxes on your goods
+ goods are sold at competitive rates as British industries have to compete with international imports
- can be outcompeted by foreign competitors

Question 9

What are tariffs? +/-

Answer 9

Taxing certain imported goods
+ helps domestic industries by making foreign goods more expensive
- other countries can also apply tariffs and goods are not as cheap as they don’t have to be competitive

Question 10

What caused the 1929 depression?

Answer 10

Wall Street crash in America

Question 11

Why did the depression effect the UK?

Answer 11

USA had replaced the UK as the worlds largest importer meaning that when depression hit UK’s exports fell by 50%

Question 12

How did the crash effect the economy? What areas were worst effected?

Answer 12

Shrank by 5%
Unemployment up to 2.5 million in 1930 from 1 million in 1929

Coal, Colton, steal, ship building, dock work and the shops and markets around these areas were worst effected

Question 13

How successful was MacDonald in tackling economic issues? (1924-25)

Answer 13

Not very - unemployment rose to 8% in 1925 and he was reluctant to step in

However inflation did fall to 1% in 1924 compared to 15% in 1920 - this was due to lack of spending tho

Question 14

What caused the end of MacDonald’s second premiership?

Answer 14

Rumours of unbalanced budget caused mass selling of pound in America - value of pound dropped - spending cuts proposed to keep pound stable - threat of cuts split Labour Party

Question 15

What did the National gov do that MacDonald failed to do?

Answer 15

Implemented the spending cuts he proposed - mainly through 10% cut in public sector wages and introduction of means test

Question 16

What stimulated British recovery and how did it?

Answer 16

Removal of gold standard in 1931

• Decreased interest rates which meant borrowing was cheaper leading to housing boom in south east and Midlands
• British goods were cheaper and more competitive
• Banks were willing to spend again

Question 17

What signs were there that Britain was recovering

Answer 17

• Income rose to 19%
• Industrial production rose to 46%
• Exports rose to 28%

Question 18

What did Churchill do to help with the war effort?

Answer 18

Created war time ministries of: health, food, war production and supply

Question 19

What had Britain failed to do pre war and was the result of this failure?

Answer 19

Re-arm effectively
Military spending skyrocketed after 1940
15k aircraft built in 1940 but 47k built in 1944

Question 20

What aid was provided to Britain during the war?

Answer 20

Between 1939-41 USA offered aid
Lend-Lease agreement meant that the US would offer supplies and the bill would be paid after the war
American Liberty ships provided coal, oil and food

Question 21

What was Britain’s economic state after WW2?

Answer 21

Bad - £4 billion owed to the US with £70 million daily interest, economy contracted by 1/4 and trade declined by 2/3

Lower GDP than Germany and Japan

Question 22

What did the UK ask America for and was it given?

Answer 22

An Emergency loan in the form of a ‘gift’

Congress refused to give it as a gift

Question 23

What aid did the UK receive from America to help it recover and how was it used?

Answer 23

£2.7 billion of Marshall aid - used ineffectily and instead of investing in industry they used it for general expenses

Question 23

What does nationalisation mean? How did the UK Nationalise industry?

Answer 23

State taking control of private owned firms. Took control of coal, power, railways, ship building and banking

Question 24

Why was nationalisation not as effective as it could of been?

Answer 24

Shareholders of newly nationalised industries were compensated. This meant that despite private rail being bought for £1 billion it actually cost the government £2 billion due to compensation fees. Little money was left to revamp industries

Question 25

What did conservatives promise to prioritise from 1951?

Answer 25

Public work schemes and a mixed economy

Question 26

What was stop-go economics?

Answer 26

Gov increased taxes and interest when economic growth was too high therefore stopping inflation by making it harder to spend (stop). Then they would reduce taxes and interest rates when economy slowed down to allow growth once more (go)

Question 27

Why were NICKY and NEDDY created?

Answer 27

To try to unite Labour, management and government. Believed this would allow economic goals to be planned and achieved

Question 28

What was NICKY?

Answer 28

Group of businessmen who gave guidance to employers and unions on what gov considered reasonable pay increases. Gov feared inflation could get out of control unless pay rises were managed

Question 29

How successful was NICKY?

Answer 29

Not very - Unions ignored wage restraints as they knew workers wanted more spending power

Question 30

What was NEDDY?

Answer 30

Meetings were management and unions discussed economy and cooperate with one another

Question 31

How successful as NEDDY?

Answer 31

Medium - Gov couldn’t enforce legal control so just hoped both sides would voluntary agree with one another

Question 32

What problems was the economy facing in 1964?

Answer 32

• Consumer spending increased and demand for foreign goods caused a balance of payments problem throttling the value of pound
• Unemployment at highest since pre war (878k)
• Gov refused to devalue pound so had to borrow £714 million from IMF

Question 33

What was created to tackle the problems NICKY left behind?

Answer 33

1966 prices and income act - forced statutory. Wage freeze for 6 months to curve inflation
1967 prices and income act - allowed wage increase to companies that could prove increasing productivity and output

Question 34

What did Wilson found in 1964? And how successful was it?

Answer 34

Ministry of tech - aimed to bring advanced tech and new processes into industry
Very successful - become one of the largest gov body

Question 35

Why did Wilson devalue the pound in 1967 and how much did he devalue it by?

Answer 35

Hoped to ease deep seated problems in economy - 14%

Question 36

What was the IRC?

Answer 36

• Organisation promoting efficient practices in industry and mergers in business where it was believed economic efficiency would increase if they merged.
• Offered loans to those wanting too introduce efficient measures

Question 37

How successful was the IRC?

Answer 37

Mergers mainly failed. Eg: British Motorsport + Layland = failure

Question 38

How did Heath reverse many of Wilsons and Macmillan’s plans?

Answer 38

• Abolished IRC = Believed state could not promote modernisation and it had to be done by private businesses
• Stopped gov’s ability to control or influence prices and income = reversing the 1966 and 1967 prices and incomes acts
• Wanted a free market = going against NICKY and NEDDY’s ideas of corporatism

Question 39

What cuts did Heath make to try to stimulate growth?

Answer 39

• Subsidies to council houses
• Free school milk
• Raising chargers on prescription

£330 million worth of cuts in first budget

Question 40

How successful were these cuts?

Answer 40

Not very - Heath did not count on increasing inflation and unemployment. Many public sector workers (mainly miners) went on strike

Question 41

What was the 1976 IMF loan? And why was it needed?

Answer 41

£4 billion landed on condition that Britain could prove they could pay it back and agree to £3 billion worth of spending cuts

Caused by increasing inflation, devaluation of pound and increasing strikes

Question 42

When and why was the gold standard reintroduced?

Answer 42

• 1925 budget
• a decreasing value of the pound was bad for British prestige and Churchill believed a competitive economy could not be built by the government simply making things easier for manufacturers