Trade and commerce 1914-67, impact of wars (SECTION 3)

Question 1

What were the 4 main impacts of WW1 on Britain?

Answer 1

1) Debt
2) Markets and industrial competition
3) Growing costs of empire
4) Benefits of victory.

Question 2

Explain the effect that the war had on debt.

Answer 2

1) Debt damaged Britain as it was no longer in a position to invest significantly in its colonies.
2) Most of Britain’s capital investment overseas had been wiped out.
3) The war had cost Britain £35million which was 13x the cost of the Boer war.
4) The sheer price of the war caused the nation’s reserves to run dangerously low and the pound had to be removed from the Gold Standard.
5) Debt rose to £7.5bn in 1919.

Question 3

Explain the effect the First World War had on markets and industrial competition.

Answer 3

1) Production for the war had been prioritised meaning Britain’s competitors were able to win over markets.
2) The war also affected the banks and financial institutions which generated profit from lending money overseas.
3) During the war, America took on the burden of lending to the Entente powers and American exports also filled the gap left by the British shortfall however the economic role of the Americans shrank swiftly after the war.
4) The global economy- built on free trade- was disrupted by the war. British investments overseas continued to earn a substantial income.

Question 4

How did the war affect the cost of the empire?

Answer 4

1) Britain’s industry had been damaged which the income used to run and defend the empire.
2) Growing nationalism had made the empire harder to police and control.

Question 5

What benefits did winning the war bring to the British?

Answer 5

1) Extension of formal control in the Middle East gave Britain access to oil which was a valuable commodity as well as useful for the merchant fleet.
2) Germany had been shattered by defeat and had been one of Britain’s main economic rivals leaving Britain free to have its dominant position in the world.

Question 6

What impact did WW1 have on India?

Answer 6

1) India contributed to about £146million to the war effort.
2) India had become less dependent on Britain due to the war as the previous 2/3 of Indian imports from Britain in 1914 fell because of war time disruption to trade and the growing strength of foreign competition.
3) Indian manufactures captured more of the domestic market.
4) Britain placed high taxes on Indian imports after the war which gave Indian industry protection against competition leading to growth.

Question 7

How did WW1 affect Canada?

Answer 7

1) Canada emerged from the war as an industrial power meaning British manufactures lost their influence .
2) Canada increasingly looked to the USA for investment and markets.
3) It had the most industrialised economy of any empire country and it sent the largest contingent of dominion manpower and it supplied the large fraction of the ammunitions Britain needed.

Question 8

How did the WW1 affect Australia and New Zealand?

Answer 8

1) They both relied heavily upon the British market and were hit hard by the disruption of trade by the war

Question 9

How did the economic effects of WW1 damages the empire?

Answer 9

1) Britain came out of the war in huge amounts of debt, reducing investment.
2) Britain lost overseas markets in its empire which allowed the colonies to become more independent.
3) Growing opposition meant that the empire was more costly to control and Britain struggled to pay to maintain order.
4) Less informal empire with loss of investment.

Question 10

In what ways did WW1 not damage the empire?

Answer 10

1) Britain gained access to oil in the middle east
2) Britain’s economic rivals (eg Germany) were economically shattered.
3) Britain managed to maintain most of its overseas trade.,
4) New territories in Africa gave access to raw materials.

Question 11

How did Britain’s attitude towards imperial trade change with the onset of the Great Depression?

Answer 11

1) In the 1920’s Britain had tries to recreate the pre-war system where the empire had no special preference.
2) Britain returned to the Gold standard in 1925 in order to stabilise its international trade.
3) The colonial development act 1929 was an exception.
4) Much greater emphasis was placed on the importance of the empire from British commerce in the aftermath of the Great Depression.
5) Imports from the Empire increased but exports were not as successful.
6) Britain was forced to abandon the gold standard in 1931 but trade with the Empire in the sterling proved a great asst.

Question 12

What was the Sterling area?
When was it formalised? What did this do?

Answer 12

1) Most of the countries of the Empire fixed the value of their currencies to sterling and some kept their national reserves in sterling, reflecting close ties to Britain.
2) The Sterling Area arrangement was formalised under the Exchange Control Act of 1947.
3) This gave access to the British market for countries in the Sterling Area whilst ensuring a profitable outlet for British overseas investment at a time when most other international opportunities were close down.
4) Britain was able to use the Empire to soften the impact of the damaging effects of the collapse of the international economy in the wake of the Great Depression.

Question 13

How important was imperial trade for the British economy between the wars?

Answer 13

1) 44% of exports went to the Empire in 1934.
2) Over 50% of cotton good, locomotive, railway carriage, motor vehicle and electrical engineering exports went to the Empire in 1934.
3) 35.3% of imports came from the Empire in 1934. Imports had increased rapidly from 1913-34. Eg: imports of wheat increased by 15%.
4) Cotton textile exports began to fall due to tough competition.
5) Until the 1930’s, the empire remained important for cotton textile exports.
6) Certain parts of the Empire increase their commercial links more than others.
7) Dominions became both an increasingly important market for British export and a more significant supplier of imports.
8) India remained an important supplier of tea and jute grew in importance in supplying raw cotton but received few British exports.

Question 14

Why did support for imperial preference increase by 1931? What was the impact of this policy?

Answer 14

1) There was increasing competition for the USA, Japan and other emerging economies.
2) As world trade shrank, imperialists argued for a return of the idea of imperial preference which would end the policy of free trade.
3) This idea was opposed by the Dominions who wanted to protect their own growing industries.
4) Imperial preference secured raw materials and cheap food, and secured some outlets for British goods in a shrinking world market

Question 15

When was the Ottawa Conference? What was its outcome?

Answer 15

1) The Ottawa conference took place in July/August of 1932.
2) The British introduced a general 10% tax on all imports - exempting the Crown colonies.
3) Britain and the Dominions gave each other’s exports preferential treatment in their own markets.
4) It reinforced the important role of the Empire in supplying foodstuffs and raw materials to Britain. It also increased dependence on the Empire markets and supressed trade with other nations.

Question 16

What were the 7 economic problems that the Empire faced in the inter-war period?

Answer 16

1) Some Dominions, particularly Australia and New Zealand experienced serious economic challenges.
2) The cost of their imports from Britain outstripped the income from their exports. The Great Depression exacerbated this issue.
3) NZ and AUS ran up debts to Britain.
4) Imperial preference became important for nations when international trade declined sharply in the 1930s.
5) Colonies in Asia and Africa suffered as a result of the collapse of world trade.
6) African colonies suffered from tumbling prices in the 1930s of their food and raw materials. Poverty rose due to falling incomes.

Question 17

To what extent did trade with Empire/Commonwealth help Britain through difficult economic circumstances (1919-39)

Answer 17

1) In the 1920’s Britain traded more with the outside world than the Empire.
2) Efforts to introduce imperial tariff protection in the 1920’s failed.
3) Empire Marketing Board set up in 1926.
4) Introduction of the Sterling Area attempted to defend the value of the pound after leaving the gold standard,
5) Ottawa Conference (July/August 1932) established the principle of imperial preference.
6) By 1939 nearly 50% of British exports went to the Commonwealth/Empire.

Question 18

What are the 10 reasons why WW2 affected the British economy more than the first?

Answer 18

1) The economy had to be geared entirely to the war.
2) The economy had been in a far weaker condition in 1939 than in 1914.
3) Major defeats in the war proved cripplingly expensive.
4) German U boat attacks of British sea traffic were devastating in the early years of the war. Britain lost 11.7m tonnes of shipping.
5) The loss of the major colonies in South East Asia from 1942 disrupted trade and cut off supplies of vital raw materials such as rubber from Malaya.
6) Britain promoted home production and food rationing to reduce imports but the balance of trade was still heavily in deficit during the war.
7) 1/3 of Britain’s overseas assets were sold.
8) Britain borrowed from the USA from 1941 with a lend lease, where the US supplied Britain with weapons, food and other necessities, meaning Britain emerged from the war with massive debts.
9) Britain increased dependence on Empire for imports.
10) Colonial reserves held in Britain were used to help Britain pay for the war effort.

Question 19

How was Britain’s economic situation made worse after WW2?

Answer 19

1) In late 1945- the USA ended the Lend-Lease, largely because it was not prepared to support a revived British Empire financially.
2) John Maynard Keynes negotiated a massive loan (approx 900mil) in 1945.
3) The pound had to be made freely convertible to dollars by the spring of 1947 meaning that the British economy was not as strong as it had been.
4) Free convertibility would require the Bank of England to be able to exchange sterling for dollars at a fixed rate.
5) The US dollar loan was supposed to enable Britain to build sufficient reserves to do this by 1947. However, Britain almost ran out of its dollar reserves within 6 weeks, largely due to imperial demand, and had to suspend free convertibility.
6) This was the Sterling Crisis of spring 1947 which revealed how weak the British economy had become.

Question 20

Who was John Maynard Keynes? What were his beliefs?

Answer 20

1) Keynes was an eminent British economist of the inter-war period.
2) He argued that government should play an active role in managing the economy to achieve full employment, higher rates of economic growth and control over inflation.
3) He was a major advisor to the wartime coalition and the post-war Labour governments.
4) He warned against a ‘financial Dunkirk’.

Question 21

What was the dual approach that the British took towards the Empire after WW2? Which Act formed the foundation for the new appraoch?

Answer 21

1) The cost of re-establishing its world power threatened to exceed the potential economic or political benefits.
2) When the costs of controlling a colony massively outstripped its actual or potential value, imperial control was abandoned.
3) Where the colonies were regarded as of economic benefit to Britain, new emphasis was placed on colonial economic development.

Question 22

Which Act formed the foundation for the new approach? What did the act do?

Answer 22

1) The Colonial Development and Welfare Act of 1940 formed the foundation for the new approach.
2) The act wrote off some colonial debts and provided colonial grants or loan of up to £5m per year

Question 23

When was a further Colonial Development and Welfare Act signed? What did this do?

Answer 23

1) A further Colonial Development and Welfare Act of 1945 was signed.
2) This increased the aid available to colonies to £120m over 10 years.
3) It also required each colony to produce a ten year development plan showing how it would use such funds.

Question 24

Explain the 3 ways in which the economic impact of the Second World War was significant in changing the British Empire.

Answer 24

1) The cost of the war led Britain to have to sell its overseas assets - reducing its informal empire.
2) Britain was forced to prioritise its resources and had no choice but to leave territories when they were no longer economically beneficial.
3) Britain had huge debts to the US and the Sterling Crisis in 1947 showed the weakness of the sterling, especially compared to the dollar. The weakening of the £ reduced the appeal of being in the British empire meaning it was more likely that nations would want to be free from colonial rule.

Question 25

Explain how the economic impact of the Second World War was not that significant to the British Empire.

Answer 25

1) Britain still relied on the empire for imports of important raw materials.
2) Britain still focused on developing some of its colonies as it had tried to do in the interwar period.