Week 5: From Great War to Depression 1914-39 Flashcards
Who enlisted in WW1?
Almost 40 per cent of men aged between 18 and 44 enlisted into service and 60,000 people were killed.
Death and injury had a large impact on the economy, not just through the fiscal costs of reperations but through the loss of a large portion of the labour force and the opportunity cost.
What happened to trade?
1) German and Britain, two of our major trading partners prior to the war fought on opposing sides and shipping costs were high due to the risk. The cost of both exporting and importing increased.
2) Troops were fighting far away from Australia, increasing the cost of supplying or forcing this supply to come from elsewhere. The cost of ‘importing’ consumer and military goods to supply troops
3) Wool prices fell, although we were still able to supply Britain and we were able to export sugar and meat.
4) Imports were cut off and Australia had to produce inefficient substituted. This resulted in increased protectionism later in order to try and maintain the jobs established in these sectors.
What happened to the current account deficit in WW1?
the ‘importing’ of goods to provide for the troops resulted in a surge in the current account deficit from 10 million in 1913-14 to an average of 32 million in the next 5 years.
What happened to the unemployment rate in WW1?
Unemployment increased dramatically, almost doubling in the first year. Falling prices led to output being restricted and a drought resulted in the shedding of labour in order to cope. While the unemployment rate dropped in later war years, it remained higher than at the outbreak of war.
What happened to domestic demand in WW1?
Domestic demand was reduced by the departure of a wage-earning men. Housing starts fell significantly and businesses had fewer customers.
What happened to manufacturing in WW1?
While real manufacturing output decline during the war due to the reduction in men in the market, there were two areas that performed well.
Textiles related industries expanded, through this was a transitional impact.
A structural change also occurred with the shortage of imports driving the rise of domestic substitutes and the rise of secondary industry within Australia.
What happened to Government debt in ww1?
The war resulted in a massive increase in Commonwealth government debt from 19.2 million in June 1914 to 324.8 million in 1919.
Taxation only accounted for a small portion (15 Per cent) of expenditure and the decline in imports (and hence tariffs) prompted income tax to be introduced (national) to be introduced along with the existing state taxes. The build-up in Government debt put Australia in a vulnerable position when the Great Depression hit.
What happened to wages and inflation in WW1?
Bond and foreign debt were used to finance the war and the increase in the money supply resulted in inflation. However, wage growth did not keep up with inflation, falling 8 per cent in real terms – further depressing domestic demand.
What was the Soldier Settlement Scheme and was is successful?
There were concerns about where returning soldiers would find employment. Soldier Settlement Schemes were established which involved giving land to returned soldiers to farm, supported by State and Commonwealth Budgets (also deemed a fitting reward for the solders).
Largely unsuccessful, partly as farms were in marginal areas and too small in an effort to cuts costs while farms had been more capital intensive and use better technology in order to be internationally competitive (also declining terms of trade and prices at the time).
When did the Great Depression start?
1929
Australia had not fully recovered from the damage caused by WW1 and although, this had been improving, the economy had been weakening since 1927. People were losing faith in the economic plan of ‘men, money, markets’ popularised in the 1920’s
What was men, money and markets?
Popularised in the 1920’s by then Prime Minister Stanley Bruce, it meant obtaining labour and capital from the UK for expanding Australian industry to provide products for the British Empire, while being protected by preferential tariffs.
At what rate did unemployment peak in the GD?
32 per cent
What did Otto Niemyer do?
The Great Depression was made worse by our Balance of Payments problem. Bank of England representative Otto Niemyer essentially told people they needed to live within their means and tighten their belts, heightening resentment and contributing to deflationary policy.
What were the 3 plans?
1) Theodore plan (increase money supply and demand)
2) Lang plan (suspension of overseas interest payments)
3) Premier’s plan (deflationary, one they went with)
What was the Theodore Plan?
Federal Treasurer, the first plan centred on the belief that the government should increase spending to stimulate the economy. They were to do this by putting the budget into debt to create more credit which would in turn create more employment. The Theodore plan, however, was rejected partly out of fear that it would increase prices and partly due to his being forced to resign over accusations of corruption.
