The Great Depression

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The Onset of the Economic Depression

  • After 1873 = British economy experienced a downturn
  • Historians are divided as to the causes and whether there was a depression at all
  • Generally agreed that several significant factors can be seen at the start of the decline
  • Industry was still expanding but at a slower rate 
  • Capital was still invested abroad
  • Production continued to inrease, but supply was overtaking demand at home and overseas 
  • Led to a fall in prices and a reduction in profit margins
  • Continuing increase in imports over exports, most especially in manufacturing
  • Signs of a rise in unemployment
  • Reluctance to consider new science-based industries
  • Coal and textiles producers believed that they would always make money
  • Failed to see the need for change and began to feel effects of foreign competition
  • British workforce was falling behind thse in countries such as Germany
  • Germany = education system was based on industrial training 
  • Most British children left school at 12 with no trainig 
  • This would have encouraged innovation
  • Britain's share in the total world manufacture of all types of goods began to decline
  • America's share increased dramatically
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The Onset of the Economic Depression

  • Challenge's to industrial supremacy mainly from America and Germany
  • 1870s = America and Germany had potentially stronger markets than Britain
  • Wet summer and poor harvest of 1873 signalled the end of the Golden Age 
  • Start of a severe depression in farming, particularly in arable
  • Several years of wet summers and disappointing harvests
  • Increasing import of cheaper grain from America 
  • Building of the railways in America helped to increase their production
  • Contributed to the depression 
  • One remedy would have been to introduce tariffs on imported foodstuffs
  • However, Disraeli now accepted the policy of free trade
  • Took the decision not to protect British agriculture
  • If agriculture was going to survive - it would need to adapt and change
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The Onset of the Economic Depression

  • 1865 - 1873 = Britain enjoyed a period of prosperity in both agriculture and industry
  • Economic progress was maintained through free trade policy
  • Gladstone's reduction in tax allowed businessmen to build up their private fortunes 
  • End of Gladstone's first ministry coincided with the onset of the depression
  • The period of sustained growth and unchallenged supremacy was coming to an end
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The Great Depression

  • 1873 - 1896 = Great Depression
  • Agriculture went through the economic doldrums 
  • Overall state of the economy is seen by historians as a period of 'readjustment' rather than depression
  • However, some argue that it was a reality:
    • Confidence was rocked by falling prices
    • Narrowing profit margins
    • Foreign competition 
    • They feared National decline
  • Onset followed a period of outstanding growth and prosperity
  • Economy was still growing, but at a slower rate
  • Rate of production in major industries was just slower
  • Was a fall in prices which meant smaller profit margins
  • Workers were laid off more frequently
  • Periods of unemployment during these years, but they were not sustained
  • Depression in agriculture continued 
  • Recovery in industry in 1880, followed by a slump in the mid 1880s, and another in the mid 1890s 
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The Great Depression

Total Agricultural Products:

  • 1874 = 121
  • 1880 = 102
  • 1886 = 83

Average Wheat Prices:

  • 1874 = 55 shillings
  • 1880 = 44 shillings
  • 1886 = 31 shillings 
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The Great Depression

  • There was an economic downturn 
  • Number of theories for the causes
  • The fall in prices appears to mark the start of the depressio
  • Reason is not so clear
  • Some historians favour a single-cause explanation
  • For example, a shortage of gold to support currency
  • No new discoveries of gold after the 1850s until the late 1880s
  • Another reason is that Britain had simply come to the end of a period of economic growth
  • No longer able to sustain log period
  • Combination of these and other factors probably accounts for the economic problems 
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Causes of the Great Depression

Overseas Competition:

  • Britain was dependent on its export trade to maintain economic position
  • Enjoyed almost a monopoly of the production and export of major industries
  • Britain was experiencing a serious challenge
  • Rapid industrialisation of America and Germany
  • America = rich in natural resources and manpower
  • 1890 = America had overtaken Britain in the production of iron and steel
  • Germany was not far behind
  • Britain stayed ahead in coall production, but only until 1900
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Causes of the Great Depression

Tariff Barriers:

  • Set up by Britain's competitors to protect their industries
  • Germany introduced trade tariffs in 1879 
  • America followed in 1890 
  • Britain held onto its belief of laissez-faire
  • The Fair Trade League (1881) pressed the government for some form of protection against British competitors without success
  • Suggested by several historians that the 'Scramble for Africa' was to secure coloial territories for trade protection
  • Colonial expansion in Africa would give Britain access to a new supply of raw materials and markets for British goods 
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Causes of the Great Depression

Out-dated Technology:

  • Hardly be avoided that other countries would eventually industrialise and challenge Britain
  • Britain = first industrial nation
  • Fallen behind in the latest technology 
  • Machinery was either old or obsolete
  • Reluctance to invest new capital
  • Steel industry = up to date Gilchrist-Thomas method was adopted by the Germans 
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Causes of the Great Depression

Absence of Entreprenurial Drive:

  • Third Generation Syndrome
  • Entreprenurial spirit of earlier industrialists was lost as the management of family firms was handed down to less-capable/interested successors
  • Little engagement with future development of new industries such as chemicals 
  • Lack of knowledge towards changes
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Causes of the Great Depression

End of the Railway Boom:

  • Ended in 1875
  • Most major towns and cities had good rail links 
  • Reduced the demand for iron and steel 
  • Led to job losses
  • 1886 unemployment = 10%
  • Support of the trade unions was not enough to help their circumstances 
  • No State welfare system to save them 
  • Majority of unemployed unskilled workers had no unions until the late 1880s 
  • Forced to rely on the support of family/friends
  • Some resorted to the workhouse
  • Falling prices meant cheaper goods in shops and a rise in real wages 
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