chapter 6 economic issues 1918-39

how seriously did the First World War affect economic conditions after 1918?

• WWI was a total war- required considerable economic effort
• taxation was not excessive- 5s in the pound
• war was financed by borrowing, increase in the amount of money put into circulation
• raised prices
• affected British trade- reduced the export and re-export trades
• 1913- exports=£525 million, re-exports=£110 million
• 1918- exports=£501 million, re-exports=£31 million
• some markets were lost to British companies
• Japanese and Indian manufactuers stepped in to provide cheaper and more available products- they were experiencing an industrial revolution, providing new competition for British traders

• invisible exports- lost income from services to trade, sold off some private investments
• very high level of financial support offered to foreign and dominion allies- £2000 million
• financed by loans in the USA and Canada, raising shorter term loans at home via government borrowing

• had to recruit a bigger labour force
• 5 million served in the armed forces
• their place in the workforce was supplied by women, younger workers and older men who delayed retirement
• industrial workforce fell by 5%
• skilled craftsmen were able to negotiate higher wages
• share of wages in national income rose

• demand for war supplies was huge
• 1916- Battle of the Somme saw a million and a half shells fired by very large guns
• 1914- total output of shells=half a million
• Britain needed the products of heavy industry
• engineering, iron, steel, chemicals, coal and agriculture faced a massive need with little foreign compeititon
• Lever Brothers the soap, edible oil and fats company grew to be the 2nd largest manufacturing company, developing margarine as a butter substitute and exporting to the USA
• cotton production and exports rose, shipping was available
• rubber, medical supplies, petrol, glass and the newer electrical goods industries prospered
• led to greater demands for coal
• country saw full employment, diversification of labour, more production, higher wages, some improvement in working conditions, some move to rational economic controls

• it was this growth that was to cause problems in the 1920s and beyond
• pre war developments were reversed
• the profits of the war moved businesses away from plans to restructure industry to meet a smaller demand or introducing new technology to improve productivity and reduce costs to ensure they were competitive
• government provided some temporary relief- subsidies, very large amount of direct government demand, reduction of foreign competition
• in the immediate post war period the government maintained interventions to help ease the transition to peace
• tariff barriers to prevent foreign competition
• suspension of the Gold Standard to allow the pound to be reduced to help exporters
• coal mines continued to be subsidised
• railways were kept in public ownership
• agricultural prices were guaranteed, agricultural wages rose

post war boom

• in the immediaete aftermath of the war there war an economic boom
• economy as a whole flourished
• the demobilised armed forces were reintegrated back into the economy
• pensions and payments to ex servicemen put a lot of money into the economy
• 17000 new agricultural smallholdings were set up
• many new companies established…