Theme 1 Flashcards
(13 cards)
1920s Economic Challenges
Loss of Trade: 20% British ships sunk, US and Japan took over the market
Debt- £8bn in 1920; 160% of income by 1924
Pound: Abandoned gold standard to print more to cover costs, led to…
Inflation: rose to 25% by 1918
Tech Developments: medicine, transport, radio. Britain fell behind in industry- Germany 2x steel production
900000 men had bene killed damaging the workforce
Economic events of:
1919-1920
1920-2921
short post war boom, increased demand for goods
severe recession, unemployment 12% with heavy industry hit the hardest, prices up by 12%, wages couldn’t keep up
Failed economic policies
Interest rates and value of the pound: government set high interest rates to curb inflation and raise pounds’ value, but this curbed economic growth- borrowing and investing too expansive so people saved
Return to gold standard in 1925 led to high exchange rates, made exports more expensive and less competitive
Tax, spending and balancing budget: taxes raised each year. 1922 Geddes Axe- £24m cuts to public spending, Defence- £190m to £111m. Spending cuts- unemployment never fell below 1m
Protectionism: duties and tariffs on foreign goods- helped in the short term, reduced incentive to modernise and compete so industries failed. Retaliatory tariffs hammered international trade- led to huge unemployment 60% ships; 49% iron/steel by 1933
Hungry Thirties (Unemployment)
1) Areas hit hardest focused on staple industries (coal in North and South Wales; shipbuilding in Scotland)
2) Unemployment 2.5m (25% workforce)- North higher
3) Productivity lowered across country, demand fell
4) London and SE- prospered, consumer industries boomed
1931 Devaluation of the Pound
Depression led to a fall in exports by 50%
Unemployment 2.5m 1933
Government cut spending and maintained high interest rates to preserve value of pound
Policy divided Labour, many resigned and National Government formed- they removed pound from gold standard and devalued it
Impact of being removed from Gold Standard
Allowed for quicker recovery than other countries
Unemployment 17% to 8.5% 1932-37
Interest rates cut 6% - 2%, encourage borrowing
Government borrowing cut by 1.5%
Boom in mortgages and housebuilding
Industrial production rose by 46%
WW2 Economic Policy
Churchill expanded governments role in wartime economy, controlled prices through controlling production levels
National government transformed Britain into a managed economy- rationing, conscription and registration for employment was compulsory 1941
war years 50% spending was on military- continued priority with 10% of GDP
Economic aid during 1940s
December 1940 cash reserves were spent
Churchill secured the lend-lease agreement with USA, they supplied Britain and debts would be repaid after war
Supplies brought on liberty ships
£6bn Marshall Aid from 1948
Impact of Austerity
1945- £4bn debt to USA; £700m deficit
Attlee’s measures: cuts in government spending, controlling private spending, rationing goods. Unpopular with British public, particularly trade unions- wage freeze or legal pay restraint
Attlee forced to devalue pound in 1949
Butskellism
1954-64 Tory governments accepted Labours approach by managing the economy along Keynesian lines- both parties accepted commitment to full employment and mixed economy
Tory Chancellor Butler and Labour Leader Gaitskell
1950s/1960s Affluence
Consumer spending rose by 45%, increased ability for people to borrow in order to spend- but led to inflation of 4% and imports increase, imbalance in BoP
Stop-Go Economics
Tory governments 1951-64 encouraged growth in consumer spending by relaxing laws on borrowing aid credit
When inflation arose, taxes and wage rises were put in place. Showed controlling both unemployment and inflation to be impossible
Corporatism
