You are not currently logged in. Please create an account or log in to view the full course.
The British Economy in 1918
- About
- Transcript
- Cite
Britain – The Economy, 1918-39
In this course, Dr Christopher Price (York St John University) explores the development and performance of the British economy between 1918-39. In the first module, we consider the state of the British economy in the immediate aftermath of the First World War (1914-18), and the major differences between the pre- and post-war economy. In the four modules that follow, we look at four distinct periods in the performance of the British economy – the difficulties of the 1920s, the Great Depression, recovery in the first half of the 1930s and rearmament in the lead-up to war. In each case, we think about the economic and political considerations that informed economic policy, as well as the extent to which the international situation shaped the British economy in this period.
The British Economy in 1918
In this module, we think about the state of the British economy following the First World War, focusing in particular: (i) the way that different groups of historians have judged the performance of the British economy in this period; (ii) the situation immediately before the First World War – Britain’s wealth and her status as an imperial power and centre of world finance; (iii) the three major issues faced by the British economy in 1918 – Britain’s debt, the rise of the United States as a financial power, and the fracturing of international trade; (iv) the expansion of the franchise and the significant increase in spending on social welfare; (v) Britain’s commitment to free trade compared to the protectionism of France, Germany and the United States; and (vi) the political importance of the gold standard.
Hello, I'm Dr Christopher Price.
00:00:06I'm a senior lecturer in history at York ST John University.
00:00:08Today, I'll be talking about the British economy in the interwar period
00:00:11from 1918 to 1939.
00:00:16This is a controversial topic because historians
00:00:18since the Second World War have looked
00:00:22back on the inter war period as a bad time the 19 thirties,
00:00:23particularly as the Devil's Decade.
00:00:28A time a cautionary tale. But they have different messages.
00:00:30Before the 19 seventies,
00:00:35Keynesian economists who follow the great economist John Maynard Keynes looked
00:00:37at the period as an example of why government should intervene more
00:00:41and thought the government did intervene enough in the interwar period
00:00:45to manage the economy to prosperity after the 19 seventies.
00:00:48Historians, generally speaking on the right,
00:00:51thought this period had too much government intervention in the economy,
00:00:54and it was a cautionary tale because there was insufficient entrepreneurship,
00:00:58too much complacency and that Britain was backward.
00:01:02Um, just decline ist analysis as it became known.
00:01:05So it's useful to look at the inter war period in its own terms.
00:01:08So in the first part,
00:01:11I'll be looking at the situation at the end of the first World war in 1918.
00:01:12Now, to understand what Britain was in this period,
00:01:17you have to go back a little bit further
00:01:20and look at the situation. Just before the start of the first World War in 1914
00:01:22at this point, Britain was by far the wealthiest nation in the world,
00:01:27also the greatest imperial power, with roughly a quarter of the world's population
00:01:32and land surface under direct rule from London.
00:01:37So Britain was a very considerable power, the only truly global power at this stage.
00:01:41Britain was also the centre of world finance,
00:01:45Britain around huge surpluses on its trade with the rest of the world
00:01:48and recycled visas loans to the rest of the world.
00:01:52So an annual surplus on international trade of about 10% of national income,
00:01:55which was huge. So Britain was in towering status at this time
00:01:59at the end of the first World war,
00:02:04the situation was much changed, although not entirely.
00:02:06Britain was victorious remained a very considerable power,
00:02:11but there were considerable changes
00:02:15in the first place. Britain now had a huge debt. Britain had a debt of £7.5 billion.
00:02:18As a result, of the first World War, which had to be serviced in the coming decades.
00:02:25This was more than the size of the economy at the time by a factor of
00:02:291.3, so it was something of a crushing burden to the economy going forward.
00:02:33Britain also had to share
00:02:39international status as top nation, as it were with the United States,
00:02:42which had been coming force in the pre first
00:02:46World War period but as a result of the wealthy
00:02:49had gained from supplying the allies in the first
00:02:51world War was now a financial arrival to Britain.
00:02:54So the world had two financial centres which are now in London
00:02:57and New York. So Britain was no longer dominant, no longer Hagemann
00:03:00but still one of the top two powers in the world.
00:03:05Britain and the United States are broadly comparable
00:03:09as financial powers.
00:03:11The American economy was very much larger than Britain's,
00:03:13but Britain had the global network of its empire and the
00:03:15trading links that came with that which balanced that status,
00:03:18so Britain had a huge deficit had to service. International trade was fractured
00:03:21in this period,
00:03:26so problem Britain would have was that trade was not as easy it had been before.
00:03:27The first World War, which were trading nations, which is Britain,
00:03:31was a considerable problem.
00:03:34Also, in the 19 twenties,
00:03:36the condition of the people had to be taken more
00:03:39seriously in economic sense before the First World War.
00:03:41Seems like a third of the British popular population lived
00:03:45in poverty of one type or another 30% or so in
00:03:48secondary poverty, at least,
00:03:52which meant that if they spent everything they had very wisely and nothing else,
00:03:54they might subsist.
00:03:58An attempt of the population, the so called submerged 10th in primary poverty,
00:03:59which meant that was, however they manage their income,
00:04:03they would not be able to subsist.
00:04:05So these problems,
00:04:08we're very conscious
00:04:10in the minds of the government. Before the First World War
00:04:12and after the first war, everybody now had the vote
00:04:14women over 30 or men over 21 which was
00:04:17a radical departure from the first World War situation.
00:04:21So governments have to concern ourselves a little
00:04:24more with the welfare of the population.
00:04:26In the whole of the interwar period,
00:04:28there was no year in which the government spent less than twice
00:04:30as much as it did before the war on welfare measures.
00:04:32So in terms of actual British people,
00:04:36the wartime post war world was a different situation to the people world,
00:04:39although by modern standards there was nothing in the
00:04:44nature of what you would call a welfare states.
00:04:45Um so Britain's debt was a huge problems, I mentioned.
00:04:48Another aspect to this was that a billion
00:04:52pounds was so directly to the United States,
00:04:54which had been a debtor of Britain's.
00:04:57Before the war, the Americans were out to exploit this position
00:04:59of power
00:05:02relative to the United Kingdom. They demanded payments every six months in gold.
00:05:04And although Britain was a negative creditor from the war,
00:05:08this situation vis a vis the United States would also be a continuing
00:05:12issue. Britain at the time
00:05:15was also a free trading nation. This was very important to policymakers in London.
00:05:18That meant that when Britain was dominant before the first World War,
00:05:24uh, it did not impose tariffs or taxes on imports to the United Kingdom.
00:05:28Nor did the British government attempt to
00:05:32subsidise the exports of British companies abroad,
00:05:34so it was completely free trading nation that felt
00:05:37that goods and social should flow freely between borders.
00:05:39Other countries did not share this policy.
00:05:43And all Britain's major trading rivals France, the United States,
00:05:45Germany practise what was known as protectionism.
00:05:49So they sheltered their domestic markets with high taxes on British
00:05:52exports must also subsidising their exports in the British market.
00:05:55This was considered unfair by British producers,
00:06:00but the government British governments felt that
00:06:02this was more damaging to the foreigners
00:06:04themselves and it was to the British because they would ultimately be inefficient.
00:06:06They also felt that the consumer was king
00:06:10and therefore they should serve the interests of consumers who
00:06:13should have the cheapest possible goods and not producers.
00:06:15This was controversial before the first World War
00:06:18became more so during and after it.
00:06:21So although Britain was still a free trading nation after the first World War,
00:06:23it did actually impose some tariffs on foreign produce,
00:06:28largely those of military significance and safeguarding Act of 1921
00:06:31produced tariffs on X on imported goods to the UK
00:06:37Um, that has strategic significance,
00:06:41and they said these are products to which ordinary economic rules do not apply.
00:06:44So Britain had taken a slight nudge in the
00:06:47direction of being a protectionist power to defend its
00:06:50industries,
00:06:53although in principle it was still free trading
00:06:54and the British tariff level was much,
00:06:56much lower than those of other major trading nations.
00:06:57So this is Britain going into the 19 twenties,
00:07:00much damaged by the war but still a major financial and economic power,
00:07:04and taking an optimistic view of the future.
00:07:09One thing that should be mentioned is that before the first World War,
00:07:15Britain was on something known as the gold standard,
00:07:18which meant that the pound was fixed against the dollar and other currencies
00:07:20and the dollar exchange was $4.
00:07:2586 to the pound, something like four times the current exchange rate.
00:07:27So it just gives an impression of how much more
00:07:32powerful Britain was in 1914 that it is now,
00:07:33um, this would be seen as something of a total.
00:07:38Britain was forced off the gold standard at the end
00:07:41of the first World War because of turbulence and economic conditions
00:07:42and inflation in the United Kingdom relative to America.
00:07:46And so an aspiration came to be to return to the gold
00:07:48standard as quickly as possible because it would feel this would restore
00:07:51international prosperity,
00:07:54ensure transparency in international trade and restore British prestige.
00:07:57So throughout the 19 twenties as well, see,
00:08:01returning to the gold standard became the totem
00:08:03for British party makers of all types.
00:08:06
Cite this Lecture
APA style
Price, C. (2021, January 14). Britain – The Economy, 1918-39 - The British Economy in 1918 [Video]. MASSOLIT. https://massolit.io/courses/britain-the-economy-1918-39/1932-35-recovery
MLA style
Price, C. "Britain – The Economy, 1918-39 – The British Economy in 1918." MASSOLIT, uploaded by MASSOLIT, 14 Jan 2021, https://massolit.io/courses/britain-the-economy-1918-39/1932-35-recovery