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The Economic Problems of Great Britain 1919-1939
- Britain was a trading nation and its prosperity was built on her early industrialization however after WWI *Britain became a debtor nation, causes of this include:
- Britain was challenged as other countries industrialized
- New post-WWI trading patterns were not in favor of Britain
- Britain had little left (after war debts) for import payments
- The post-WWI rise in protectionism damaged Britain given the nature of her economy (trade based)
- The break up of A.H. deprived Britain of a valuable export market
- British industry was becoming outdated
- Solutions to Britain’s economic problems:
- Exporting more
- Import less
- Increase invisible exports
- Difficulties w/ the solutions:
- To export more, Britain would have to produce cheaply which meant either:
- Using more efficient methods of production (v. expensive)
- Reducing pay/ increasing work load (socially unacceptable)
- To import less Britain would have to impose tariffs on foreign goods (this would be unpopular b/c Britain was a major importer of food and therefore this would lead to a decrease in living standards.)
- To increase invisible exports Britain would have to restore confidence in her economic security. To do this Britain:
- Announced in 1923 that it would honor all war debts — and to do this taxes increased and British goods became more expensive (therefore visible exports declined)
- Announced in 1925 that it would return to the Gold Standard — this pushed up the value of the pound which resulted in expensive British goods and in British uncompetitiveness. (the Gold Standard was abandoned in 1931)
- During the inter-war period, high U. led to social unrest and led to five changes in British Gov. (btw 1919-1931)
The National Government 1931-1940
- Took Britain off the Gold Standard
- Free Trade was abandoned
- High tariffs were imposed on goods (those suspected of being ‘dumped’ on Britain)
- An import duty of 10% was imposed
- A system of ‘imperial preferences’ was set up w/ free trade btw Britain and her empire
- Reduced interest rates (easier to borrow)
- Limits were imposed on the export of capital
- Wages were driven down by the depression and heavy U.
- Imports of raw materials were cheaper b/c of the depression
- Improvements in manufacturing lowered prices
- Lower prices led to increased consumption despite lower wages
The national Gov. brought about the small beginnings of a slow recovery.
The Economic Problems of France 1919-1939
But, France had been the major battlefield for WWI and suffered greatly as a result. Her problems were:
- Loss of revenue in areas which had been devastated by the war
- Bankruptcy of the French treasury (due to massive borrowing)
- Manpower shortage because of heavy war losses
- The newly developed industrial sector promoted trade while the agricultural sector promoted projectionist policies.
- The taxation system was outdated and inefficient
- The French Gov. relied too much on reparations
France needed an economically strong Germany but its politicians sought to cripple Germany.
In relation to Germany and Britain, France performed well in the 1920s.
- France relied less on trade and more on agriculture and suffered less from the shrinkage in World Trade.
- France had a strong agricultural base
- France obtained resource-rich areas from Germany
- The franc was undervalued and this helped French exports
- The French Gov. was divided and weak, and could not take decisive action (such action in Britain deteriorated the situation rather then improved it)
Problems in the 1930s
Serious U. and difficulties in agriculture and industry, in response the Socialists (unpopularity:)
- Reduced salaries in the civil service
- Reduced pensions to ex-servicemen
- Closed down public work schemes
- Increased taxes on Consumer Goods
(1934-1936 a right wing Gov. came to power, later extremist right wingers attempted a coup which failed and led to the rise to power of the Popular Front)
The Policies of the Popular Front
- Its victory was followed by a series of strikes by ind. workers
- This brought the economy to a standstill and
- Led the right wing to fear revolution
The Matignon Agreement
(1936) (agreement btw left and right wing Gov. factions)
- Its measures were: 12% rise in wages / nationalization of armament works / greater Gov. control over the Bank of France / paid vacation for all workers / a 40 hour week / recognition of trade union rights / the end of occupation of factories and the owners retained control
- The problem of the agreement was the question of paying for the agreed reforms.
- At first the Gov. relied on borrowing
- Later the franc was devalued but this did not stimulate recovery b/c of the reduction of production (due to a 40 hour week)
Why was the Gov. unable to deal w/ the problems?
- Huge debts had been incurred and the leadership demoralized
- There was a large/powerful agricultural lobby
- Industry was backward
- Those who controlled financial institutions (rich industrialists) were conservative
- Civil Service control lay in the hands of right wingers who were opposed to reform
- French politics were polarized and cooperation btw left and right was small.
The Economy of the USSR during the period 1919-1939
- The introduction in 1928 of a new system of central planning brought about rapid development
- The USSR began to catch up with the advanced countries of the West.
Why did the USSR avoid the Great Depression?
- She developed her economy in isolation of the world trading system and:
- Stalin aimed at achieving autarky and to this end lessened the importance of imports upon the USSR
- The USSR was isolated diplomatically. (the USA established diplomatic relations w/ the USSR in 1933)
- The Gov. had great control over the economy (ie: prices and wages were fixed)
- Soviet industry was not consumer oriented
- There was no possibility of speculation by bank
- No independent labor unions, and therefore no disruptive strikes
- There was not the vast inequalities in wealth distribution that existed in the West
- And there was:
- No political opposition
- No interest groups to oppose economic measures
- The Gov. was not subject to public opinion
But:
- The methods were not transferable to the West (the USSR was a totalitarian state)
- Behind economic successes lay "slave labor camps, mass executions and wholesale starvation" (in parts of the USSR)
- The Soviet system proved in the long term to be inflexible and unable to progress beyond a certain stage.
The Economic Problems of Germany 1919-1939
- Political instability / Germans did not accept the constitution of the Weimar Republic
- Germany lost her colonies and territories (therefore resources, population and industry) when she most needed them
- Germany had to pay reparations
- Anti-German feelings were high and this damaged German exports
- Germany had to hand over "huge quantities of industrial machinery, merchant shipping, railway engines, and wagons" which were needed by Germany
- Parts of Germany were occupied
1919-1923: All progress was destroyed by the occupation of the Ruhr. As the economy collapsed, the currency became worthless and social unrest rose.
1924-1929: Germany began to recover economically (w/ the Dawes and Young plans)
1929-1933: Germany’s economy was destroyed by the Great Depression / this led to the rise to power of Hitler and the Nazis
The Economic Policy of the Nazis
- Hitler seemed to have brought by the late 1930s an economic miracle, his methods were:
- A high degree of central planning
- The use of production targets for key areas
- The use of strict controls on the distribution of raw materials
- A drive towards autarky / cutting down of imports
- Labor Unions were abolished as early as 1934
- Measures to reduce U. included:
- Increases in public works
- Rapid expansion of the armed forces
- Banning certain social groups from certain jobs *
- The growth of the Nazi party *
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