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RESPONDING TO ECONOMIC CHALLENGES - Coggle Diagram
RESPONDING TO ECONOMIC CHALLENGES
POST-WAR BOOM, CRISIS AND RECOVERY 1918-39
The British Government did not except the war to go as long as it did
Having to pay money back to America
British industries had to switch over to War Production and focused less on the exports trades
Lost over 750,000 men in War
Financial cost of war --> £3.25 million 💰
£8 billion in debt
POST-WAR BOOM 💥
War-time restrictions and rationing = More disposable money
Throughout 1919 consumers and business spent their saving
Luxuries --> Soap, Coffee, Clothes and Cigarettes
SPECULATIVE BOOM :check:
As new shares were issued for transfer investors and other businesses to = Boom in investments back into London Stock Market
(1918) £65 million (1920) £384 million
Investors were keen to buy shipyards, cotton mills and coal mines
THIS WAS A POOR DECISION
as the monopoly for these places were dying, as they were competitors in Japan and USA :red_cross:
RECESSION (1920-21)
unemployment rapidly increased :red_cross:
Old industries collapsed :Coal and Ship building :red_cross:
Wales and Tynside = Deeply Depressed :red_cross:
Cost of living increased by 25% :red_cross:
Wages Stagnated :red_cross:
RANGE OF REASONS FOR WHY IT HAPPENED
DEFLATION
Government cut spending by 75% (1918-20)
In rode to return to the value of the £, the Bank of England had to raise interest rates by 7%
THIS MEANT IT WAS VERY EXPENSIVE TO BORROW MONEY
:red_cross:
This drained any available money from people to spend in the economy.
This rose debts through the roof ,especially with trying to repay debt --> 120% of GPD to 160%
LOSS OF EXPORT TRADE
The export market was no longer dominated by Britain
More competitors
Japan started to supply to India and South East Asia
cotton
silk
Causing the North of Britain to decline
UNDER INVESTMENT
Steel Industry was in decline
American steel was better quality and better price
(1937) Britain : 83,000 tonnes
American : 210,00 tonnes
INDUSTRIAL RELATIONS
To avoid general strike, Lloyd George brought off main industries with general pay and hours
48 hour weeks
Resulted in a 13% decreased in working hours
No increase in productivity
Wage rates remained high
MEANS PRODUCTS STAYED OVERPRICED AND NONCOMPETITIVE
ATTEMPTS TO SAVE ECONOMIC PROBLEMS (1921-24)
THE GEDDES AXE (1921)
Lloyd George implemented greater cuts in public expenditure and appointed
--> Sir Eric Geddes
He hoped cuts wold stimulate the economy
Geddes recommended £87 million in the 1922-23 budget
Military Budget - Main Source
Health
Welfare
Housing
Cut Back by £23.7 million
TARIFFS AND FREE TRADE
FREE TRADE -
Free trade means that domestic industries have to compete with foreign competitors
There is no important taxes on foreign goods to British manufactures have to make sure that their product are sold at the lowest possible prices in order to attract customers
But it does mean that there is more competitive foreign businesses can out-compete British ones and force them into bankruptcy
TARIFFS
It means adding tariffs to certain goods that are imported into a country
It helps protect domestic industries that are struggling from competition by making the goods more expensive
But it does prevent consumers from having access to cheaper goods and it can result in other countries applying tariffs to British expectorants in retaliation
RAMSAY MACDONALD AND THE ECONOMY
Lack of Majority
He lacked parliamentary majority to carry out any major economic measures to deal with unemployment
He was unable to increase spending and taxation to help relieve the economy to create jobs :red_cross:
(1921-24) unemployment has declines from 12 % to 6.5% but started to climb again with MacDonald in office and rose to 8% in (1924) :check:
Inflation also began to fall to just under 1% (1924), BUT THIS WAS CAUSED BECAUSE SPENDING HAD COLLAPSED DUE TO UNEMPLOYMENT :check: :red_cross:
BALDWINS 2ND ADMINISTRATION (1924-29)
Reintroduced the Gold standard
🥇 £ was decreasing in value and competitive economy
DEPRESSION (1929-34) 📉
Key Industies Crashed
Coal
Dock Work
Cotton
Iron and Steel
Ship Building
Unemployment
1 million (1929) --> 2.5 million (1930)
Government Assistance increased
Main priority was keeping the Gold Standard
THE LABOUR GOVERNMENT'S RESPONSE
Huge Debts
Rising level of unemployment
Chancellor off Exchequer believed that unemployment relief should come from taking the wealthy and from corporeal profits
But profits slumped, and private and the wealthy, and so providing for the unemployed became unsustainable
KEYNESIAN
THE NATIONAL GOVERNMENT RESPONSE
Implemented the public spending cuts -->
cut public sector workers pay by 10%
Implemented
the means tests
for unemployment assistance :red_cross:
THE SPECIAL AREAS ACT
Tynside
South Wales
West Cumberland
Scotland
These places neeed direct government assisstance
New Steel worked in Ebbw Vale brought jobs to depressed South Wales
HUNGER MARCHES (1921-)
The National unemployed workers movement Boycotted Labour Party --> links with communism
Protested against the means test
Unemployed men from these depressed areas walked all the way to London to number 10
Most Famous : Jarrow in Tyneside (1936) as they refused to 'starve at home'
POST-WAR AUSTERITY (1945-51) AND ECONOMIC AID
(1931-41) The USA offered Britain considerable economic help --> Lend-Lease agreement - America would supply Britain resources like weapons and bill them after the War
WW2
Over £4 million in debt
Paying £70 million to the US
Trade had been disrupted
Bleak Winter (1947) = Food Shortage
NATIONALISATION
New Labour government (1945) had control over
Coal
Power
Railways
Ship building
Banking
Wanted to create full employment
ACTS
The Coal industry Nationalization Act (1946)
The Bank of England Act (1946)
The Transport Act (1947) - Railways and Buses
The Electricity Act (1947) - National Grid
The Gas Act (1949)
The Iron and Steel Act (1949)
Cost £2 billion
THE CONSERVATIVES AND THE POST-WAR ECONOMY (1951-61)
Voters and the public wanted wartime rationing to end - which did end in (1954)
They opposed further nationalization
Economic Boom was underway
PRIORITIZING
Full employment - Keynesian
No returns of mass unemployment like in the 1930's
Mixed Economy - They said they were not to increase levels of nationalization, but no plans to reduce it either
'Stop-Go' economics
Consumer affluence
Borrow and spend money on consumer good
= CONSUMER CREDIT
Conservatives allowed consume economy to grow, but excessive spending =
INFLATION
Increase in imports = Led to balance in Payments = A Problem
SO : Macmillan raised taxes and interest rates to decrease borrowing or the economy would grow too quickly :red_cross:
NEDDY AND NICKY
NEDDY - (The National Development Council and Office)
Management and union could discuss the development of the economy and work with one another
Benefit from long-term economic growth
NICKY (The National Incomes Commission)
Striking meant days lots of work
Pay rises were being demanded
Was an advisory council assembled from economics and industry experts
ignored by most unions
THE WILSON GOVERNMENT AND THE ECONOMY (1964-70)
Wanted to modernise Britain economy
he experienced similar economic problems to past government
Payment deficits
Increasing inflation
failure of wage restraints
The prices and income Act (1966)
Enforced a stationary wage freezes for 6 months to curb inflation
The following
The prices and income Act (1967)
Allowed wage increases in companies that could prove they were increasing productivity and output
Modernization
Technology - Ministry of Technology
DEVALUATION
(1967) Wilson admitted that devaluation would help ease the deep seated economic problems
Decreased 14%
This idea of 'the pound in your pocket' would be affected
*LED TO WILSON'S RESIGNATION
: :red_cross:*
THE HEATH GOVERNMENT AND THE ECONOMY (1970-74)
Modernisation --> Private businesses = Break away from consensus politics
CUTS :
Subsides in council homes
Free school milk for children
Raising charges on prescriptions
Cut spending (£330 million) = Lower taxes = economic growth
Problems :
Inflation is at 15%
Unemployment - 2% (end of 1950's) 6% (Early 1970's)
1973 oil crisis