Trade and commerce, impact of war

• Economic impact of war in Britain

  • WW1 cost almost a million Britons and 200,000 soldiers from across the empire
  • Extremely expensive
• Economic impact of war on Britain

  public finances were directed towards the war effort, leaving Britain in severe debt

  • Much of Britain's capital investment overseas had been wiped out
  • The pound sterling (£) had to be removed from the gold standard for the duration, because gold reserves ran so low
• Cost of war

  Estimated that the war cost about £35,000 million. 13 times as much as the second Anglo Boer war of 1899 - 1902. Over $4 billion had to be borrowed from the USA, as the country's reserves ran so dangerously low
• Gold standard

  • Since its foundation in 1694 the Bank of England had issued notes promising to pay the bearer a sum of money
  • Promise could be made good by the bank paying out gold in exchange for its notes
  • Link with gold helped to maintain the value of the notes and its suspension of this 'gold standard'
• Economic impact of war on Britain

  • Production for the war was prioritised over making goods for export to traditional overseas markets
  • Meant that Britain's were able to win markets traditionally dominated by British exports
  • Britain's traditional industries, textiles, shipbuilding, coal, iron and steel created income to pay for running and defending empire
• Economic impact of war on Britain

  • Banks and financial instituitions, generated profit from lending money overseas,
  • result in economic burden of the empire grew, as Britain ability to pay for is diminished
• Economic impact of war on Britain

  • Problem intensified in the 1930s by the Great Depression , saw a collapse of international trade and markets for British industrial exports
  • Financial crisis in 1931 forced the country off the gold standard again
  • Turned reduced earnings from overseas investment
• Economic impact of war on the empire

  • India contributed almost £146 million to the war effort
  • Experienced inflation and shortages during the war as a result
  • 1914 two thirds of India's imports came from Britain and it started to fall
  • help control the face of rising nationalist movement, the British placed high taxes on Indian imports, rising from 11% in 1917 to 25% in 1931
• Economic impact of war on the empire

  • Canada benefitted from the war, emerging as an industrial power
• Economic impact of war on the empire

  • Australia and New Zealand, exporters of food
  • relied heavily on the British market
  • Consequently hit hard by the disruption of trade caused by the war
• British policy towards imperial trade went through two distinct phases in the inter - war period

  • 1920s, Britain tried to recreate the economic system which had existed before 1914. Britain returned to the gold standard in 1925 in order to stabilise its international trade
  • One exception to the policy was Colonial Development Act of 1929
• British policy towards imperial trade went through two distinct phases in the inter - war period

  • Aftermath of the Great Depression a much greater emphasis was placed on the importance of the empire for British commerce and imports from the empire increased
  • Britain was again forced to abandon the gold standard in 1931 but trade with the empire in sterling proved a great asset
• Sterling area - Countries (although mostly not all in the empire and commonwealth) that either pegged their currencies to the pound sterling

  Used the pound as their own currency
• British policy towards imperial trade went through two distinct phases in the inter - war period

  • Most of the countries of the empire fixed the value of their currencies to sterling and some kept their national reserves in sterling
  • Reflecting their close ties with Britain
  • Gave access to the British market for countries in the Sterling area
  • Ensuring a profitable outlet for British overseas investment
  • Most other international opportunities closed down
• British exports 1913 1934

  Total value of British exports to the world - £525m - £378m

  Total value of British exports to the empire - £195m - £166m

  Imperial exports as a percent of total British exports - 37.2% - 44%
• Percentage of certain exports going to the empire (from Britain)

  1913 1934

  Cotton good exports - 51.7% - 53.2%

  Locomotive exports - 58.6% - 65.3%

  Railway carriage exports - 58.4% - 68.3%

  Motor vehicle exports - 67.4% - 71.7%

  Electrical engineering exports - 61.6% - 61.1%
• Value of imperial trade and commerce for Britain

  • 1930s, the empire remained important for cotton textile exports, as it did for a range of other industrial productions at the time for tough competition
  • World trade shrank, imperialists, such as Lord Beaverbrook, the newspaper magnate, again argued for a return of the idea of 'imperial preference'
• Value of imperial trade and commerce for Britain

  • 'imperial preference', ending Britain's historic policy of free trade
  • Met with opposition from the Dominions which wished to protect their own growing industries and compromise reached at Ottawa Conference of 1932
• Ottawa Conference of 1932

  • The British introduced a general 10% tax on all imports but the Crown Colonies were exempted
  • Britain and the Dominions gave each other's exports preferential treatment in their own markets
• Value of imperial trade and commerce in Britain

  Reinforced the important role of the empire in supplying foodstuff raw materials to Britain.
• Importance of Empire as a source of crucial imports between 1913 and 1934

  British imports 1913 1934

  Total value of British imports from the world - £769m - £727m

  Total value of British imports from the empire - £191m - £257

  Imperial imports as a percentage of total British imports - 24.9% - 35.3%
• Importance of the Empire as a source of crucial imports between 1913 and 1934

  Percentage of certain imports coming from the empire to Britain

  1913 1934

  Tea imports - 87.3% - 88.9%

  Wheat imports - 48.5% - 63.3%

  Cocoa imports - 50.9% - 90.7%
• Regional shares in British exports and imports, 1909 - 38

  British exports to:

  Dominions

  17.5% - 1909 - 13

  20.6% - 1925 - 29

  25.9% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  British exports to:

  India and Burma

  11.9% - 1909 - 13

  11.6% - 1925 - 29

  8.0% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  British exports to:

  Rest of British empire

  5.6% - 1909 - 13

  5.0% - 1925 - 29

  7.4% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  Total for British empire

  35.0% - 1909 - 13

  37.2% - 1925 - 29

  41.3% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  British imports from

  Dominions

  14.3% - 1909 - 13

  16.9% - 1925 - 29

  24.3% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  British imports from

  India and Burma

  7.3% - 1909 - 13

  6.1% - 1925 - 29

  6.5% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  British imports from

  Rest of British empire

  5.3% - 1909 - 13

  9.9% - 1925 - 29

  11.4% - 1934 - 38
• Regional shares in British exports and imports, 1909 - 38

  British imports from

  26.9% - 1909 - 13

  32.9% - 1925 - 29

  41.2% - 1934 - 38
• Value of Imperial trade and commerce for the empire

  • Australia and New Zealand, experienced serious economic problems in the inter - war period
  • Cost of their largely manufactured imports from Britain outstripped the income from their largely foodstuff/raw materials exports
  • Both countries ran up debts with Britain
  • New Zealand suffered less than Australia
  • Imperial preference became especially important for these countries when international trade turned down sharply in the 1930s
• Value of imperial trade and commerce for the empire

  • Asia and Africa also suffered as a result of the collapse of world trade in 1930s
  • Burma and Malay were especially hard hit
  • Malaya relied on exports of tin and rubber
  • Burma on exports of rice
• Colonial development and Welfare Act of 1940 formed the foundation for the new approach. This:

  • wrote off some colonial debts
  • provided colonial grants or loans of up to £5 million per year
• A further Colonial Development and Welfare Act of 1945:

  • increased the aid available to colonies to £210 million over ten years
  • required each colony to produce a ten year development plan showing how it would use such funds
• Land - lease = An arrangement during WW2 by which the US supplied Britain with weapons, food and other necessities
• Economic impact of WW2

  WW2 hit Britain even harder then WW1. Entered the war in a far weaker condition than it had in done in 1914. Major defeats in the West and East and Southeast Asia in the first three years of war proved cripplingly expensive
• Economic impact of WW2

  • German U boat attacks on British sea traffic were devastating especially in early years of war
  • Britain lost 11.7 million tons of shipping in the war, or about 54% of the country's merchant fleet strength at the beginning of the war
  • Loss of major colonies in Southeast Asia to the Japanese from 1942 disrupted trade and cut of supplies of vital raw materials such as rubber from Malaya
• Economic impact of WW2:

  • The diversion of industrial production to producing weapons of war meant that less was produced for export
  • British tried to reduce imports, by campaigns to increase home production and food rationing
  • Britain's balance of trade was heavily in deficit during the war
• Economic impact of WW2

  • A third of Britain's overseas assets (investments in businesses) were sold to pay for the war
  • Britain borrowed from the USA from 1941 in the form of lend lease and emerged from war with massive debts
  • Britain increased its dependence on the empire for imports, considerable investment by colonial governments
  • EG, in Africa to help increase the supply of foodstuffs and raw materials
• Economic impact of WW2:

  • Colonial reserves held in Britain (called 'sterling balances') were used to help Britain pay for the war effort