Post WWI Economic Problems

Post WWI Economic Problems

1. Britain's Domestic & Overseas Commitments

   • Maintaining Britain's role as imperial power meant huge expenditure on armed forces, overseas bases and government of coolonies.
   • Britain drawn into Cold War between USSR and USA. Britain aided West Berlin in 1948 airlift following communist blockade and involved in formation of NATO. Economic crisis renewed following resume to rearmement in response to Korean war 1951.
   • February 1947 "winter crisis." British Ambassador in US informed US gov that Britain couldn't afford continuing supporting Turkey and Greece and would have to withdraw from Palestine. Anericans responded with Marshall Plan.
   • Attlee and Bevin decided to commit Britain to development of nuclear weapons, though very expensive and divided party.
   • Winter 1947 worst of the century, freezing temp and snow throughout Feb and March. Transport came to stand still. Minister for Fuel, Shinwell, failed to stockpile enough coal in 1946. So coal supplies to industry were cut to divert coal stocks to power stations. Industry closed. Unemployment rose to 2 million. Coal exports dropped by 20%. All money was spent on coal.

2. Government Financial Problems

   • Debts of £4,198 million and balance of payments deficit of nearly £1 billion.
   • Exports of manufacturers had dropped by 60% in wartime.
   • Shrinkage of invisible exports from £248 million in 1938 to £120 million in 1946.
   • Costs of maintaining overseas military commitments quintrupled between 1938 and 1946.

3. Other economic problems

   • World trading nations experienced severe balance of payment difficulties, worries this would destroy international commerce the USA adopted Marshall Programme 1947 to provide dollars to any country willing to receive them in return for granted trade concessions to the US. Europe received $10 billion, of which Britain received 10%. Labour felt this created a beggar and master relationship, denying gov. any chance of acting independently.
   • Total war left widespread belief in advantages of State Planning, ownership and control. This made nationalisation possible. By 1945, State already virtually nationalised key parts of British industry. After war, traditional labourers and middle/upper classes agreed nationalisation was a good idea. But this was expensive, private owners had to be compensated which cost £2700 million. Tax payers burdened with unprofitable industries which would have to be subsidised. Pay and conditions didn't improve much. Labour administration did not directly involve workers r consumers in decision making and running of industries.