Why was Britain in economic and military decline after WWI?

Great Debates
21

[QUOTE=jimmmy]
Not disagreeing with anything here. Would add or echo as the case maybe:

Britain also controlled the trade in “invisible exports” (banking, insurance and shipping services) and dominated the trade in Industrial and textile goods (and all but cornered the market in exporting the raw materials and unique products of many of these places) e.g. India, China, Latin America, or the coasts of Africa. Until after WWI - when for many of the reasons listed already this became less viable and her trade began to slip.

Further after WWI even at a time when Britain is indebt, struggling with post-War depression and manpower shortages - new colonial powers (Japan/Italy) are pushing there colonies militarily…and economic rivals (like the U.S.) began to push her more and more

I would also mention the nascent Nationalist movements abroad (and sympathizers inside the UK) began to pick up steam in the 20’s and 30’s. Some of this was due to the Colonies having “played their part” in World War I, some just because the World was a different place (in attitudes, education, development) than it had been as the decades rolled out post-1918. Colonies like Australia and Canada demanded more not less after the war - and even places like India and Nigeria saw the birth of serious Nationalist movements (that would take decades of building up steam to bear fruit) all of which required some combo of attention, Money, military and/or concession.
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Question: how much of GB’s prosperity was due the the British pound sterling being the world’s medium of exchange? The ascendency if the pound meant that British banks had a hammerlock on international lending, credit, etc. i’m willing to be the collapse of the pound was a bigger factor (in the UK’s decline0 than any other single factor.

22

[QUOTE=ralph124c]
Question: how much of GB’s prosperity was due the the British pound sterling being the world’s medium of exchange? The ascendency if the pound meant that British banks had a hammerlock on international lending, credit, etc. i’m willing to be the collapse of the pound was a bigger factor (in the UK’s decline0 than any other single factor.
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Well we have debated what the switch to Euros rather than the Dollar as the International Lingua Franca will mean to the U.S. many times on this board. Maybe we can look at this without putting this controversial topic on the table just yet.

I am not as sure it is a slam dunk as you are arguing. *Why * did the world lose confidence in the Pound ? We can ask ourselves that and the answer – really is because the British Economy was no longer seen as capable of sustaining a stable reliable Pound. Why? Well for all the reasons, obviously some more than others, listed above.

I think it is can be conceptualized as saying “the Dollar has collapsed and America lost its 1991-era status” and that is the end of it without looking at the reasons: Oil Prices, Budget Deficit, Trade Deficit, and Iraq in that order. So it is with our purposes and Britain and the pound – symptom not the disease itself say I.

And he should have left it there - but he is a bit of a blowhard:

Britain from 1821 had a “Gold Standard” which meant that a pound was worth X amount of Gold. By the 1870s all Nations that mattered had followed suit with the Pound leading the way. During World War I all nations that mattered placed restrictions on gold convertibility (essentially they left the Gold Standard and started printing up money to fight the War). Britain returned the Pound to the gold Standard in 1925,to her credit she was trying to lead the rest of the World in putting the Humpty Dumpty International Financial world together again. Britain used the pre-War price of the Pound to gold which was a drastic over-value and resulted in Britain creating severe economic dislocation inside Britain on top of debt. The World sank into depression in the early 30’s (not solely or even mainly because of this Gold issue though some conservatives would tell you just that).

Again, Britain was already well into in decline mode and the bad decisions on these type of issues helped grease the skids – but they are not “Why”

23

[QUOTE=Little Nemo]
Well, no, not really. Britain was on the winning side of both wars. Other countries fought in both world wars and were stronger afterwards. And Britain had fought in other major wars like the Seven Years War and the Napoleonic Wars and emerged stronger for it. So there isn’t any inherent reason why fighting two major wars should have sent Britain into decline.
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World war one and Two were what they are ‘world wars’ which come to be more expensive. There’s a reason why the UK was virtually bankcrupt and facing a ‘financial dunkirk’ in the onset of 1945.

24

[QUOTE=Ryan_Liam]
World war one and Two were what they are ‘world wars’ which come to be more expensive. There’s a reason why the UK was virtually bankcrupt and facing a ‘financial dunkirk’ in the onset of 1945.
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Before the U.S.A. entered WW2 Britain cleaned out her gold reserves paying for American war supplies ,at the end of the war the U.K. was not just broke but heavily in debt to the United States financially.

As a consequence Britain never again recovered her previous economic power.

25

the big postwar decline? I mean, Germany was humming along nicely by 1965-while the UK was sinking. Face it Europe after WWII was a mess-they needed new roads, homes, factories, and rolling stockwhy didn’t the British get a substantial share of this huge market?
Also, I recall that when France and the UK went to war in the ME (the Suez Incident of 1956), speculators started a run on the pound-which led to the downfall of the Eden government and near-bankruptcey for GB.

26

[QUOTE=ralph124c]
as was mentioned, the cost of maintaining a two ocean navy was immense. The UK (rather foolishly) insisted upon parity with the US Navy-why, i don’t know. I think there was a mutiny at the naval base at Scapa Flow (in 1922?); it was because the navy tried to cut the pay of enlisted men. So, evidently the navy was causing a big financial problem for GB, well before WWII.
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I don’t get this. The British navy was the finest in the world from about 1700-1940. They didn’t want parity with the US because that would’ve meant dropping all their naval ambitions and becoming a second-rate naval power.

27

[QUOTE=BrainGlutton]
…

OK, but why? Britain had not suffered a major military defeat since 1783, it still controlled the markets and resources of two-fifths of the Earth’s surface – why did its military and economic power decline?

Relevant ongoing GQ thread.
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In my opinion the timeframe offered by the question is incorrect: Britain had been undergoing a relative decline in manufacturing and financial dominance since 1870 (and some note that the warning bells were first rung in 1851 during the Great Exhibition), when the industrial US finally shook off the effects of the Civil War and Germany unified. By then the writing was on the wall as racial prejudices of the day meant that both Germany and the US would always have a population advantage, the US far more so than Germany.

In regards to the loss of Empire, one cannot underestimate the psychological impact the effect of fighting WW1 had on indigenous people, especially the hundreds of thousands transferred to Western Europe, many of them fighting in the trenches. Seeing their white “masters” destroy each other in an orgy of battle while being taught the most modern skills in the art of death and deception, then, finally being shipped back home, gave the native peoples an effective set of leaders and a far greater understanding of how the European world worked. (For example, the idea of prolonging a war for the purpose of having the civilian population get tired of it was an idea that many indigenous people used quite effectively against future Western incursions (think: Viet Nam)).

And there was the US penchant for choosing the winning side at the most opportune time… for the US, of course. Having a former colony reap many of the rewards while shouldering very little of the losses of the Great War, and the Greater War that followed, hastened what had already been happening for 40-years prior.

28

[QUOTE=ralph124c]
the big postwar decline? I mean, Germany was humming along nicely by 1965-while the UK was sinking. Face it Europe after WWII was a mess-they needed new roads, homes, factories, and rolling stockwhy didn’t the British get a substantial share of this huge market?
Also, I recall that when France and the UK went to war in the ME (the Suez Incident of 1956), speculators started a run on the pound-which led to the downfall of the Eden government and near-bankruptcey for GB.
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A few reasons I can think of…

  1. Germany was shorn of nearly all its colonial possessions after WW1. Far from being the “punishment” this was thought of in 1918, it proved a boon as it freed up all German reinvestment for Germany and not some foolhardy venture in Africa or the Pacific Ocean.

Britian, however, still had to support India, etc not just after WW1 but WW2. It proved unsustainable, a fact she painfully grew to appreciate in 1945-46.

On a related note (and to reflect something mentioned above), Germany also had over a thousand factories dismantled after WW2, this destruction of German economic power extending to 1950. While that caused much short-term pain, it forced the Germans to rebuild using the latest tools and techniques… while Britain and France were hungrily accepting obsolete technologies and equipment.

  1. The freeze of 1947. Possibly the straw that broke the camels back, this storm, one of the worst on record, shut down Britain for over two months, losing the government billions in tax revenues. This loss of revenue was so severe that on February 21, 1947 Britain announced to the Truman administration that they can no longer provide financial aid to Turkey and Greece. Because of this, America had to reverse its retreat into isolationism and, within months, formulated the domino theory, implemented the Truman Doctrine, and announced the Marshall Plan.

  2. Britain nationalized a lot of industries after WW2 and kept them nationalized long past the national emergency. The bank, the coal mines, railroads, etc. Germany didn’t do this, neither did the US, nor Japan. The USSR did, and we see what happened to them :wink: .

  3. Don’t forget the psychological atmosphere of the day. While on the “winning side”. carving up the British empire was a question pondered by both Roosevelt and Stalin once they were assured as to the inevitable conclusion of the war. The Brits realized this and could do nothing about it. Again they won a war, but this time only by the intercession of their bastard stepchild, their rich bastard stepchild. It’s embarrasing. And then having to go, hat in hand, and say “we can’t meet our obligations - you’ve got a spare $400 million?”

These events had a drastic psychological impact on the British people, many of whom could not come to grips that the sun was setting on the British Empire. Spirits were low, bellies were hungry, their bank accounts were overextended, your industry was geared for last months war (not next months automobiles), the US was in the process of saying “so long, and thanks for all the fish”, India hated them, the Arabs hated them, the US and the USSR talked to each other over the heads of the British… nobody respected them anymore.

Given that, is it any wonder they went into a post war funk? All that effort of trying to achieve a European balance of power the past two, three centuries in order to maintain a peace that was weighted towards British economic interests… wasted. Gone. K-pft!

I wonder if Punch ever did a cartoon during the post-war years of a lion, hiding in its cave licking its wounds. Because that’s the image that comes to mind whenever I read about post-war (1945-1960) Great Britian.

29

[QUOTE=JohnT]
A few reasons I can think of…

  1. Germany was shorn of nearly all its colonial possessions after WW1. Far from being the “punishment” this was thought of in 1918, it proved a boon as it freed up all German reinvestment for Germany and not some foolhardy venture in Africa or the Pacific Ocean.

Britian, however, still had to support India, etc not just after WW1 but WW2. It proved unsustainable, a fact she painfully grew to appreciate in 1945-46.

On a related note (and to reflect something mentioned above), Germany also had over a thousand factories dismantled after WW2, this destruction of German economic power extending to 1950. While that caused much short-term pain, it forced the Germans to rebuild using the latest tools and techniques… while Britain and France were hungrily accepting obsolete technologies and equipment.

  1. The freeze of 1947. Possibly the straw that broke the camels back, this storm, one of the worst on record, shut down Britain for over two months, losing the government billions in tax revenues. This loss of revenue was so severe that on February 21, 1947 Britain announced to the Truman administration that they can no longer provide financial aid to Turkey and Greece. Because of this, America had to reverse its retreat into isolationism and, within months, formulated the domino theory, implemented the Truman Doctrine, and announced the Marshall Plan.

  2. Britain nationalized a lot of industries after WW2 and kept them nationalized long past the national emergency. The bank, the coal mines, railroads, etc. Germany didn’t do this, neither did the US, nor Japan. The USSR did, and we see what happened to them :wink: .

  3. Don’t forget the psychological atmosphere of the day. While on the “winning side”. carving up the British empire was a question pondered by both Roosevelt and Stalin once they were assured as to the inevitable conclusion of the war. The Brits realized this and could do nothing about it. Again they won a war, but this time only by the intercession of their bastard stepchild, their rich bastard stepchild. It’s embarrasing. And then having to go, hat in hand, and say “we can’t meet our obligations - you’ve got a spare $400 million?”

These events had a drastic psychological impact on the British people, many of whom could not come to grips that the sun was setting on the British Empire. Spirits were low, bellies were hungry, their bank accounts were overextended, your industry was geared for last months war (not next months automobiles), the US was in the process of saying “so long, and thanks for all the fish”, India hated them, the Arabs hated them, the US and the USSR talked to each other over the heads of the British… nobody respected them anymore.

Given that, is it any wonder they went into a post war funk? All that effort of trying to achieve a European balance of power the past two, three centuries in order to maintain a peace that was weighted towards British economic interests… wasted. Gone. K-pft!

I wonder if Punch ever did a cartoon during the post-war years of a lion, hiding in its cave licking its wounds. Because that’s the image that comes to mind whenever I read about post-war (1945-1960) Great Britian.
[/QUOTE]

On a related note (and to reflect something mentioned above), Germany also had over a thousand factories dismantled after WW2, this destruction of German economic power extending to 1950. While that caused much short-term pain, it forced the Germans to rebuild using the latest tools and techniques… while Britain and France were hungrily accepting obsolete technologies and equipment.
I never understood this line of reasoning: I think you are still better off with an obsolete factory rather than NO factory. take two comparable automobile companies: say BMW (Germany) and Rover (England). It is 1946-the Rover plant is functioning; the BMW plant is burned to the ground. Rover can still build cars on its (albeit obsolete) production lines.BMW can’t-they have to wait 36-72 months before their first cars roll off the lines. In those months, ROVER has sold say 300,000 cars-with those profits, they can reinvest in more modern machinery. Assuming they do this (instead of pissing it away), Rover should stay on top. So I don’t know why the British had such difficulties-was it bad labor relations? :eek:

30

[QUOTE=ralph124c]
In those months, ROVER has sold say 300,000 cars-with those profits, they can reinvest in more modern machinery. Assuming they do this (instead of pissing it away), Rover should stay on top. So I don’t know why the British had such difficulties-was it bad labor relations? :eek:
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Bad labour, bad management, bad motivation.

I don’t know about BMW, but Volkswagen was built up by a British army officer.

31

There was a brief window for car exports while Europe was rebuilding its war-ravaged factories, and the Attlee government encouraged it by putting very high purchase tax (as much as 66% at one point) on domestic car sales. For a few years British manufacturers could sell anything with four wheels and a brake and there was little incentive to modernise facilities or develop radically new designs. They were offered the VW Beetle [Bug for US readers] design in 1946 by the Control Commission Germany and they fell about laughing at the idea that anyone would want to buy this car.
They were not keen on exporting at all, especially to non-English speaking countries, and did so reluctantly and only because the government forced them to, preferring to service the undemanding British consumer, who is taught from his earliest years to take what he’s given and be grateful.

32

[quote\I never understood this line of reasoning: I think you are still better off with an obsolete factory rather than NO factory. take two comparable automobile companies: say BMW (Germany) and Rover (England). It is 1946-the Rover plant is functioning; the BMW plant is burned to the ground. Rover can still build cars on its (albeit obsolete) production lines.BMW can’t-they have to wait 36-72 months before their first cars roll off the lines. In those months, ROVER has sold say 300,000 cars-with those profits, they can reinvest in more modern machinery. Assuming they do this (instead of pissing it away), Rover should stay on top. So I don’t know why the British had such difficulties-was it bad labor relations?[/quote]

It is counter-intuitive, but post-WW1 British experience viz the US and Germany, and then the US experience viz Japan after WW2 suggests that, even for losing countries, post-war reinvestment in new equipment and ideas can bring about higher long term rates of return and productivity gains than being the big dog at the end of the scuffle sitting pretty with a bunch of gleaming factories.

After all, when you’re at the top there’s only one way to go… down. :wink:

33

Just saw on BBC tv news that the Bank of England has just now made the final payment to the American treasury for the loans taken out to keep Britain fighting in WW2 ,I assume (perhaps wrongly)before the U.S.A. entry to the war.

Whichever way you look at it it was a very,very expensive war for the U.K.

34

it was the bill for aid in transit between VJ Day and the end of Lend-Lease on 2/9/45.
The way it ended abruptly, without any warning let alone transitional arrangements, left a sour taste in many people here. “A shade too business-like” was a common reaction.