Why did Britain face economic problems in the 1920s? (T1)

Question 1

What was the British economy like in the years 1919-1920?

Answer 1

There was a short boom - fuelled by an increase in demand for scarce goods caused by WW1

Question 2

What was the British economy like in the years 1920-1921?

Answer 2

• Saw a severe recession
• Unemployment rose to 12% of the working population
• Heavy industries suffered the worst –> prices rose by 25% and wages failed to keep up with this

Question 3

What were the main causes of the economic recession in 1920-21?

Answer 3

• Loss in trade
• Underinvestment in traditional industries
• Declining industrial relations
• Attaching the pound to the Gold Standard in 1924 was a significant economic mistake by the Baldwin Government

Question 4

What happened in 1922 to cause some relief from the recession?

Answer 4

• Spending cuts

- Unemployment remained high at 10%

Question 5

What happened in 1929?

Answer 5

The Great Depression - it hit Britain hard as trade collapsed and unemployment soared
The National Government eventually helped the situation by devaluing the pound

Question 6

What were the 4 main factors for economic problems in the inter-war year?

Answer 6

1. The legacy of WW1
2. Ineffective solutions in managing the economy during the 1920s
3. Rise of the Trade Unions
4. The impact of the depression

Question 7

How did the loss of trade due to the legacy of WW1 cause economic problems?

Answer 7

• During WW1 British ships were occupied that were shipping essential war supplies - 20% sunk in the process, therefore could not export
• Economic rivals (US and Japan) filled the gap left by an economic decline left by a decline in british exports
• Britain was unable to trade with countries which they were at war with

Question 8

How did debt due to the legacy of WW1 cause economic problems?

Answer 8

• The war cost Britain £3.25bn
• With debts of £8bn by 1920, mainly to US banks
• Wartime debts rose to 160% of income by 1924

Question 9

How did the fall in value of the pound affect the economy? (Legacy of WW1)

Answer 9

• In order to be able to print enough money to cover the immense costs of the war
• The decision resulted in a rise in inflation and a drop in the value of the £ ( £1 was valued at $3.19 in 1919)

Question 10

How did inflation due to the legacy of WW1 cause economic problems?

Answer 10

• Inflation rose to 25% in 1918 which impacted upon prices

Question 11

How did technological development cause economic problems? (WW1)

Answer 11

• Britain fell behind in technological advancement
• Germany and France had their factories destroyed and therefore had to purchase new, modern machinery - giving them an edge over Britain
• By 1918 Germany was producing 2x the amount of steel Britain was producing

Question 12

How did the deaths in WW1 cause economic problems?

Answer 12

900,000 men were killed, many of which made up the workforce

Question 13

How did interest rates an the value of the £ due to ineffective solutions in managing the economy during the 1920s cause economic problems?

Answer 13

• Gov. set high interest rates to curb inflation + raise the value of the £ (however this stunted economic growth)
• People are more likely to save than spend due to high interest rates + businesses have to spend more money on debt

Question 14

When did Britain return to the gold standard?

Answer 14

In 1925 which restored the value of the £ to its pre-war value of $4.86

Question 15

What happened when Britain returned to the gold standard (for traditional industries)?

Answer 15

• It was disastrous for traditional industries - the high exchange rates made British exports more expensive and less competitive

Question 16

Which industries suffered most when Britain returned to the gold standard?

Answer 16

• Coal
• Steel
• Textiles
• Shipping

Question 17

When did Britain abandon the gold standard?

Answer 17

1914

Question 18

What other reason (due to the value of the pound)

Answer 18

g