Economic failure could be defined as a period in history in which industrial production and productivity fell, unemployment rose on the whole, exports decreased, imports increased and disposable income and consequently consumer spending fell. It is also indicated by the loss of competitiveness for the staple industries in the global market. Growth of new industries is negligible on the whole. However, there has been a great deal of argument about whether the inter-war period was one of economic failure for Britain and how far was its economy successful competing against its European neighbours and competitors overseas like the USA and Japan.
Robert Pearce, in his ‘Contemporary Britain’ argues that the main problem in analysing Britain’s economic performance in the inter-war period is due to the fact that some parts of the economy suffered very badly due to the 1929 Wall Street Crash in America like the traditional staple industries while on the other hand, in his ‘Britain: Industrial Relations and the Economy 1900-39’ he points out that certain segments of the economy excelled during this period even during the Depression years. The period also saw the growth of many new industries like the service and retail sector, motor vehicles and electric industry.
Pearce has also argued that figures can be manipulated by historians to render support to their argument. For example if we compare the figures of industrial production between the years 1928-1933 there is only a decline of 0. 1% which suggests that the economy survived the Depression years quite successfully. However, if we compare the figures of 1929-33 we see there has been a decline of almost 5%, which suggests otherwise. Figures available of the inter-war period show that to a large extent Britain’s traditional staple industries performed poorly.
During the Great War these industries had a great boost due to the demands of the war and this boom continued even after the war. Steel production went up by 50%. Industrial production, on the whole, went up by 20%. However, production soon exceeded consumption. In 1920 Britain produced 2 million tons of shipping which had to be cut back to 1/2 million. Its share in the world’s shipping output fell from 51% in 1926-29 to 34% in 1937-38. In 1936, Britain was importing more ships than it was exporting. Industrial production was cut back by 9% between 1924 and 1935.
By 1929, British manufacturing production equalled the 1913 level whereas its main competitors were far ahead. The USA had increased its production by 80%, Japan by 200% and France, which shared the majority of the burden of the Great War, by 40%. The value of Britain’s exports halved between 1929-31. India had been the largest market for Lancashire cotton. However, at the end of the war it was India which was exporting its cotton to Britain. British exports fell from 3800 sq. m to 2000 sq. m. In the years between 1910 and 1920 British cotton production fell by 25%, between 1920 and 1930 by 50%. Coal was another industry which suffered.
Britain lost a number of its overseas markets to Japan. The alternatives to coal like gas and electricity and in case of ships, oil were more acceptable to the customers in the markets in which Britain used to sell its goods. British coal productivity went up slower compared to its rivals especially Germany. In 1938, 60% of British coal was cut by machinery whereas in 1934, 97% of coal in the Ruhr valley of Germany was being cut in the same manner. However, we can argue that there was an opposite current as well. In the years 1920-29 industrial production grew by 2. 8% per annum.
Output per worker per hour increased by 3. % a year which was better than most rivals. The staple industries employed less people and exported less as well but there was significant increase in productivity which went up by 18% between 1924 and 1930. Iron and steel, on their own, went up by 25%. Between 1932-37, industrial production went up by 46%. Steel production went up from 5. 2 million tons in 1932 to 7 million and to 13 million tons in 1937. Between 1924 and 1938, productivity in the coal industry went up by over 1/3rd. Thus we can say that although there have been patches where the staple industry of Britain did perform well, on the whole it was a dismal period for it.
In the midst of the overall decline in the traditional staple industries Britain possessed, there were certain new and developing industries that were emerging and doing quite well in the inter war period. Electrical industry was rapidly expanding. In 1939 1/3 of the households had electric connection. By this time more than 325,000 people were employed in this industry and same amount of people were also employed in the electrical engineering industry. Electric consumption doubled between 1931-37. The motor vehicle industry also got a boost during this period.
There were companies like Morris in Oxford, Ford in Essex and Austin in Birmingham which grew. The number of vehicles produced increased from 95,000 in 1923 to 1/2 million in 1937. The number of vehicles on road doubled between 1930-39. The industry employed some 400,000 people. The aircraft industry was also growing in Coventry and Bristol. During this time there was a significant growth in retailing industry and shops like Marks & Spencer and Sainsbury’s were set up. The Imperial Chemical Industries was also set up to give a boost to this industry. Unemployment was a figure that was too high for the liking of any contemporary government.
In 1923-29, the French economy was booming although during the war it had suffered more than Britain. There were less than 600 people in France who were claiming unemployment benefits. The figure at that time in the UK was far more than that. However, it can also be argued that the new industries that sprung up in Britain depended more on machinery than men. The Great Depression of 1929 had a great impact on the unemployment level of Britain as it rose from 1 million in 1929 to 3 million in 1931-32 which meant 22% of the insured workforce in Britain were unemployed.
However, Pearce argues that there were 75,000 more people who were unemployed but not on the registers. In 1934, 62% of the workers in Merthyr Tydfil in South Wales were unemployed. In Jarrow, there was 73% unemployment and the shipyard had to be closed down. Between 1935-39 the government did create 1 million jobs and by 1939 only 7. 9% of the insured workforce was unemployed in 1939 which was lowest since 1920. But the level did not go below the 1 million mark before 1940. Thus we see that the inter war period was generally marked by high level of unemployment.
Thus we see the economic situation in the period between the wars in Britain. Whether it was a period of economic failure remains a matter of debate. It is beyond doubt that British economy suffered tremendously and it can be argued that this failure overshadows the growth in the new industries. London was no longer the financial capital of the world. Less demands for British goods abroad led to fall in industrial output in many sectors especially shipping. To conclude we must say that the period between the two world wars was certainly a period of economic decline for Britain although there were certain exceptions nevertheless.