boom, crisis and recovery

Loss of Trade – Post WW1

• During the war, 20% of merchant ships were lost as shipping focused on importing supplies.

• UK couldn’t regain pre-war dominance.

• USA + Japan took over markets → UK exports dropped.

Technological Development – Post WW1

• Growth in new industries like aircraft + radio.

• Created jobs for semi-skilled workers → boosted post-war economy.

Inflation – 1918

• Inflation reached 25%.

• Prices ↑ faster than wages → families struggled.

• Govt worried about stability + public anger.

Geddes Axe – 1922

• Gov cut spending: education, pensions, housing, unemployment benefits, health.

• Aim: repay £850m war debt.

• Result: ↑ unemployment + social hardship.

Value of the Pound

• 1914: UK left gold standard.

• 1925: Rejoined (Churchill) = pound fixed too high at $4.86.

• 1931: MacDonald got US loan ($80m) → spent fast → left gold again.

• Pound fell to $3.40 → helped exports but trust in UK economy ↓.

Protectionism – 1921

• Coalition wanted tariffs to protect key industries.

• Public feared food prices would rise → rejected.

• Limited tariffs in 1925.

• No big investment in new industries (e.g. cars) → long-term weakness.

Cheap Money Policy – 1920s

• Interest rates cut: 6% → 2%.

• Borrowing became cheaper → investment ↑.

• Gov could spend more + mortgage costs ↓ → housing boom → jobs ↑.