3.3.1

Economic Impact of WW1

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Economic Impact of WW1 on Britain

The economic impact of WW1 was substantial. Britain’s investments overseas were wiped out and her resources were drained through funding the war.

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The economic impact of WW1 on Britain

  • 10% of all of Britain’s overseas investments were requisitioned by the government and sold off to fund the war effort.
  • In 1913, exports made up 30% of Britain's GDP. In the interwar period, this fell to 15% (Harley, 2004). Many of Britain's exports were replaced by rivals during the war. The historian, Eichengreen called this the 'beachhead effect'.
  • Unemployment rose to 10.9% on average during the interwar period from 6% before the war.
  • Britain's coal, iron, steel, and mining industries were hit particularly hard.
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Cost of borrowing during the war

  • The UK's debt rose from £650m at the start of the war to £7.4 billion at the end of the war.
  • In the 1920s, 44% of government spending was spent on interest payments from the war debts.
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The Great Depression

  • The Great Depression started in 1929. Banks failed in America, global trade fell across the world and Britain was forced to abandon the Gold Standard exchange rate system.
  • The global economy only really recovered from the Great Depression when the world began rearming again, preparing to go to war with Hitler and the Germans.

Economic Impact of WW1 on the Empire

Despite the drain on Britain's economy, some areas of the Empire benefitted, gaining control over their own domestic markets.

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Impact of WW1 on India

  • India experienced inflation and shortages during the war.
  • Because Britain's factories were more devoted to the war effort, India's domestic manufacturers benefitted and won a higher market share relative to British manufacturers.
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Impact of WW1 on Canada

  • Canada benefited from the war. They exported more wheat to Britain and began to export more to the USA given its rising status as a power amid British weakness.
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Impact of WW1 on Australia and New Zealand

  • Australia and New Zealand were hit hard by the war’s disruption. They relied on the British market for a high percentage of their exports.

Jump to other topics

1High Water Mark of the British Empire, 1857-1914

2Imperial Consolidation & Liberal Rule, 1890-1914

3Imperialism Challenged, 1914-1967

4The Wind of Change, 1947-1967

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