GB Industry 20th Century

By the time of Queen Victoria's death in 1901, other nations, including the United States and Germany, had developed their own industries; the United Kingdom's comparative economic advantage had lessened, and the ambitions of its rivals had grown. The losses and destruction of World War I, the depression in its aftermath during the 1930s, and decades of relatively slow growth eroded the United Kingdom's preeminent international position of the previous century. The Great Depression hit the nation especially harshly, as it had still not fully recovered from the war. See also the Great Depression in the United Kingdom.

In World War II, there was again a great deal of destruction to British infrastructure, and the years after the war also saw Britain lose almost all of her remaining colonies as the empire dissolved. In the 1945 general election, the Labour Party was elected, introducing sweeping reforms of the British economy. Taxes increased, industries were nationalised, and a welfare state with national health, pensions, and social security was created.

The next years saw some of the most rapid growth Britain had ever experienced, recovering from the devastation of the Second World War and then expanding rapidly past the previous size of the economy. By the end of the 1960s, this growth began to slow, and by the 1970s Britain entered a long running period of relative economic malaise. This led to the election of Margaret Thatcher, who cut back on the government's role in the economy and weakened the power of the trade unions.


1900–1928: the early 20th century

By the turn of the twentieth century, Britain’s economic fortunes were in relative decline. Germany and the United States were becoming the biggest threats in terms of domestic economic production, having vastly superior natural resources than Britain. Furthermore, Germany had developed its own policy of imperialism which led to friction with other imperial powers in Europe up to the First World War.

The First World War (1914–1918) saw absolute losses for Britain’s economy. It is estimated that she lost a quarter of her total wealth in fighting the war. Failure to appreciate the damage done to the British economy led to the pursuit of traditional liberal economic policies which plunged the country further into economic dislocation with high unemployment and sluggish growth. By 1926, a General Strike was called by trade unions but it failed, and many of those who had gone on strike were blacklisted, and thus were prevented from working for many years later.


1929–1939: the Great Depression and the 1930s

In 1929, the Wall St Crash affected Britain resulting in leaving the Gold Standard. Whereas Britain had championed the concept of the free market when it ruled the world through its empire, it gradually withdrew to adopting Tariff Reform as a measure of protectionism. By the early 1930s, protectionism once again signalled the economic problems the British economy faced. When the Labour Government collapsed in 1931, it was replaced by a National Government representing all the parties as an indication of the economic troubles that had beset the country. Britain was not alone, with equal economic troubles affecting most European countries, most powerfully Germany.

In political terms, the economic problems found expression in the rise of radical movements who promised solutions which conventional political parties were no longer able to provide. In Britain this was seen with the rise of the Communist Party of Great Britain (CPGB) and the Fascists under Oswald Mosley. Their political strength was limited however and never provided any real alternative to conventional political parties in the UK.

At the same time, the economic power created by the empire was starting to weaken. A process of decolonisation had been set in train in the aftermath of World War I. The empire had been an essential base in the success of Britain’s economy; providing cheap resources, labour and vital strategic points for defence. However, during the interwar period came the rise of movements seeking self-determination and self-government, most notably personified with Mahatma Gandhi. With the white empire having become a Commonwealth, (a loose association of states bound by ties of history), it was only a matter of time before the rest of the empire followed suit.

Britain’s economic problems are cited as the reason for appeasement. Delaying a commitment to war was a means of buying time to divert scarce economic resources into the production of military hardware and armaments.