In 1914 Britain was at the very top of its power; the British Empire controlled 25% of the world’s land surface and about 25% of the world’s population and had both exceptional wealth and a high standard of living.
The London Stock Exchange was the centre of British power: it accounted for 40% of the value of stocks listed globally (3.4% in 2022) and about 25% of global bonds were traded in London. Britain was also the dominant exporter of manufactured goods and the world’s largest net energy exporter (coal); a position we can only look at with envy today.
Coal – of which the UK had plenty – powered the domestic industry and equally powered and enabled faster transport across Europe and Africa. Britain created an early economic advantage by having ample energy, coupled with innovation and a natural global trade market via its Empire. Britain had absolute free trade, having NO tariffs on any imported goods. Having started its industrial revolution about 50 years earlier than any other country made Britain a global leader without real competition; it had ‘first-mover’ advantage, at least until the beginning of the 20th century.
But global trade without tariffs on imports had its drawbacks and to an extent Britain became a victim of its own success. Faster global transportation links (mostly due to British coal) and the opening of shipping routes, especially the Suez Canal, brought cheaper agricultural produce, a.o from India, Europe and the Americas to Britain. By 1914, Britain imported more than 50% of all bread, fruit, butter and cheese and about 40% of all its meat (source: “Muddling Through” by Duncan Weldon. 2022), which is higher than it is today.
Where Britain still ruled the roost in 1914, prior to the Great War, Germany and the US started closing the wealth gap with Britain. New, more sophisticated industries such as chemicals and industrial engineering were created in Germany and America and Britain had no substantial part in this. Thanks to these new industries, German and American output per worker (productivity) started pulling ahead of Britain for the first time in 50 years.
Although Britain came out of the Great War victorious and with some German colonies added to its Empire, the ‘Roaring Twenties’ were not very present in the UK. Instead, the immediate post-war period started with a recession, high debt, high unemployment as well as a pandemic, the Spanish Flu, which killed 200,000 people in the UK, mostly young, working age people (this is similar to the 204,000 deaths from Covid-19). Britain’s global trade was damaged by the war and many of Britain’s export markets were taken over by the Americans and the Japanese during the war and were never regained.
Between the two world wars, The British economy was in constant turmoil with worker’s strikes, high inflation and a crippling debt. In the period leading to World War II, workers were mobilising rapidly, fed up with low wages and often unacceptable working conditions. Where in 1914 only 20% of the total workforce was organised in unions, this accelerated to 40% of workers in the 1920s and increased steadily after that.
Britain post World War II had a troubled economy once more. Although militarily still strong – and victorious again – the constant and continued lack of cash and the large debts incurred to pay for the war (owed mostly to the US) and interest payments on that debt made the UK (too) dependent on borrowing from other countries and specifically the US, where the world’s power now laid. The pound was under duress and had to be devalued for from $4.03 to the pound to $2.80. This was hugely significant as Sterling was one of the leading global currencies and a reflection of Britain’ standing in the world. It demonstrated the newfound dominance of the United States and the USD as the global reserve currency instead of Sterling.
The 1956 Suez Canal crisis, where France, Britain and Israel cooked up a scheme to avoid Egypt nationalising the Suez Canal – an essential trade route for Europe – showed the strength of the newly powerful and confident US. Although the British rushed their military forces to Egypt to launch an offensive, they were stopped by the US, which sided with the Egyptians and forced the UK to recall its troops and offer Egypt a ceasefire, being worried about Egypt falling under the influence of Communist Russia.
In return for this ceasefire, the US would allow Britain to access much needed cash and support for Sterling, the value of which was again under enormous pressure. Once the UK had abandoned its military offense against Egypt, the US president – Eisenhower - enabled it access to IMF funds, amounting to $1.3 billion. Britain could not refuse. Many see the crisis in the Suez Canal as the real turning point at which Britain lost its crown as world leader and passed the parcel to the US, the new sheriff in town. This historic event is well portrayed in the Netflix series The Crown.
1950s Britain lost its Empire and the ability to impose its will on the world. Its diminished role as the world’s banker and much reduced income as a global trade hub took away the financial leeway to send troops around the world to enhance British interests. But from chaos and hubris come new things, they say. A new British generation grew up without the riches and the status of imperial Britain and adapted and reinvented itself into modern Britain.
Although many may long for the golden era preceding 1914 and the enormous power held by Britain for so long, modern Britain today can be proud of its diversity, its democracy, its traditions and institutions; demonstrating that history and modernity are not mutually exclusive. But equally, the UK needs to urgently carve out a new economic role for itself both as far as energy is concerned as well as in trade and technology, because if it doesn’t, looking back to the enviable position Britain held more than 100 years ago, rather than forward, will be all too tempting.
References & links:
https://www.statista.com/stati...
https://www.gov.uk/government/statistics/food-statistics-pocketbook/food-statistics-in-your-pocket
https://link.springer.com/chapter/10.1057/9780230596306_4
https://www.history.com/topics/cold-war/suez-crisis
https://www.theguardian.com/politics/2001/mar/14/past.education1
“Muddling through from boom to bust and back again”. By Duncan Weldon 2022.
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