In the eternal debate over the United Kingdom’s role in the world, a chronology of Britain’s relative decline in global status is usually constructed over the last 70 years since the Second World War. For better or worse, the Lend-Lease Act, the Suez Crisis, and the entry into the European Economic Community are often used as examples of Britain’s economic and political power slowly disintegrating. However, Britain’s economic superpower status has been in decline for much longer, since the First World War. On this centenary of the conclusion of that conflict, let’s take a look back on exactly what the War to End All Wars did to the British economy and its prospects for the twentieth century.
In 1914, the UK economy was no longer the world’s largest by GDP, having been overtaken by the United States, and, in some measures, by Germany. Yet, the country remained the world’s centre of finance, lending more money overseas than any others. This gave Westminster the flexibility to finance, until 1916, not just its own war efforts, but half the French effort, a third of the Russian effort, and nearly all of the Italian effort. This, however, proved unsustainable, and after 1916 the UK (and through it the rest of the Entente) had to borrow enormous sums from American financial institutions. By the end of the war, Britain had gone from the world’s biggest investor to its largest creditor and the center of global financial gravity was swiftly moving across the Atlantic to New York City.
The financial pressures of the war and the human cost of losing so many men to either death or injury would put additional pressure on the British economy in the 1920s. To cope with the massive interest payments and rapidly rising inflation, a return to the gold standard was deemed necessary in 1920 by the Cunliffe Committee, which had the undesirable effect of decreasing real wages for the first half of the 1920s. Unemployment remained high in the traditional industries of coal mining, iron and steel processing, and shipbuilding, with the latter being a shocking 30 per cent on average from 1925 to 1929. Total exports rose, but the United States and Japan began to eat into British market share in the Americas and East Asia respectively, a trend that outlasted all other primary effects of the war. While women were enfranchised in the aftermath of the war, they did not enter into the workforce in large enough numbers to compensate for the dead and injured, contributing to productivity growth that was extremely sluggish compared to the first decade of the twentieth century.
The war also directly and indirectly increased the financial burden of the Empire on the home country. Directly, the annexation of the German colonies of Namibia, Tanzania, and Papua New Guinea, along with the Ottoman territories in the Middle East, represented a bureaucratic and logistical challenge unseen since the scramble for Africa 30 years prior. More challenging was the rising nationalism in the colonies aggravated by the war. In the case of the other CANZUK territories, gradualist reform and other diplomatic measures would prove sufficient to quell more radical calls for separation from Britain. The same was not true elsewhere.
The Irish War of Independence proved to be a strategic nightmare for the United Kingdom as it sought to return to a civilian economic footing yet was faced with relentless guerrilla warfare that neither the government nor the general public was willing to stomach. While cutting losses in Ireland was a wise economic decision, the first truly successful revolt against the British Empire since 1775 proved to Britain’s other colonial subjects, especially in India, that independence was achievable. By 1918, Indian grievances were piling up. In addition to the “normal” travesties and indignations of colonial rule at home, now over a million Indians had served in the British armed forces over World War I, with over 75,000 of them dying, for little practical advancement in general welfare or political autonomy. Growing Indian nationalism in the interwar period necessitated large increases in the budget of the colonial bureaucracy and military apparatus; in combination with the deployment of armed forces to face an increasingly hostile Japan, India quickly became a serious drain on the United Kingdom’s financial resources. The British Empire had reached its territorial zenith, but the rot was beginning to settle in.
The British experience in World War One serves not only as a lesson of the futility of war and the tragedy of imperial ambition but also as a warning to those hoping for the United Kingdom to ascend, as a phoenix, back to its rightful place in world affairs. The descent of British economic power has been carrying on now not for seventy years but for one hundred; all the territories and titles gained by blood at the Somme and Gallipoli couldn’t stop it; they only made it worse. The climb back up to a superpower status is steep indeed, and those plotting an attempt to scale it ought to ask themselves why they will succeed where none of Britain’s twentieth century political champions could for 100 years.