Coal Industry example essay topic

Essay Analysing the British Economy in the 1920's. By 1924 it was clear that the British economy was weaker than it had been in the pre-1914 years. Britain had seemingly lost its title of 'the workshop of the world' and was forced to fall in line behind major competitive countries such as America and Germany. The 1920's saw Britain face an economic decline in the industries that had once carried the country to industrial supremacy. The First World War did bring major changes to the British economy. On a positive note industry was stimulated through an unprecedented switch to war production.

However when peace finally arrived it brought with it some challenges to the country's economic future. The first set back was that Britain lost 750,000 men in the war (nine per cent of all men under 45 years of age) and twice that number had been severely wounded. This meant that Britain had lost a large productive section of its workforce. Although this was indeed a blow to the economy the matter of national dept posed an even greater threat to British welfare. In the latter years of the war Britain had been forced to borrow massive amounts of money, for example in 1917 loans were taken from America. By the end of the war total public dept was nearly lb 8,000 million-an amount that would clearly but a massive strain on any economy.

This resulted in a heavy load being put on the Budget in the 1920's. Measure were taken to combat dept, for example lb 300 million out of a total annual expenditure of lb 800 million was put aside for paying off nation dept. Also out of each lb 100 of unearned or investment income, lb 25 was taken in tax and out of this amount lb 10 was simply for the dept. Dept resulted in money being taken away for Britain that could have helped in prosper again. The staple industries, such as coal, shipbuilding and textiles, were used to being dominant in the manufacturing sector, for example more than a million men were working in the coal industry at the beginning of the 1920's. However the 'staples' were export dependent and as this level started to dropped so did their dominance.

This decline was a serious one if measured against the productivity baseline of 1913. These industries suffered due to reasons specific to their particular trade and also by problems that effected these industries as a whole. The coal industry was effected by a dramatic fall in both domestic and industrial demand. The amount of tons of coal consumed in homes fell from 182 million 1909-13 to 160 million 1921-29. World tonnage of coal-fired vessels fell from 44 million in 1914 to 32 million by 1937. The reason for this lack in demand was due to the growing popularity of alternate forms of power such as electricity, petrol and oil.

The coal industry also suffered due to poor internal industrial relations. There was a three-month strike in 1921 followed by a six-month strike in 1926. This caused productivity levels to fluctuated and left overseas customers losing faith that Britain could offer the regular supply of coal that they depended on. The cotton industry started to decline just as it reached its peak in 1925. One factor that contributed to this was the surge of investment during the short boom of 1919-20. However when the boom ended, firms were overvalued and owners were left with heavy overheads from the cost of loans and investments.

This resulted in less capital being available for developing new machinery and thus meant that the cotton companies became less profitable. Shipbuilding suffered also in the 1920's. The British share of new world tonnage launched fell form 58.7% in the years 1090-13 to only 44.7% 1920-29. One of the main reasons for this fall was that intensive shipbuilding programmes in Britain in the aftermath of the war saw Britain more than replace the merchant vessels lost. To summarise the shipbuilding industry was faced with oversupplying its country with ships.

In fact this problem was increased further by the actual slump in world trade during these years. There were just too many ships to carry too few goods world-wide. Also, as seen before, there was a switch in demand form coal fired vessels to oil-fired ones. The British shipbuilding industry was slow to keep up with trends so missed out on an opportunity to expand their market.

There were also some large problems that effected all of the staple industries in turn. As each of the industries mentioned were heavily export dependent, they were effected the most by the decline in British exports. The coal industry exported 88 million tons per annum 1909-13 but this figure fell to 70 million 1921-29. The cotton industry exported 75% the amount that it did 1909-13. British goods were being undermined by competitors world wide that offered the same goods but at cheaper prices. For example the cotton industry lost its large export market in India to Japan who could offer more attractive prices and polish coal was becoming increasingly better value for buyers.

Another factor that added to their decline was protectionism of other countries. Tariffs enforced by governments meant that British goods were more expensive in comparison to goods made in their own country. Popularity of British goods suffered due to this tactical procedure. In 1917 Indian governments imposed a tariff of 7.5% on imported goods (this later rose to 11% in 1921). Another factor that effected all the 'staples' was the high cost of labour. Hourly wage rates in 1924 were 28% higher tan in 1913.

Wages were rising faster than prices so industries were loosing profits fast. The normal working week had also been reduced by one-sixth, resulting in employers paying more for fifty hours' work than they used to pay for sixty. One reason for this problem was the growing strength of Trade Unions who pressurised employers into keeping wages high. The structure of the staple industries also added to their decline. Managers were against considering restructuring or amalgamation as the industries had always been decentralised, consisted of many small firms. However if they had altered the structure they could have helped increase output and cut rising costs.

Managers also failed to lay off workers to save money and instead kept them on short-time working. This was initially pragmatic in order to appease Trade Unions and also keep a skilled workforce within reach in case they began to profit again. However this strategy failed to cut costs enough to be beneficial to the crisis. The decline in these industries did lead to heavy unemployment. Between 1923 and 1929 11.3% of the insured workforce were unemployed. They were dubbed the 'intractable million' and were a sure sign that the British economy was in bad health.

The problem was worse because there was an uneven distribution of the unemployment meant that whole regions faced serious decline. It was 'outer Britain' that suffered the worse, as areas such as North East and Wales were where the majority of the staple industries were situated. The government introduced some measures to help lower unemployment figures. A committee headed by Viscount St David was created in 1921. This was allocated money to spend in areas of high unemployment in order to create jobs, but not enough funding was given so little progress was made. In 1928 an Industrial Transference Scheme was created which this time offered grants to areas of low unemployment on the condition that 50% of the new workforce should be transferred from the most struggling areas.

This proposed to help 200, 00 miners but only managed to help 42,000. Government attempts did not lower unemployment as only created a small number of jobs. A more drastic attempt to help the economy was offered in the decision to go onto the gold standard' in 1925. Putting the economy on the gold standard was seen as a way out of decline as it was a measure that would stop the balance of payments deficit that Britain was suffering from. It was a self-regulating mechanism that proposed to correct the imbalance between imports and exports. It was also seen as an automatic check of inflation as it was assumed that the government would only be able to issue money equivalent to their actual gold and bullion reserves.

The British government believed that only when the pound was strong enough that the economy would be ready to go back on the gold. Leading economists at the time set the level of strength at the pound being equivalent to $4.86. This was the level that the pound could 'look the dollar in the face'. One critic of this proposal was Keynes who believed that going back on gold would not lower unemployment but rise it even further. He even produced a pamphlet titled 'The Economic Consequences of Mr Churchill' (1925) which outlined his view that the gold standard would be little short of disastrous. Keynes' views spoke some truth and the economy lasted the short time of six years on the gold.

The gold standard failed as it led to the pound becoming over valued. Economists had pressurised the government into making the pound equal to $4.86 but this lead to British exports being very costly. Exports were more expensive and levels declined further thus running the staple industries further into the ground. In order to make the value of the pound higher the government had increased interest rates. This, they saw, would be an incentive to but sterling and therefore let it grow in price till in could face the dollar substantially. High interest rates provoked the whole problem even more as it made exports even more expensive and made it costly for industries to invest, develop and improve their business.

Unemployment levels, as predicted by Keynes, did not fall but rose. The 'intractable million' were stuck firmly in limbo. By the end of the 1920's it was clear that the British economy was not as stable as it used to be. The staple industries had declined leaving the healthy figures of 1913 in the past. Unemployment levels had risen and there was no obvious sign the figures halting. The decision made by the government to put the economy on the gold standard had caused consequences that were the opposite of what they had hoped for.

However not all was bleak during the 1920's. New industries were growing and there was hope that they would flourish and prosper. Electricity was seen as a new and promising form of power supply and this therefore gave scope for the electrical goods industry to grow. The motor car industry was also on the up. In 1914 there had been 106,000 private cars and 64,000 commercial vehicles on British roads. By 1921 these numbers has doubled.

Perhaps the 1920's were just a transition period between the old industrial regime of the pre-14 era and the new industrial market that would grow to bring a better economy to Britain.