Britain's fundamental issue even before the war was a lack of foreign exchange, the end stage of 90 years of relative decline. British foreign investment by the 1930s had come to an almost total end, and the current account of the balance of payments was running a consistent deficit by the middle of the decade, with a consequent run on t…
Britain's fundamental issue even before the war was a lack of foreign exchange, the end stage of 90 years of relative decline. British foreign investment by the 1930s had come to an almost total end, and the current account of the balance of payments was running a consistent deficit by the middle of the decade, with a consequent run on the pound. "The international financial hegemony which had potentially been within the reach of the United States since 1918 was now achieved" (Cain and Hopkins, British Imperialism 1688-2000, p. 479). Reflecting this reality, the Tripartate Agreement of 1936 required the British, French, and American central banks to settle their balances in gold on a 24-hour basis on a price based on the going exchange rate of their currencies relative to the dollar, the only currency with a fixed value relative to gold. The Tripartate Agreement was overtaken by subsequent events (specifically, the conquest of France), but the similarity to the postwar Bretton Woods system is obvious.
Of course there are things Britain could have done differently to avoid dependence. They're all just completely unpalatable. Britain could have dismantled the Royal Navy, for example. It even had choices after the war, precisely because Lend-Lease had been given away and not loaned. It could have refused the American stabilization loan and gone in for full autarky, with a consequent catastrophic fall in living standards. (This has no relevance to anything happening today, of course.) The choice to take the stabilization loan was Atlee's, not Churchill's. But it's the same choice any British politician would have made.
There's this weird desire to ignore the realities facing Britain in the 1930s and 1940s and instead present what Britain did as the result of the willful choices of one man, even when the choices in question were taken when the man was not in office. I don't get it.
Britain's fundamental issue even before the war was a lack of foreign exchange, the end stage of 90 years of relative decline. British foreign investment by the 1930s had come to an almost total end, and the current account of the balance of payments was running a consistent deficit by the middle of the decade, with a consequent run on the pound. "The international financial hegemony which had potentially been within the reach of the United States since 1918 was now achieved" (Cain and Hopkins, British Imperialism 1688-2000, p. 479). Reflecting this reality, the Tripartate Agreement of 1936 required the British, French, and American central banks to settle their balances in gold on a 24-hour basis on a price based on the going exchange rate of their currencies relative to the dollar, the only currency with a fixed value relative to gold. The Tripartate Agreement was overtaken by subsequent events (specifically, the conquest of France), but the similarity to the postwar Bretton Woods system is obvious.
Of course there are things Britain could have done differently to avoid dependence. They're all just completely unpalatable. Britain could have dismantled the Royal Navy, for example. It even had choices after the war, precisely because Lend-Lease had been given away and not loaned. It could have refused the American stabilization loan and gone in for full autarky, with a consequent catastrophic fall in living standards. (This has no relevance to anything happening today, of course.) The choice to take the stabilization loan was Atlee's, not Churchill's. But it's the same choice any British politician would have made.
There's this weird desire to ignore the realities facing Britain in the 1930s and 1940s and instead present what Britain did as the result of the willful choices of one man, even when the choices in question were taken when the man was not in office. I don't get it.