INTRODUCTION

In 1870 Britain appeared to dominate the international economy; by 1939 things looked very different as export industries struggled in a moribund international economy. In the eighteenth century Britain had become Europe’s leading trading nation, and, during the industrial revolution, industrialisation and export growth went hand in hand to make Britain the ‘workshop of the world’. In the late nineteenth century the international economy grew rapidly – during an era of globalisation that was not rivalled until the late twentieth century. Although the dominance of British firms diminished as foreign (particularly American) firms increased their share of world export markets, British export industries continued to prosper. Furthermore, British shipping, banking and mercantile services remained at the centre of the world economy.

By 1939, Britain’s relationship with the rest of the world was altogether gloomier. The First World War had ended the era of a liberal expanding global economy. In Britain, as in other combatant nations, firms had turned their resources towards the war effort. Foreign customers found themselves ignored by their usual suppliers and looked elsewhere for alternatives. During the 1920s Britain returned to the pre-war goldbased monetary standard at an exchange rate that made British exports expensive. At the end of the 1920s, strains from the war and the imperfect return to gold contributed to the great depression in the 1930s. As depression and monetary instability spread, governments responded by circumscribing international trade to protect domestic firms and jobs and to insulate the monetary system from international pressure. In response to depression and the changed world, Britain abandoned the gold standard in 1931 and moved from a policy of free trade to one of tariff protection.