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At the end of the First World War, a crisis of Empire could surely have hardly been further from the minds of British policy-makers. The indications were, that, victorious in war - albeit at a terrible price - and with the Empire at its greatest ever territorial extent, this was the time to consolidate the Empire, returning to a normality of trade and discourse, and incorporating the territorial fruits of Britain's victory into the Imperial system. There was "little reason to suppose that the strength to hold on to new acquisitions was not there". [1] Indeed, the task was to restore the "lost paradise" [2] of 1913 and to augment it.
With hindsight it is clear that such optimism was unfounded. Here I will examine how far the effects of the war contributed to the frustration of these retrograde ambitions, and discuss the extent to which developments in the immediate post-war position represented a crisis in the Empire.
Dictionary definitions of `crisis' refer to "a crucial stage...in a sequence of events." [3] All the stages in a sequence are part of the whole movement, but I will argue here that the war compressed change - which may have been likely in the long-run anyway - into a very short space of time. My focus will be on the economic sphere, but brief consideration will also be given to some of the political and diplomatic aspects of Empire, as well as to the geo-political consideration; that is, Britain's position in the `world order' that emerged at the end of the First World War.
It is only in retrospect that the negative impact of the war on the British economy became fully apparent: long-run economic change has made a nonsense of the post-war Imperialists' high hopes. In 1914, Britain had still been one of the world's premier economic forces, acting as the `well-spring of world trade through investment' [4]. Britain's economy was predicated on a highly developed trading network, and it still lay at the heart of the world's financial services industry. Britain's trading pattern at the outbreak of war can be characterised as one where raw materials and food were imported - to feed the manufacturing system and the population respectively - and where visible exports were largely comprised of manufactured goods [5]. British manufacturing was concentrated in `older' spheres, where British supremacy had already been eroded by the productivity gains of other industrial nations, especially Germany and the US [6]. These older industries - coal, iron, steel, textiles, and heavy manufactures such as ships, vehicles, and machinery - comprised something like two thirds of all of Britain's exports in the period 1911 to 1913 [7]. In one traditional historiographic account of Britain's economy, this concentration of industrial production is cited as the key determinant in the relative decline of Britain's economic strength, and as representing a structural weakness that could be exploited by other industrialising nations.
The deficit on Britain's visible trade was offset by the extensive trade in invisibles: foreign investment, shipping, banking, insurance and other services. London acted as a key finance centre, exporting capital to the world and importing vast dividends from overseas investment and property. Something like one half of this foreign investment was within the Empire [8]. In contrast to the industry-centred view, it is possible to cite Britain's foreign investment as the key determinant of Britain's global economic and political influence [9].
This overall trading pattern, where invisibles provided a balance of payments surplus despite the deficit on visible trade, was crucially impacted by the upheavals in the world economy that resulted from the disruptive shocks of the First World War. The war disrupted trade through fighting, blockades, curtailment of markets, and through the collapse in trading confidence and investment [10]. Additionally, the domestic economies of the combatant nations were switched over to war production, which meant that their foreign customers had to find alternative sources of supply of `peacetime' manufactures. This import substitution took the form of finding alternative producers or developing indigenous manufacturing capacity. Also critical to the combatant nations was the accumulation of war debts [11].
The effects of these developments on the British economy, and on its Imperial trade, were far-reaching. British imports rose to fuel war-production, and exports of manufactures and services fell. In order to pay for the war, gold reserves were depleted, and Britain's borrowing created substantial indebtedness, particularly with the US. Government borrowing increased from 0.26% of National Income in 1913 to 1.57% in 1919 [12], a significant shift which helped to create a deficit between government revenue and expenditure of £2 billion [13]. Equally important were losses in Britain's overseas investment portfolio: property abroad had been confiscated (in Russia, for example), and large quantities of assets had been liquidated to finance the war effort. By 1918, assets abroad had declined by one quarter compared to 1914 [14], exacerbating the loss of confidence in a devalued sterling and, crucially, contributing to the loss of Britain's cushion against its balance of trade deficit.
This "drastic slump in…invisible income" [15], and the global loss of confidence in credit, meant that Britain was "no longer in a position to supply sufficient capital to fuel the international economy" [16]. Britain subsequently turned more towards a semi-protectionist Imperial trade zone to maximise its trading efficiency. This increasing dependence on the `sterling area' countries came about since trade with these countries - strengthened by the ties of formal and informal empire - had declined less than that with countries outside the Empire [17] . It has been strongly argued that it is the implications of the loss of investment capital and its associated dividends that provides the key to understanding the contraction of Britain's global economic influence [18].
Thus, at the end of the war, the structural basis of British trade had altered, although the effects were yet to be fully felt. In terms of the Empire, it might even be said that trading interdependency had been strengthened, despite the development of the periphery's autonomous industrial capacity during the war years.
The paradoxes inherent in Imperial economic relationships were paralleled by shifts in constitutional and political ties [19]. One view might be that the joint efforts of Imperial nations united them in a common purpose and in common sacrifice, creating a `validation of the Imperial ideal'. Another interpretation is that the co-operation of Britain's dominions and colonies during the war years had been bought at great cost: the cost being concessions to nationalists and loyalists alike. Also costly were the promises made to various groups about self-government and national independence: these sometimes conflicting promises and the precedents that concessions set were matters of wartime expediency, but they can be seen as creating the conditions wherein the extant tensions in Imperial relations between autonomy and centralisation were exacerbated [20]. Also, the ability of Britain to police the Empire and to enforce its will can be seen to have declined in terms of both formal and informal control: formally, through precedent-setting over self-government, through the nascent redefinition of Imperial constitutional ties, and through the relative decline in the strength of the Royal Navy; informally, Britain was no longer in a position to act as the world's banker and thus be the leading influence in the international economy.
Britain's Imperial position after 1918 - and its position in the wider world - presents a series of contrasts between established positions of economic and diplomatic prestige, and the emerging developments of economic decline and Imperial redefinition. The economic element is vital since it profoundly affected Britain's ability to pursue domestic and international policies, and limited its scope in negotiating the consolidation of its post-war Empire and mandated territories. In many ways - for example the importance of `native' agencies as Imperial police forces - reliance on the Empire had created the conditions which would fracture the old Imperial order after 1918.
It seems strange to talk of a `crisis' in the Empire after the First World War: the Empire was at its greatest extent, the war had been won, and the possibility seemed to exist to return to the pre-war status quo. In hindsight it is clear that the economic changes wrought by the war undermined Britain's capacity to act as an Imperial power in the way that it had done when it was economically pre-eminent. The decline from its hegemonic position in the financial services sphere can be seen as crucial here, since this shift undermined Britain's informal influence worldwide. This, coupled with military shrinkage and the post-war re-emergence of "devolutionary and nationalist agendas" [21] at the periphery, created a de facto reduction in Britain's bargaining position and its ability to maintain the Imperial status quo.
It is possible to conceive of an `Imperial Dynamic' of expansion and exploitation (no pejorative connotation intended) which was still largely in place in 1914, and which was critical to the domestic economy of Britain and in the metropole's position in the Empire. At the war's end economic momentum created by this dynamic allowed the impression to remain that Britain's Imperial future could consist of a return to the rosy past. In retrospect, the evidence suggests that the deep structural changes in Britain's trading base and in the nature of Britain's relationships with the components of Empire meant that faith in such a `return to paradise' was unfounded. It is difficult here to disentangle the idea of Empire - an Empire of prestige and influence - from the economic, strategic, and political realities of Britain's Imperial relations.
Beneath the calm, optimistic surface of Imperial expansion and consolidation lay a turbulence that threatened to well up and threaten the stability of the Empire. One aspect of Imperial historiography polarises the post-First World War situation as `Imperial High Noon' or `Imperial Sunset'. I would adapt this metaphor a little. The post-war setting is a large green lawn on an autumn day: it is mid-afternoon, and the sun is shining, warm and bright. But, away from the dazzle of the sun, the leaves are starting to turn brown and dark clouds are creeping over the horizon.
`Crisis' often connotes a sudden development. In economic and institutional history change usually occurs at a more sedate pace. The Empire in 1918 perhaps seemed stronger than ever, but it is clear in retrospect that all the elements for its transformation were in place.
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Cain, P. J.
and
Hopkins, A. G. - British Imperialism: Innovation and Expansion 1688 - 1914; Longman, 1993
and
British Imperialism: Crisis and Deconstruction 1914 - 1990; Longman, 1993
Hobsbawm, Eric - Industry and Empire Penguin, 1969
Judd, Denis - Empire: The British Imperial Experience from 1765 to the Present; Harper Collins, 1996
Kenwood, A.G.
and
Lougheed, A. L. - The Growth of the International Economy 1820 - 1990; Routledge, 1992
Pollard, Sidney - The Development of the British Economy 1914 - 1990; Edward Arnold, 1992
Porter, Bernard - The Lion's Share; Longman, 1996
[1] B. Porter, The Lion's Share (Longman, 1996), p. 254
[2] Eric Hobsbawm, Industry and Empir (Penguin, 1969), p. 152
[3] Collins' English Dictionary, 1986 ed.
[4] See P. J. Cain and A. G. Hopkins, British Imperialism: Innovation and Expansion 1688-1914, [Hereafter referred to as VOL. 1], (Longman, 1993), Ch. 1, passim ; and P. J. Cain and A. G. Hopkins, British Imperialism: Crisis and Deconstruction 1914 - 1990, [Hereafter referred to as VOL. 2], (Longman, 1993), Ch. 3, passim
[5] see Sidney Pollard, The Development of the British Economy 1914 - 1990 (Edward Arnold, 1992), pp. 1 - 10
[6] ibid., pp. 1 - 3
[7] ibid., p.2
[8] ibid., Ch. 1, passim, and Cain and Hopkins, VOL1, Ch. 1, passim
[9] Cain and Hopkins, VOL 2, Ch. 1, passim
[10] Pollard, op cit., Ch. 1, passim; Cain and Hopkins, VOL 2, Ch. 3, passim
[11] see A. G. Kenwood and A. L. Lougheed, The Growth of the International Economy 1820 - 1990 (Routledge, 1992), Ch.11, passim
[12] Pollard, op cit., p. 24
[13] ibid.
[14] Cain and Hopkins, VOL 2, p. 41
[15] ibid., p.40
[16] ibid., p. 308
[17] ibid., p. 39
[18] Cain and Hopkins, VOL 1, Ch. 1, passim, and VOL 2, Chh. 1 and 3, passim
[19] This brief treatment relies heavily on Porter, Ch. 7
[20] See Denis Judd, Empire: The British Imperial Experience from 1765 to the Present, (Harper Collins, 1996), CH. 19, passim
[21] ibid., p. 253