Depression and Recovery

Abstract

IN making a general appraisal of the inter-war period, one is immediately up against the methodological problem of evaluating the economic effects of the First World War; and unless one is prepared to contemplate the kind of heroic assumptions made in some studies in econometric history, which might require the assumption that the war did not occur, the question is to some extent unanswerable. This subject has, moreover, been discussed in some detail by Milward (1970). But a few comments in relation to the theme of the present study seem to be in order. Quite clearly there were fairly immediate consequences from the war in terms of inflation and the subsequent depression. There were, too, more persistent effects such as the collapse of the international financial system, the breakdown of normal international capital movements, and the disrupting effects of reparations payments. The best account of these events is probably still that given in Keynes’s brilliant essay The Economic Consequences of the Peace (1919). Against this, if one takes a broader view, the effect of the war appears to have been predominantly one of exacerbating already existing weaknesses in the British economy; though the work of Ashworth (1960, 1966) and Saul (1960) suggests that these weaknesses were not pronounced before 1914 and were probably a feature of the Edwardian, rather than of the late Victorian, economy.