The Great Depression

• After 1873 = British economy experienced a downturn
• Historians are divided as to the causes and whether there was a depression at all
• Generally agreed that several significant factors can be seen at the start of the decline
• Industry was still expanding but at a slower rate 
• Capital was still invested abroad
• Production continued to inrease, but supply was overtaking demand at home and overseas 
• Led to a fall in prices and a reduction in profit margins
• Continuing increase in imports over exports, most especially in manufacturing
• Signs of a rise in unemployment
• Reluctance to consider new science-based industries
• Coal and textiles producers believed that they would always make money
• Failed to see the need for change and began to feel effects of foreign competition
• British workforce was falling behind thse in countries such as Germany
• Germany = education system was based on industrial training 
• Most British children left school at 12 with no trainig 
• This would have encouraged innovation
• Britain's share in the total world manufacture of all types of goods began to decline
• America's share increased dramatically

• Challenge's to industrial supremacy mainly from America and Germany
• 1870s = America and Germany had potentially stronger markets than Britain
• Wet summer and poor harvest of 1873 signalled the end of the Golden Age 
• Start of a severe depression in farming, particularly in arable
• Several years of wet summers and disappointing harvests
• Increasing import of cheaper grain from America 
• Building of the railways in America helped to increase their production
• Contributed to the depression 
• One remedy would have been to introduce tariffs on imported foodstuffs
• However, Disraeli now accepted the policy of free trade
• Took the decision not to protect British agriculture
• If agriculture was going to survive - it would need to adapt and change

• 1865 - 1873 = Britain enjoyed a period of prosperity in both agriculture and industry
• Economic progress was maintained through free trade policy
• Gladstone's reduction in tax allowed businessmen to build up their private fortunes 
• End of Gladstone's first ministry coincided with the onset of the depression
• The period of sustained growth and unchallenged supremacy was coming to an end

• 1873 - 1896 = Great Depression
• Agriculture went through the economic doldrums 
• Overall state of the economy is seen by historians as a period of 'readjustment' rather than depression
• However, some argue that it was a reality:
  • Confidence was rocked by falling prices
  • Narrowing profit margins
  • Foreign competition 
  • They feared National decline
• Onset followed a period of outstanding growth and prosperity
• Economy was still growing, but at a slower rate
• Rate of production in major industries was just slower
• Was a fall in prices which meant smaller profit margins
• Workers were laid off more frequently
• Periods of unemployment during these years, but they were not sustained
• Depression in agriculture continued 
• Recovery in industry in 1880, followed by a slump in the mid 1880s, and another in the mid 1890s 

Total Agricultural Products:

• 1874 = 121
• 1880 = 102
• 1886 = 83

Average Wheat Prices:

• 1874 = 55 shillings
• 1880 = 44 shillings
• 1886 = 31 shillings 

• There was an economic downturn 
• Number of theories for the causes
• The fall in prices appears to mark the start of the depressio
• Reason is not so clear
• Some historians favour a single-cause explanation
• For example, a shortage of gold to support currency
• No new discoveries of gold after the 1850s until the late 1880s
• Another reason is that Britain had simply come to the end of a period of economic growth
• No longer able to sustain log period
• Combination of these and other factors probably accounts for the economic problems 

Overseas Competition:

• Britain was dependent on its export trade to maintain economic position
• Enjoyed almost a monopoly of the production and export of major industries
• Britain was experiencing a serious challenge
• Rapid industrialisation of America and Germany
• America = rich in natural resources and manpower
• 1890 = America had overtaken Britain in the production of iron and steel
• Germany was not far behind
• Britain stayed ahead in coall production, but only until 1900

Tariff Barriers:

• Set up by Britain's competitors to protect their industries
• Germany introduced trade tariffs in 1879 
• America followed in 1890 
• Britain held onto its belief of laissez-faire
• The Fair Trade League (1881) pressed the government for some form of protection against British competitors without success
• Suggested by several historians that the 'Scramble for Africa' was to secure coloial territories for trade protection
• Colonial expansion in Africa would give Britain access to a new supply of raw materials and markets for British goods 

Out-dated Technology:

• Hardly be avoided that other countries would eventually industrialise and challenge Britain
• Britain = first industrial nation
• Fallen behind in the latest technology 
• Machinery was either old or obsolete
• Reluctance to invest new capital
• Steel industry = up to date Gilchrist-Thomas method was adopted by the Germans 

Absence of Entreprenurial Drive:

• Third Generation Syndrome
• Entreprenurial spirit of earlier industrialists was lost as the management of family firms was handed down to less-capable/interested successors
• Little engagement with future development of new industries such as chemicals 
• Lack of knowledge towards changes

End of the Railway Boom:

• Ended in 1875
• Most major towns and cities had good rail links 
• Reduced the demand for iron and steel 
• Led to job losses
• 1886 unemployment = 10%
• Support of the trade unions was not enough to help their circumstances 
• No State welfare system to save them 
• Majority of unemployed unskilled workers had no unions until the late 1880s 
• Forced to rely on the support of family/friends
• Some resorted to the workhouse
• Falling prices meant cheaper goods in shops and a rise in real wages