How Successful was Britain's Economy Between 1906 - 1914? By Imogen Gill

During the early twentieth century, the British Empire covered almost a quarter of the world's territory. Despite Britain claiming the status of the world's greatest trading nation its economy faced competition from the USA and Germany due to failing to adapt fast enough to the changing economic climate. Consequently, Britain's economy was mostly unsuccessful during the early-twentieth century. It is extremely important that I contribute to the debate on the state of the economy, because of historians struggling to agree on a conclusion, which is mostly due to the lack of accurate statistical evidence at the time. Evaluating the success of Britain's economy is also problematic because the topic is so broad that the economy changed a huge amount over the eight years, and therefore there are numerous factors to consider.
Britain was the first country to have an industrial revolution in the 18th century, which changed the face of the economy and created a basis for economic success. Mass production was achieved by the invention of new machinery and technology, therefore Britain was sought after for the resources that other countries were yet to start producing thus increasing foreign trade. Furthermore, the industrial revolution gave Britain a head start to develop strong staple industries; in 1913, sixty percent of exports came from the textile, coal and shipbuilding industries. The development of new industries such as electronic engineering, chemicals and motor vehicle production (based on new technologies) made industry more efficient and increased productivity and profits. Fuel and oil bills contributed close to £88,500,000 to the economy and 375,500 people were employed in motor trade. In terms of both the old and new industries their impact on the success of Britain's economy was in some ways huge because it allowed the empire to trade and therefore have a stable income based upon the products that the industrial revolution made possible to produce.
Moreover, a large amount of Britain's economy was made up of trade and invisible earnings (consisting of investing and lending money), which became vital to maintaining the economy in the early 1900s as the success of the staple and new industries began to decline. In 1914, Britain had twenty-five per cent of the world's trade and was known as the world leader in banking, investment and insurance. For this reason, the reliability of the Bank of England encouraged countries to invest in British enterprises. Invisible earnings became of extreme importance to the economy as they helped compensate the loss of income from exports as imports increased while exports decreased. Without the important role of invisible earnings, Britain may not have experienced the moderate economic success during the early twentieth century because the trade gap would have increased resulting in an economic crisis, as there would not have been enough money to fund production.
Despite the success of the trading aspects of Britain, there was considerably more elements of an unsuccessful economy; this was highly due to foreign competition. America had a high wage economy, which aided workers with enough money to buy goods, and a larger home market, because of this demand for production increased and the economy was successful enough to develop new industries. On the contrary, Britain had a low wage economy, which meant only the middle/upper class could afford to buy goods, thus generating a lower demand for production causing prices to fall. This resulted in unemployment as factories could no longer pay their workers and a cycle of economic depression formed as less and less people were able to buy goods other than the bare minimum to survive. When focusing on the new industries the USA and Germany had a longer time to get used to new technology due to their more successful economies, which lead to them investing to improve the production of their goods. This is evident as Germany's chemical industry was twice the size of the British by 1913, as the German government funded the development of new industries, however Britain failed to catch up because of its vested trust in the idea of ‘laissez-faire' which meant the government did not get involved in businesses' affairs or help them financially.