Post-War Economy of Britain

By: Aditya Prodduturu 6

Concerns About the Postwar Economy After WW2 - Part One

Post-War Britain Condition

In 1945, Britain and the Allies defeated the Axis Powers once again. However, although British were triumphant, the war has exhausted much of their financial and monetary reserves. During the immediate postwar period was a period of severe destitution and impoverishment. Approximately more than 4 million houses and properties were destroyed or badly damaged. This caused a acute shortage of housing, especially for many of the soldiers that returned from fighting the war. This also causes shortages in commodities, which forced the nation to regress to use of rationing techniques such as during the war. Rationing also had be extended to include items that had not been previously included in the rationing during wartime.

Economic State of Britain

For the first time since the 18th century, Britain became a debtor nation. Britain had to take significant loans from foreign nations in order to finance the war, because the cost of the war exceeded Britain's budget and the amount of money that they could raise through taxes and other revenues. By 1945, Britain hit a record in debt. Britain's debt reached 200 percent of its GDP. The winter of 1947 was probably the lowest economic point of the century for Britain. There were many crisis such as fuel shortages, gas rationing, inadequate food and shelter, and also it was one of the coldest seasons on record added to the nation's problems. Britain's unemployment reached nearly 2.3 million, and its financial and monetary crisis worsened.

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John Keynes

John Keynes was a British economist whose ideas fundamentally affected the theory and the practice of modern macroeconomics and informed the economic policies of governments. Keynes played a huge role in ending Britain's post war economic depression. During World War II, Keynes wrote a novel called "How to Pay for the War". In the novel, he argued that the war effort should be largely financed by higher taxation and especially by the compulsory saving, rather than the deficit spending, in order to avoid inflation and other economic problems. Keynes was later sent in 1946 to the United States in order to negotiate to resolve Britain's economic problems, but rejected by the United States. The British were later saved by the heightening Cold War tensions, because United States became motivated to bail out its allies.
The Marshall Plan

The Marshall Plan was an American initiative to aid Europe, during which the United States gave Britain approximately 17 billion dollars in means of economic support in order to rebuild the European economies and countries after the end of World War II. The Marshall Plan began as a four year plan starting in 1948. During these four years, the United States had the goals of rebuilding war-devastated regions, removal of trade barriers, modernization of industry, and make Europe and its countries prosperous once again. The Marshall Plan aid was divided amongst the participant states on approximately per capita basis. However, a larger amount was given to the major industrial powers, as they were seen as the general necessity for the European revival. Also more aid per capita was given to the Allied nations with less for those that had remained neutral or had sided with Axis.

Britain was able to recover due to the aid received from the United States through the Marshall Plan. Britain once again started slowly rising towards its former prosperity with the help of the aid and went on to become a powerful, wealthy, and developed nation.

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Works Cited

Bernstein, George L. "Britain's Economic Problems After the Second World War." EconWW2. Tulane, n.d. Web. 19 Dec. 2014. <>.

"Britain, the Commonwealth and the End of Empire." BBC News. BBC, n.d. Web. 19 Dec. 2014. <>.

Crick, W.F. "Britain's Post-War Economic Policy, 1945-50." JSTOR. The Canadian Journal of Economics and Political Science, Feb. 1951. Web. 19 Dec. 2014. <>.

Pettinger, Tejvan. "Post War Economic Britain." Economics Essays. N.p., 16 Feb. 2010. Web. 19 Dec. 2014. <>.