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The Challenge of Hegemony

and that imperial economic unity offered far greater bene‹ts (Kennedy 1981; Turner 1988).

constituents of the free-trade coalition

In the aftermath of World War I, the free traders were no longer the dom- inant coalition, and their agenda became to roll back the wartime gains of the opposing economic nationalist faction (McRae and Cairncross 1984, 15–16; Newton and Porter 1988, 55–63; Tomlinson 1990, 53–59, 79–89, 113–21). The members of the free-trade coalition generally agreed that the best solution to Britain’s dilemma was an easing of international ten- sion, retreat of the state from intervention in the economy, and the free- ing of international trade from arti‹cial restraints. Speci‹cally, the Bank of England was determined to restore the gold standard, to control the money supply, and, most important, for London to resume its position as the world’s money market. The Treasury’s intent was to return free trade, bal- ance budgets, and restore economy in public spending; reduce high wartime tax; and roll back the state as regulator of the economy. Fiscal conservatives argued that wartime protection was corrupting the political process by creating powerful vested interests whose in›uence would be dif‹cult to resist. They countered that the problem of the staple industries was that they needed to “put their house in order” and address the issue of inef‹ciency. The City’s interest was to restore the international service economy, which would help pay for imports, produce a balance of pay- ments surplus, generate capital for foreign investment, and stimulate demand for British exports. Finally, the Treasury, the Bank of England, and the City of London especially opposed the military’s program for peacetime rearmament for fear that it would bring in›ation and a subse- quent economic crash in Britain’s recovering economy.

The members of the free-trade bloc included the Labour Party, Liberals, trade unions, invisible exports, the City of London, the ‹nancial commu- nity, the Bank of England, ‹scal conservatives, paci‹sts, state ‹scal bureau- crats (chancellor of the Exchequer, Treasury advisers, and supporting civil servants), exporters and importers who relied heavily on foreign raw mate- rials and overseas markets, and the working class. The free-trade coalition favored a grand strategy of cooperation through (1) arms limitations and disarmament agreements to prevent a costly arms race, and reliance on collective security to lower the cost of hegemony, (2) retreat from empire and, concomitantly, a reduction in imperial defense, and (3) restoration of ‹scal orthodoxy (including balanced budgets, debt-funding, and cuts in

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