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Britain’s Grand Strategy of Restrained Punishment


ping, banking, creditors, bondholders, insurance services, and overseas investment) along with the Treasury and the Bank of England reasserted their authority over economic policy in order to restore the prewar liberal trading system. The City opposed a large rearmament program, fearing that excessive borrowing might lead to in›ation and weaken Britain’s recovering economy. By the mid-1930s, the City preferred to rely on pri- vate industry for rearming, rather than state arms factories. Detractors of wartime duties and imperial preferences included those who relied heavily on foreign raw materials and markets, such as shipbuilding, and the work- ing class, who feared higher food prices.

The Labour Party

The Labour Party also favored ‹nancial orthodoxy. The Labour Party functioned as a pressure group for labor and the trade unions, supporting cheap consumer imports and the export orientation of British industry on which much union strength had been built. Labour also supported expen- diture on welfare, clashing with the Treasury Department. Yet, as Tomlin- son notes, “we cannot see the early 1920s as a period when a growing labour movement fought against prevailing economic orthodoxies” (1990, 67). Labour and its constituents regarded disarmament, collective security, and consultation among League of Nations members (rather than balance of power diplomacy) as the only certain method for preventing war (Gor- don 1969, 47–54; Hall 1976, 478–80; Schmidt 1986b, 279–88). They opposed the economic nationalists’ rearmament proposals for fear that “unilateral” British rearmament risked igniting another arms race. In the 1935 election, the Labour Party declared that “the best defence is not huge competitive armaments, but the organisation of collective security against any aggressor and the agreed reduction of armaments everywhere” (Shay 1977, 58). Consequently, Labour members urged the government to take all steps necessary to bring the 1932 League of Nations World Disarma- ment Conference to a successful conclusion.

supporters of the economic nationalist coalition

In opposition, empowered economic nationalists sought to perpetuate their windfall from punishing Germany and the Great War. Their desired grand strategy was to punish the rising contenders through immediate rearmament, which meant repealing the Ten Year Rule, expanding the wartime duties and tariffs to include imperial preferences, extending state

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