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The Challenge of Hegemony

management over the economy, and blocking calls for a return to the gold standard. As the party of protection and empire, the Conservative Party clamored for reserving access to its empire markets for its own industry, while blocking non-empire competition, and correcting the de‹ciencies in the nation’s defenses.18 Economic nationalists also called for repealing the Ten Year Rule (1919), which instructed the military services (army, navy, air force) to plan their budgets on the assumption that no major con›ict would occur for ten years, countering that Britain could afford a large rear- mament program.


The members of the economic nationalist coalition included inef‹cient industry, state managers, members of the military services, state bureau- crats such as the members of the Committee of Imperial Defence, and empire organizations. Inef‹cient British industry (including iron and steel, the motor car industry, cotton, and coal), industrial lobbying organizations (such as the National Union of Manufacturers or NUM and the Federa- tion of British Industry or FBI), and the Association of British Chambers of Commerce supported tariff reform, imperial preferences, and manage- ment of the British economy.19 More threatening to free traders, by the mid-1930s, the FBI rejected conventional economic beliefs, calling for managed international trade. This entailed binding international agree- ments or producer alliances between industrial competitors (in Britain, Germany, and Japan) by creating a managed price-system, sector produc- tion, and the joint development of markets. Another grievance common to industrialists was the overvaluation of sterling due to the restoration of the gold standard in 1925 (Holland 1981, 288). Industrialists opposed the return to gold because it meant higher export prices, tighter international markets, and scarcer investment capital due to high interest rates (Bright 1985, 222).

The Military Services

The members of the Navy and the Army (Chiefs of Staff, COS) called for immediate rearmament, earmarking greater resources to defense, while complaining about the lax armaments policy.20 Since 1919, conscription had been abandoned, defense Estimates lowered, and disarmament advanced (in the 1921–22 Washington and 1930 London Naval Treaties). In 1924, strong opposition to armament expenditure by the Labour gov- ernment halted construction of the Singapore naval base (which was

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