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Britain’s Grand Strategy of Restrained Punishment


rearmament (two-power naval standard, Continental army, and air force with reserves), peacetime state intervention in the economy (termed National Ef‹ciency), abandonment of the gold standard (the gold stan- dard meant higher export prices), international binding trade agreements (covering production, prices, and the allocation of markets), and imperial preferences that would link the empire and the domestic economy. The internal result of such an agenda would enhance inef‹cient industry, the military services, settler groups, and empire-oriented bureaucrats. Eco- nomic nationalists condemned Britain’s “lead” in disarmament (the Washington Disarmament Conference meant that Britain would not com- plete any new capital ships for ten years). They warned that failure to increase Britain’s defense expenditure would leave Great Britain vulnera- ble to attack, undermining its national security. Economic nationalists also warned that the restoration of the gold standard or any rollback of wartime protection and subsidies would destroy domestic industry because of the unfair competition, dumping, protectionism, and tariffs of Britain’s major trading competitors.

In contrast to the period prior to World War I, during the two decades prior to World War II, the commercial composition of the emerging con- tenders shifted from a preponderance of liberal contenders to a preponder- ance of imperial competitors. By 1932, the foreign commercial policy of Germany, Japan, Italy, and to a lesser extent France had turned toward economic autarky and commercial self-suf‹ciency, while a liberal United States opposed Britain’s colonial rule and sought to reverse London’s pol- icy of imperial preferences.

Within Britain, the reversal in the foreign commercial policy of the ris- ing states altered the domestic structure of opportunities and constraints. The outcome was the strengthening of the economic nationalist faction and the weakening of the free-trade coalition, swaying London’s grand strategy toward punishment. Some free traders defected to the economic nationalist faction. They joined inef‹cient industry, who renewed their push for a departure from the gold standard (1931), and imposition of imperial preferences (Ottawa Agreement of 1932) and protectionism (quotas and new tariffs). The military services reversed the Ten Year Rule in 1932 and engaged in a large rearmament program after 1935, limited by free-trade opposition and by industrial bottlenecks. The Conservative Party (the dominant force in the national government) led a successful propaganda campaign resulting in the general public becoming more ori- ented to defense and empire. Manufacturing and business used their

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