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The Challenge of Hegemony

authorized to review defense spending and supported the Treasury view, called for maximum armaments production between 1938 and 1939.53 His rationale was that Britain could bargain only from a position of strength (Shay 1977, 189–93, 214–16; Peden 1979, 92–100). Even the Labour Party stopped voting against the military Estimates and passed a resolution stating that “we must confront potential aggressors with an emphatic supe- riority of armed strength,” but they still opposed military conscription (Gordon 1969, 66–77; Lloyd 1970, 197; Shay 1977, 218). The public was also more vocal concerning the conduct of the rearmament program. Indeed, budget rationing barely survived the Anschluss (Greenwood 1994, 33). After the Munich Conference, the Treasury recognized that it was “being progressively put out of action” (Peden 1979, 44) and that “Trea- sury parsimony” would no longer effectively set limits on the production of weapons (Parker 1981, 313).

Between 1933–34 and 1938, defense spending more than doubled, from 103 million pounds to 262 million pounds, and then nearly doubled again by 1939, to 400 million pounds (Thomas 1983, 554, table 1). The most dramatic increase in defense outlays was on the air force, whose plans were increased from the DRC’s recommendations in 1934. Naval expansion was restrained by the terms of the Washington and London Naval Treaties until 1937, and after 1937 by limitations in industrial capacity. After 1937, expenditures rose rapidly, as if the full two-power standard was in effect (Bright 1985, 241). The Admiralty was able to lay down nearly all the major ›eet units it planned in 1936–39 for the New Standard, espe- cially in terms of capital ships and cruisers (Peden 1979, 165). Until 1934, the Admiralty had enjoyed preeminence among the services, leaving it with fewer shortages than the other branches.54 In contrast, the army was restrained until 1939 and then drastically expanded by conscription, although this move was opposed by the Labour Party.55

Shortages of skilled labor in key industries slowed rearmament. In response, economic nationalists advanced their agenda of state interven- tion, compulsion, and defense production through the force of law, while free traders resisted calls for government control of wages, prices, pro‹ts, and production (Shay 1977, 92–102). In 1938, the Cabinet asked industry to give preference to military work, speeding up the rearmament program, however, only on a voluntary basis that rejected the use of state controls (Barnett 1972, 415; Peden 1979, 128–33). There was also discussion of a scheme to create a “shadow armaments industry” of new factories built

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