After World War One through to the early 30s, traditional industries – such as coal and steel – were in decline. One reason for this was their failure to modernise; this was a major reason for the decline of traditional industries as Britain were experiencing progression in the manufacturing industry, which required industries to be more innovate and modernise their products and practices. But we should also consider other factors, such as: foreign competition, the Wall Street Crash and the Gold Standard as it is these factors which prohibited the traditional industries from modernising, hence I do not believe that the failure to modernise was the main reason for the decline of traditional industries.
The failure to modernise had big impact on the traditional industries; these factories tended to be very labour-intensive, with most of the work being done by manual workers – only 1/5th of coal was produced by machine! This meant that these industries had much lower productivity than the new industries, such as chemical and electricity. This is because machines were much faster and more efficient, hence the traditional industries experienced cash flow problems and financial strains. The solution to financial problems often resulted in traditional industries cutting wages, increasing working hours, or making workers redundant. This made workers feel under-valued, shown by the 1919 Sankey Commission: this Royal Commission revealed miners’ demands for increased wages, a 7 hour day and a bare majority for the mines to be nationalised. This led to the decline of traditional industries as the lack of action taken by the government to implement this commission contributed to the General Strike of 1926; the strike itself led to the decline as it not only lost working days (in fact, 1926 is year which lost the most working days, totaling over 160,000) – it greatly damaged industrial relations, increasing the tension between the government and the traditional industries. Further tension translates to less help and support by the government, thus making it harder for the traditional industries to survive in a bad economy, or push forward changes (shown by the failure of the General Strike) that will help expand their industry and maintain demand. It should be noted that not many workers from the new industries partook in these strikes as they experienced prosperity and growth throughout this period; this implies that the decline of traditional industries was due to the low demand, which was as a result of the lack of government intervention and support, hence the failure to modernise was the root cause of the decline traditional industries because it was this failure which prevented the government from investing in such industries.
Another factor was foreign competition. Other countries were converting to newer industries much more quickly than Britain, meaning Britain was experiencing relative decline. Investors saw these international companies as a much more promising investment than British industry; as a result, they would seek overseas opportunities opposed to domestic funding. This led to the decline of traditional industries as it meant they received less funding – traditional industries therefore didn’t have enough money to pay for new machines and increase wages, which in effect prohibited these industries from modernising. It also contributed to the troubles in industrial relations described in the previous paragraph, so I believe that foreign competition was the main reason for the decline of traditional industries as it was the factor which caused the failure to modernise. Moreover, foreign competition led to tariffs, which heightened after the Wall Street Crash in 1929. America’s stock exchange plummeted and in this respect, the phrase “When America sneezes, the whole world catches the cold” rings true. Britain was dependent on trade, particularly with the USA, hence when other countries implemented their own tariffs Britain reacted in a similar manner to preserve her own economy. Though this led to the decline of traditional industries since exports became more expensive and thus less competitive; consequently, Britain followed a policy of protectionism which did increase competitiveness in the short term, though simply postponed the inevitably of the traditional industries declining, due to their inability to modernise.
The Gold Standard was also a factor in the decline of the traditional industries. In 1925, Churchill decided to put Britain back on the Gold Standard – that is, the pound was defined by the value of gold. This made the pound worth almost $4.90, which is estimated to be 10% overvalued. This high exchange rate meant that exports were more expensive – the traditional industries were less competitive internationally hence their overseas market was reduced. Additionally, this meant that imports were cheaper; the cheaper imports were more competitive in the domestic market than the traditional industries, also leading to the decline of the traditional industries. Therefore, the traditional industries received less income and so less money to spend on modernising.
In conclusion, I think that the failure to modernise was an important reason for the decline of the traditional industries as it reduced productivity and severely damaged industrial relations, represented by the 1926 General Strike. It reduced productivity as laborers were much slower than machines; and industrial relations were damaged due to the workers demanding terms from the Sankey Comission – these demands not being met led to over 160,000 working days being lost in 1926. However, it was foreign competition, the Wall Street Crash and the Gold Standard which caused the failure to modernise, hence they were the main reasons for the decline of the traditional industries. Foreign competition led to more investment in overseas opportunities than in domestic industries, meaning the traditional industries did not have enough money to kick-start their modernisation process, even if they wanted to. The Wall Street Crash amplified such competition as countries became more concerned with their own economies and implemented tariffs, making traditional industries’ exports less competitive. Before the Wall Street Crash, it was the Gold Standard which made British exports more expensive and imports cheaper, thus reducing the competitiveness of traditional industries. On that account, the failure to modernise was not the main reason for the decline of traditional industries because each factor which prohibited modernisation was more significant.