This page intentionally left blank Arms, Economics and British Strategy This book integrates strategy, technology and economics and presents a new way of looking at twentieth-century military history and Britain’s decline as a great power. G. C. Peden explores how, from the Edwardian era to the 1960s, warfare was transformed by a series of innovations, including dreadnoughts, submarines, aircraft, tanks, radar, nuclear weapons and guided missiles. He shows that the cost of these new weapons tended to rise more quickly than national income and argues that strategy had to be adapted to take account of both the increased potency of new weapons and the economy’s diminishing ability to sustain armed forces of a given size. Prior to the development of nuclear weapons, British strategy was based on an ability to wear down an enemy through blockade, attrition (in the First World War) and strategic bombing (in the Second), and therefore power rested as much on economic strength as on armaments. g. c. peden is Professor of History at the University of Stirling. His publications include British Rearmament and the Treasury, 1932–1939 (1979), and The Treasury and British Public Policy, 1906–1959 (2000). Cambridge Military Histories Edited by HEW STRACHAN, Chichele Professor of the History of War, University of Oxford and Fellow of All Souls College, Oxford GEOFFREY WAWRO, Major General Olinto Mark Basanti Professor of Military History, and Director, Center for the Study of Military History, University of North Texas The aim of this new series is to publish outstanding works of research on warfare throughout the ages and throughout the world. Books in the series will take a broad approach to military history, examining war in all its military, strategic, political and economic aspects. The series is intended to complement Studies in the Social and Cultural History of Modern Warfare by focusing on the ‘hard’ military history of armies, tactics, strategy and warfare. Books in the series will consist mainly of single author works – academically vigorous and groundbreak- ing – which will be accessible to both academics and the interested general reader. Titles in the series include: E. Bruce Reynolds Thailand’s Secret War: OSS, SOE and the Free Thai Underground During World War II Robert T. Foley German Strategy and the Path to Verdun: Erich von Falkenhayn and the Development of Attrition, 1870–1916 Elizabeth Greenhalgh Victory through Coalition: Britain and France during the First World War Arms, Economics and British Strategy From Dreadnoughts to Hydrogen Bombs G. C. Peden CAMBRIDGE UNIVERSITY PRESS Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521867481 © G. C. Peden 2007 This publication is in copyright. Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published in print format 2007 ISBN-13 978-0-511-29474-7 eBook (EBL) ISBN-10 0-511-29474-3 eBook (EBL) ISBN-13 978-0-521-86748-1 hardback ISBN-10 0-521-86748-7 hardback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Contents List of tables page viii Acknowledgements x List of abbreviations xi Introduction 1 1 The dreadnought era, 1904–1914 17 2 The First World War 49 3 Retrenchment and rearmament, 1919–1939 98 4 The Second World War 164 5 The impacts of the atomic bomb and the Cold War, 1945–1954 229 6 The hydrogen bomb, the economy and decolonisation, 1954–1969 272 Conclusion 344 Select bibliography 352 Index 367 vii Tables 1.1 Defence expenditure as percentage of GDP, 1904/5–1913/14 page 35 1.2 Distribution of defence expenditure by departments, 1904/5–1913/14 38 1.3 Cumulative totals of dreadnought battleships and battle-cruisers completed at end of each year, 1906–16 39 2.1 Aircraft production, 1914–18 69 2.2 GDP and government and consumers’ shares of GDP, 1913–20 74 2.3 Balance of payments on current account, 1914–18 75 2.4 Balance of payments on capital account, 1914–18 76 3.1 Costs of aircraft, 1924–39 117 3.2 Defence departments’ expenditure as percentage of GDP, 1919/20–1939/40 127 3.3 Indices of GDP for United Kingdom, France, Germany, Italy, Japan and the USA, 1913–37 129 3.4 Balance of payments, 1930–8 136 3.5 Military aircraft production in Britain, France, Germany, Japan, the USA and the USSR, 1933–40 138 3.6 Major warships launched (or conversions to aircraft carriers begun), 1922–35 and 1936–40 141 3.7 Commonwealth navies in 1931 and 1939 149 3.8 Expenditure by the defence departments, 1924/5–1939/40 151 3.9 Distribution of expenditure by the defence services, 1933/4–1938/9 152 viii List of tables ix 4.1 Capital ships and aircraft carriers launched or converted, 1936–45 178 4.2 British and German aircraft production, 1939–44 186 4.3 Production of tanks and self-propelled artillery on tank chassis, 1939–44 187 4.4 Numbers of days lost in strikes and lockouts in all industries and services, and the percentage of these that were in coal-mining, 1914–18 and 1939–45 192 4.5 Percentage shares of national income (NNP), 1938–45 194 5.1 Navies in 1954: numbers of ships (with numbers completed since war in brackets) 243 5.2 Strength of armed forces and women’s services, 1945–54 250 5.3 Defence expenditure as a percentage of GDP, 1946/7–1953/4 250 5.4 Planned and actual rearmament expenditure on products of metal and engineering industries, 1950/1–1953/4 252 5.5 UK share of export of manufactures from eleven industrial countries, 1937, 1948, 1950–8 258 5.6 Defence expenditure of leading NATO countries as a percentage of GNP at factor cost, 1949–55 259 6.1 UK share of export of manufactures from eleven industrial countries, 1954–69 298 6.2 Comparisons of GNP of various countries with UK at current prices and exchange rates, 1954–69 300 6.3 Populations of various countries, 1959 and 1970 301 6.4 Defence personnel overseas and balance-of-payments cost, 1955, 1961 and 1967 305 6.5 Defence expenditure of leading NATO countries as percentage of GNP at factor cost, 1954–69 306 6.6 Strength of armed forces and women’s services, 1954–69 307 6.7 Defence expenditure as a percentage of GDP, 1954/5–1969/70 308 6.8 Index of defence expenditure at constant prices, 1955–69 309 Acknowledgements I am particularly grateful to Gill Bennett, David Edgerton, David French and Hew Strachan for reading and commenting on earlier drafts of this book. I have also benefited over the years that I have been working on economics and defence from conversations with William Ashworth, Simon Ball, Christopher Bartlett, Kathleen Burk, Alec Cairncross, David Dilks, Norman Gibbs, Roger Middleton, Phillips O’Brien, R. A. C. Parker, Donald Cameron Watt and Tom Wilson. Responsibility for errors or omissions is mine alone. I thank Birmingham University Library; the Bodleian Library, Oxford; the British Library, London; Churchill College, Cambridge; the Hartley Library, Southampton University; the National Archives of the United Kingdom: Public Record Office, London; the National Library of Scotland, Edinburgh; and the National Maritime Museum, Greenwich, for access to documents and other material. All the staff concerned gave friendly assistance. I also thank Birmingham University; the Trustees of the Broadlands Archives; the Trustees of Harold Macmillan’s papers; the Chief Executive of the National Archives of the United Kingdom; the Trustees of the National Library of Scotland; and the Clerk of the Records, the Parliamentary Archives, with the agreement of the Beaverbrook Foundation; and the following publishers: Edward Arnold (Table 4.5) and Palgrave Macmillan (Tables 2.3 and 2.4) for permission to reproduce or publish passages based on copyright material. The image on the cover first appeared in The British Navy Book, published by Blackie and Son Ltd in 1915. Every effort has been made to secure necessary permissions to reproduce copyright material but in some cases it has proved to be impossible to trace copyright holders. If any omissions are brought to my notice, Cambridge University Press will be happy to include appropriate acknowledgements on reprinting. The British Academy and Stirling University provided financial assistance to cover research expenses and the Arts and Humanities Research Council funded a semester’s study leave in which to complete the project. Finally, I owe my wife, Alison, more than I can say for her support. x Abbreviations TEXT BAC British Aircraft Corporation BAOR British Army of the Rhine BEA British European Airways BEF British Expeditionary Force BOAC British Overseas Airways Corporation CAS Chief of Air Staff CDS Chief of the Defence Staff CENTO Central Treaty Organisation CID Committee of Imperial Defence CIGS Chief of the Imperial General Staff CND Campaign for Nuclear Disarmament DEA Department of Economic Affairs DMO Director of Military Operations DRC Defence Requirements Sub-Committee EPT excess profits tax FAA Fleet Air Arm GATT General Agreement on Tariffs and Trade GDP gross domestic product GNP gross national product h.p. horse-power ICBM intercontinental ballistic missile IMF International Monetary Fund IRBM intermediate-range ballistic missile MP member of Parliament m.p.h.