THE ECONOMICS OF SHIPBUILDING AND BRITISH NAVAL STRATEGY IN THE PERIOD OF RE-ARMAMENT Benn Mikula Department of History McGill University Montreal, Canada March 1988 A thesis submitted to the Faculty of Graduate Studies and Research in partial fulfillment of the requirements for the degree of Master of Arts. ABSTRACT The Economics of Shipbuilding and British Na va I Strategy i nth e Period of Re-armament. Benn Mikula McGill University Department of History March 1988 Historically, strength on the high seas had been essential to Britain's status as a great power. This sea power was based on a strong Royal Navy, merchant marine and, ultimately, a strong shipbuilding industry. Encompassing the years 1918-1942, but laying especial emphasis on the period of rearmament in the late 'thirties, this thesis will examine the impact of shipbuilding on naval policy, and vice versa. Close attention will be paid to the impact of politics and larger economic forces on this relationship. Such an investigation requires exploring the nature of the British shipbuilding industty; its economic fortunes; the economic and military trends of the period; as well as British diplomacy and grand strategy. As such, it is an investigation of that murky area where strategy, economics, and politics meet an area central to the conduct of total war in the twentieth century. RESUME The Economics of Shipbuilding and British Naval Strategy in the period of Re-armament. Benn Mikula ·Departement d'Histoire McGill University Mars, 1988 La force maritime de l'Angleterre avait historiquement et6 essentielle ason statut de grande puissance. Cette puissance maritime etait fondee d'une part sur ses forces navales et d'autre part sur la marine marchande et, par consequence, sur une puissante industrie de construction maritime. Cette these examinera l'impact de cette industrie sur la politique navale, et vice versa, lors des annees 1918 a1942. Une emphase sera mise sur la periode de rearmement vers la fin des annees trentes. Une attention particuliere sera ponee sur l'impact sur cette relation de la politique et des forces economiques. Une telle etude implique un examen de la nature de l'industrie de la construction maritime, son sort economique, les tendences economiques et militaires de la periode ainsi que la diplomatic et la strategie generale brittaniques. C'est done une etude de ce point vague ou s'unnissent la strategie, l'economie et la politique: un point fondamental a la guerre totale au XX:eme siecle. TABLE OF CONTENTS 0- Preface and Acknowledgements ... i. Chapter One The Nature of the Shipbuilding Industry ... Page 1. Chapter Two Shipbuilding and the British Economy 1918-1936: 'We ought to 'ave listened to our Alfred' ... Page 25. Chapter Three Diplomacy, Domestic Politics, and Naval Policy to 1938 ... Page 47. ChapterFwr With Hands Tied and a Murky Crystal Ball: Economic Policy and its Impact. .. Page 102. OmperFive The Juggling Act Ends: Shipbuilding Goes to War... Page 119. OmpterSix Conclusion ... Page 154. Bibliography ... Page 160. i. PREFACE AND ACKNOWLEDGEMENTS This thesis will outline the relationship between British naval strategy and the shipbuilding industry. While this relationship provides the dominant focus, it must be said at the outset that a host of complicating factors - economic, political, and military - are extremely relevant to the discussion. As such, they form an important and inseperable part of the text .. Decision making never occurs in a vacuum; nor do policy makers ever have the luxury of addressing problems of national interest individually and in isolation from each other. In this examination of shipbuilding and naval policy, the intention is to piece together the nature and import of the relationship. To do so, it is necessary to adopt a broad perspective. As vital elements in the formulation of British policy, these issues must be investigated in relation to other elements in the grand strategic equation. This is especially true when dealing with a period as complex and myth laden as 1918-1942. The title is best explained in terms of the densely woven web of links between strategic necessity, diplomatic necessity, economic policy and economic imperatives, industry, and politics which exist in any nation. Shipbuilding, because of its special rOle as the provider of a strategic product (ships) and major industry, is a marvellous exemplar of the workings of the British 'web'. It is also a metaphor, for in decline shipbuilding touches on Britain's fall from great power status, and speaks volumes about her relative impoverishment. Yet while this tale may be one of largely unmitigated gloom, it is far from being one of unparallelled incompetence. It shall be seen how what is calle the British 'ruling class' conducted themselves and national policy with a ftrm and logical grip, even under the most trying of circumstances. In the end, after the fall from grace of shipbuilding and the decline of Britannia's naval power, it was the weight of outside events which proved most decisive. As this thesis touches upon a great many subjects which it cannot stay to explicate at length, I have relied throughout on the reader's familiarity with the flow of British history in this period. Some assumptions have been made regarding knowledge of the most prominent issues of the day, both in England and abroad. Whenever economics intrudes, no special knowledge was assumed, though in the interests of clarity and brevity, extended definitions were omitted. This murky area where politics, economics, and strategy remains as yet considerably under-examined by the historical community. Historians have lamentably tended to write purely in 11. historical terms, and the same is unfortunately true of economists. This thesis has attempted to steer clear of either extreme, and in so doing create some sort of synthesis. In terms of the precise linkage and the historical period, this thesis breaks some new ground, however to claim more would be to inflict a grave injustice on the many writers far more expert than I in this area. For the general course of inter-war British history, I turned to the works of Mr. A.F. Havighurst and Mr. C.L. Mowat. [1] For a more specific overview of matters strategic and naval, it would be impossible not to avoid the exhaustive histories of Mr. N.H. Gibbs and Capt. S.W. Roskill. [2] In terms of books devoted purely to naval strategy, Capt. A. T. Mahan and Admiral Sir P. Gretton provide, respectively, the seminal work and the best post-mortem. The works of Admiral Sir H. Richmond are also of value. [3] Messrs. Pollard and Robertson have surely written the complete work on British shipbuilding before 1914, while the post Great War era is covered best the volumes of Messrs. Jones and Todd. [4] The Transactions of the Institution of Naval Architects proved to be a mother lode of sensible thinking and analysis of the industry; one that seems to have been surprisingly neglected by other historians. On a broader economic scale, the histories of Miss S. How son and Messrs. Middleton and Feinstein are by far the most original and informative sources for the inter-war period. [5] Mr. M. M. Postan's book on war production stands in a similar category. [6] Mr Corelli Barnett's challenging The Audit of War is an essential and ground breaking accompaniment to the above. An equally ground breaking work is Mr G.C. Peden's British Rearmament and the Treasury, a work which is the authoratative source on the role of the Treasury. A third book of considerable interest to the historian of war and the economy is Mr A.S. Milward's War, Economy, and Society. Biographies and memoirs are also most important in this area. The memoirs of the Earl of Avon and Sir Winston Churchill, whatever their faults, are most useful. [7] Similarly, Mr. K. Feiling's magnificent biography of Neville Chamberlain and Messrs. Middlemas and Barnes' study of Stanley Bald win were of particular use. [8] The primary sources for this paper are very much of the garden variety sort: Cabinet Papers, Admiralty Papers, Documents on British Foreign Policy, and so on. The selection of secondary sources is also relatively unsurprising. The difference perhaps lies more in the mix than in anything else. Finally, I wish to express my gratitude to the following people (however boring this may be to iii. the idle reader). Tradition has it one should thank one's parents: in this case, an admirable idea. It was a most pleasant and satisfying diversion from the tried and true of corporate finance, and worth every bit of it. My close friends also deserve a vote of thanks; in large measure for having abstained from becoming an anti-historical lynch mob. In the year I took to write this thesis, I am well aware of just how many times I slipped into the obscure or, dare I say it, the profoundly boring. Finally, I wish to express my gratitude to Professor Robert Vogel, the man who rashly became my adviser. His wit and insight were invaluable, as was his sense of humour. iv. [1] A. F. Havighurst Twentieth Cenwry Britain Harper & Row, 1962. C.L. Mowat Britain Between tbe Wars 1918-1940 Methuen & Co., 1955 [2] S. W. Roskill Naval Policy Between the Wars, Two Vols. Collins, 1968 & 197 6. N.H. Gibbs Grand Strategy, Vol. I H.M.S.O., 1976. [3] A.T. Mahan Naval Strategy Low, 1912. See also The Inftuence of Sea Power Upon History. Sir P. Gretton Maritime Strategy Cassell, 1965. Sir H. Richmond National Policy and Naval Strength••• 1928. [4] S. Pollard & W. Robertson The Britmh Shipbuilding l'n<lmtry 1870-1914 Harvard University Press, 1979.