Financing of British war economy in 1939-45

This bachelor thesis is focused on analysis of financing the British war economy during Second World War. The main goal of this thesis is to provide comprehensive view on aspects of financing a war economy in general and to illustrate those aspects on the example of Great Britain. The first part deals with pre-war period with accent on the process of rearmament. The second part defines means of war-time finance in general and then analyses their specific application in Great Britain. This part is also dedicated to comparison of approaches to financing war economy in Great Britain and Germany. The third part concerns specific issues of acquiring American dollars in order to finance government purchases of goods from the United States within boundaries of Cash and Carry doctrine. This part also analyses methods applied to acquiring American dollars and evaluates their importance to the British economy. Part of this thesis is also description of collaboration between Great Britain and United States after adoption of Lend-Lease act. Based on accessible information I answered the main questions about used methods and structure of financing British war finance. Half of the expenditure was met by raised taxation, which relied mostly on income tax. The other half of expenditure was covered by borrowings. The main source of the borrowings were the British citizen`s savings. In order to prevent macroeconomic destabilization the government introduced rationing and income taxes. These steps were successful in limiting demand-pulled inflation. Final analysis of means used to acquire American dollars states that those methods were unsuccessful in providing sufficient amounts of dollars. Therefore the introduction Lend-Lease act was essential to British war effort