The economic problems that developed into a whirlwind in the forties of this century first became serious in the years after the close of World War I. British textiles had to compete in Asia with textile products from India and Japan which were produced at a much lower cost because of low wages. Oil and coal from new European mines challenged Britain's lead in coal exports. At the same period there was a fall in the demand for many of the heavy industrial products that British factories had supplied to the rest of the world; locomotives, heavy machinery, cargo ships. The politico-economic dogma of self-sufficiency developed in nations that for long had been British customers. They began to protect their own growing industries with tariffs, quotas, and other restrictions. But the effect on the British economy of this decline in exports was cushioned by income from investments overseas and by a substantial improvement in the terms of trade. During the twenties and early thirties British industry began to contract for the first time in centuries. Unemployment averaged 14 per cent between 1921 and 1939. By September 1939, however, the economy, stimulated by the armament program, increased production, and greater industrial investment at home, began to improve. Britain faced the Second World War on a secure economic basis. Indeed, there were persuasive gentlemen in the London of that Indian summer of peace who tried to persuade you that economic strength alone could win the war. When Americans think of the effect of World War II on Britain we are apt to think in terms of bomb damage and ships sunk. Certainly these were important parts of a generally disastrous picture, but the whole is much more impressive than the parts. The inability to continue industrial maintenance and make replacements under the hammer of war, shipping losses, and bomb damage ran down the British economy by about £3,000,000,000. At the present rate of exchange this amounts to $8,400,000,000. The present cost of rebuilding ships and houses and factories is, of course, infinitely higher due to the upswing in labor costs and material prices since 1945. This loss was accompanied by a drastic change in Britain's world trading position. To begin with, she lost almost all her overseas assets--those investments which had cushioned the shock of the falling export market and whose income had largely paid for imports. The terrible appetite of war--a ship torpedoed, a division lost, a factory bombed--devoured them. Over £1,000,000,000 worth of overseas investments ($2,800,000,000 at the current rate of exchange) were sold to pay for war supplies. Of this amount, £428,000,000 (about $1,198,400,000) represented investments in the United States and Canada.