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After World War II Britain could no longer afford the expense of administering one quarter of the worlds population , it wanted to protect its own land which comprised 1/600 th area of World , the current UK. Also, as a result of the war,British understood that the various peoples of the empire (and the other European empires as well) are capable and deserving of governing themselves. These empires could not be kept quiet anymore by giving the excuse that " these countries are incapable of governing themselves" as they had started demanding either through armed rebellion or peaceful protest and politics ,the right to be self governing dominions within the commonwealth. Some of the Countries literally drove the British out of their Counties. Having just fought, and been nearly bankrupted by, the British could hardly deny them their right to administer their own land.

Answer

WW2 caused the fall of the British Empire for two reasons.

Firstly, many nations such as India could no longer remain patient to slavery and Indian who had united together to fight in the war gained momentum as a result of WW 2 and started revolting against the British to get back their own Land. The losses to the Japanese also destroyed the myth of European omnipotence

Secondly, the UK was financially exhausted and heavily in debt to the US. This left it almost impossible to defend its far-flung colonies by force. The US capitalized on its position of banker and forced the UK to abandon the empire by threat of economic collapse otherwise. This was so that vast markets were opened to American companies and to weaken the UK in general.

LONG POLITICALLY INCORRECT ANSWER

Great Britain was falling long before WWII. As early as the turn of the 20th century cartoons were popping up with renderings of the famous crowned Lion, (the symbol of Great Britain's power and influence) with it's teeth pulled out. This was a sad commentary on a once proud and formidable world empire. But the British were falling prey to the age old rise and fall of nations.

They had become complacent and prideful, they had forgotten the struggle to establish safe borders and the great sense of nationalism and gratitude for their victories over the deluge of attackers they had so valiantly fought off one after the other other for centuries.

They had become soft and comfortable as their wealth grew. It seemed impossible to imagine the bright light of their great empire ever going out. They began to spend more and more of their budget on social reforms and less and less on their navy. Soon it was obvious there was no real benefit to doing business with the British as their ability to protect commercial interests over seas was no better or even weaker than other nations. But the British, (as all nations at this point in their cycle) were too proud to see it and slowly but surely their empire began to weaken and by WWI they found themselves fighting a in a war that they had not prepared for. It was called the great war but it tested the resolve of the British and although they were on the side of the victors they paid a horrible price.

You would have thought they would've learned their lesson but by WWII the unthinkable was again at their doorstep and again they were caught with their pants down. In the end, all that saved them was an airplane built on a budget and against the will of many who thought it was an expenditure that was not a responsible use of tax payers money in a time when Great Britain was still trying to recover from WWI.

This airplane was the famous Spitfire, and it saved the day over Britain in air combat with Germany, a plane that almost wasn't. The British victory over the German Luftwaffe was a kin to Lord Nelson's victory at Trafalgar or Queen Elizabeth's victory over the Spanish Armada but in classic British form, they won a great victory against all odds with overwhelming numbers pitted against them.

Later the victory ships from America barely kept the tiny island in supplies and the combined escorts of the American, Canadian and British fleets kept them moving. Once again the British isles were saved from being completely cut off.

But the British never learned their lesson. By 1980 they faced a threat from the relatively insignificant forces of Argentina who claimed the British Falkland Islands as their own.

This was not the mighty 16th century Spanish navy or the combined might of both the French and Spanish fleets at the battle of Trafalgar. Nor was it the German Luftwaffe that blackened the sky with steel and rained down blankets of bombs on London. no it was the tiny and insignificant Argentine military.

Great Britain had finally sunk to it's lowest point since the early 1400's and once again Parliament called called for a renewal of naval power.

In short, the rise and fall of any nation can be looked at in terms of cycles and Great Brittan is no exception. The fall of any nation is never the result of one single defining event but a series of foolish decisions made by complacent, ignorant entitlement minded people willing to ignore the lessons of the past.

As naval power goes, so does Great Britain.

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Q: What caused the fall of the British Empire?
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