14: Changes to economic policy Flashcards
what were the 5 different views on how to deal with the economic crisis?
- Orthodox
- Keynes’
- Oswald Mosley’s
- Conservative
- Extreme left-wing socialist
Who held and shared the orthodox view? (4)
- Held by Philip Snowden
- bankers
- economists
- business men
What were the Orthodox ideas? (3)
- Keep to traditional economic policies such as free trade, balanced budgets and the gold standard
- Maintain the confidence of international bankers and traders in Britain by cutting government spending
- Keep the value of the pound based on gold
What were Keynes’ ideas? (4)
- The government should borrow money to spend on projects which would provide more jobs
- Employers and workers would be spending more due to wages and profits
- This would increase demand helping industries
- The money in the economy would be used over and over again due to the ‘multiplier effect’
What were Oswald Mosley’s ideas? (3)
- borrow money and spend more on roads, schools, hospitals and services. This would provide jobs and better facilities at lower costs
- Introduce tariffs to protect jobs
- Increase pensions and benefits to boost consumption
What were the Conservative ideas?
Orthodox ideas except they argued for protection instead of free trade
What were the extreme left-wing socialist ideas? (2)
- Capitalism was collapsing
- Governments should not try to save it but use the collapse to create a socialist economy and society
When was the other run on the pound?
September 1931
Why was there another run on the pound?
Investors heard of a mutiny among naval troops protesting against pay cuts at Invergordon in Scotland
What happened to the gold reserves and what did the Governor of the Bank of England decide to do?
- The reserves were depleted
- The gold standard would have to be suspended
How much did the pound devalue by?
30%
How did the devaluation of the pound affect British exports?
British exports turned out to be cheaper and easier to sell
Why was the effectiveness of the suspension of the gold standard limited? (2)
- Other currencies also left the gold standard and they depreciated in value too
- Many countries introduced protective tariffs which made exporting difficult
What did coming off the gold standard do for the government?
They no longer needed to maintain the value of the pound which required high interest rates to attract investors to put money into Britian
What were interest rates reduced from (1931) and to (1932)?
- 6%
- 2%
What was the policy off lowering interest rates called?
cheap money
How did cheap money help the recovery?(2)
- Making it easier for industries to borrow money to invest in modern machinery
- Making it easier for consumers to borrow money on mortgages to buy houses
Due to the private house-building boom, how many homes were built in the 1930s?
2 million
What did house building provide? (3)
- work
- demand for furniture and fitting
- a revival in the construction industry
What were the limitations of the private house-building boom? (3)
- The houses were built mainly for the middle class who were more likely to have steady jobs and so could take advantage of the cheap mortgages and low prices
- The houses were mostly built by the private sector
- There was much less local government house building
How many council houses were built in total between 1931 and 1940
700,000
What were the Conservatives united in belief about?
the introduction of tariffs could make a real difference to Britain’s economy
What did Chamberlain introduce in 1932 and what did it do? (2)
- Introduced the Import Duties Bill
- imposed a general duty of 10% on all goods entering Britain
What were the believed benefits of exempting goods from the British Empire from tariffs?
-Empire would become a self-supporting economic unit enjoying free trade within its borders but protected from the outside world by tariffs
When was the Ottawa Conference?
July and August 1932
What happened at the Ottawa Conference?
- Dominions such as Australia and Canada expressed concern that the free trade would mean that their own industries suffered in the face of competition from British goods
- A series of trade agreements were made so that Britian
