Britain: A changing political and economic environment. Flashcards
What happened in the 1918 general election?
- By 1918 Lloyd George, the liberal leader and PM, had effectively split the party. This was because after the coalition with the conservative starting in 1915, many people believed he had abandoned the principles of the liberal party and had become too close with the conservatives. The election of 1918 was fought between the Liberal-Conservative coalition and the labour and liberal opposition parties. The coalition won the election with a landslide victory with 459 seats, over 300 of which came from the conservative MPS, whereas the opposition liberals only won 36 seats, 235 less than the previous election.
Although the coalition was headed by a liberal PM, the conservatives within the coalition were by far the more popular political party.
What was Lloyd George perceived as initially?
In 1918 Lloyd George was a national hero. He was credited by much of the country as the ‘man who won the war’, and as the tough negotiator who would be able to represent Britain at the Paris Peace Conference. He was a man of humble origins from north Wales and had made it clear that he was an enemy of privilege and no friend to the House of Lords, an unelected body of hereditary peers that sat at the apex of Britain’s class system.
What was the scandal that ruined Lloyd George?
The news in June 1922 that he had been involved in a scandal selling knighthoods and peerages was deeply shocking. In the past, titles had been sold by government ministers to their supporters in industry for large donations, but it was done in a discreet and largely unnoticed fashion. Lloyd George’s trade in titles was run from a private office he established, and knowledge of the operation was widespread. During his six years as prime minister (1916-22) he sold 1,500 knighthoods and nearly a hundred peerages.
Several titles were freely given away to Fleet Street newspaper magnates, such as Lord Beaverbrook, so that they would turn a blind eye and not report the practice. When the 1922 honours list was announced there were several people on it who had criminal convictions for fraud and the press finally published the story. Lloyd George himself called the honours system corrupt, but the scandal did immense damage to his credibility
What was the issue with Lloyd George and Turkey?
His decision to go to war with Turkey, if it sought to revise the terms of the peace treaty it had been forced to sign in 1918, further dented his credibility; his Conservative coalition partners disagreed with the policy. This was because Britain had just recently emerged damaged from WW1, and the majority of the government were unwilling to put it through something similar so soon again. They decided that the looming crisis with Turkey was their opportunity to act.
How did the Liberal-Conservative coalition end?
A secret meeting of leading Conservatives was held at the Carlton Club, a private members club used by London political elites. At the meeting it was decided to abandon the coalition with the Liberals. As a result, the election of November 1922 was a disaster for the Liberals.
What happened in the 1922 election and why?
The conservatives won the election with 344 seats. Those led by Lloyd George (now the National Liberal Party) were reduced to 53 MPs, and while those opposition Liberals led by Herbert Asquith saw their share of the vote grow to give them 62 MPs, it was still too small an increase to prevent the party from further decline.
Lloyd George’s personal unpopularity by 1922 was partly the cause of the Liberals’ decline, but the growth in the popularity of the Labour Party had a much greater, long- term impact.
What was the first labour government?
The first Labour government was led by Ramsay MacDonald in 1924. It was a minority government and its election was seen as a deeply alarming development by many of the Conservative-supporting newspapers like The Times. The party was committed to parliamentary democracy and went to great lengths to demonstrate how moderate it was. Nonetheless, Labour’s opponents in the Conservative Party and the media liked to compare it to the repressive regime in Soviet Russia and suggested that there might be Soviet sympathisers among the cabinet.
What was one of the reasons why MacDonald’s government failed?
One of the main problems that MacDonald and his government encountered was strained relations with the National Executive Committee of the Labour Party itself. MacDonald was forced to make harsh economic choices that affected the poorest voters and had to manage the threat of industrial action. As prime minister he had to compromise, but the party was critical of him for not being more radical. Because he was the head of a minority government, dependent on Liberal support, any attempt to introduce a more radical programme would have resulted in a withdrawal of this support and the collapse of the government. The government lasted for nine months, too short a time to introduce much legislation.
How did the MacDonald’s Labour government collapse?
MacDonald’s government collapsed in the autumn of 1924 following a motion of no confidence which MacDonald only narrowly won. The motion against Labour came about following the decision of the Attorney General Sir Patrick Hastings to drop charges of incitement to mutiny against a socialist newspaper, the Worker’s Weekly. The newspaper had published an article by John Ross Campbell which broke the law by demanding that soldiers should turn their weapons onto the government, their ‘oppressors’.
On 6 August, under pressure from backbench Labour MPs, the prosecution against Campbell was withdrawn and MacDonald was accused by both Liberal and Conservative parties of having secret communist sympathies. The case coincided with his attempts to normalise relations between Britain and the Soviet Union. A second motion was passed against the government, calling for an official inquiry into the withdrawal of charges against Campbell. MacDonald was forced to resign and call an election
What happened before the 1924 general election?
Labour’s election campaign was marred by the publication of a damaging story in the Daily Mail.
The Conservative-supporting newspaper claimed that a letter from the Russian communist revolutionary Gregori Zinoviev to the British Communist Party had been discovered. The letter, a forgery, appeared to be an incitement to revolution, telling British communists to prepare to overthrow the government. The Daily Mail hoped it would dissuade people from voting for Labour or any other left-wing party.
What happened in the 1924 election?
Although the Labour vote didn’t collapse, still gaining 151 seats, it lost the election and the Conservative Party, under Stanley Baldwin, was able to form a majority, gaining 412 seats. This election was a defining moment for the Liberal Party as a declining force in British politics; it saw a 12 per cent decline in its share of the vote and a loss of 118 seats.
The Conservatives were the clear beneficiaries, taking seats from both the Liberal and Labour parties. First-time Labour voters in the previous election who were now disappointed with Ramsay MacDonald switched to the Conservatives, as did Liberal voters who had lost faith in the ability of the party to revive itself.
How did Baldwin appeal to all classes?
The new Conservative government formed by Stanley Baldwin presented itself as an alternative to the Labour Party and the ‘threat’ of socialism in Britain. However, Baldwin wanted to be seen by the country as a moderate politician who could appeal to all social classes. He believed that the rhetoric of ‘class war’ that had emerged during the brief MacDonald government was deeply damaging to Britain and he discouraged the Conservative Party from attacking Labour as secret agents of the USSR (which had been alleged in Conservative-supporting newspapers during MacDonald’s administration)
What were the reforms to Labour’s funding?
Despite Baldwin’s appeals to his party for peaceful coexistence with the Labour Party, many Conservative MPs still believed that the government should use all methods at its disposal to weaken it and the trade unions. In 1925 a private member’s bill to prevent the Labour Party from receiving a political levy from the trades unions, which would have financially crippled it, was opposed by Baldwin in the House of Commons and subsequently failed. He was more concerned with political stability than political conflict between the parties.
Baldwin’s conciliatory approach could not be sustained in the long run. Following the General Strike, he yielded to pressure to introduce laws reducing Labour’s funding from the unions. In the 1927 amendment to the 1906 Trade Disputes Act the political levy on union members could no longer be automatically deducted from their union membership and passed to the Labour Party; instead, members had to agree to pay it. Over one-third chose to opt out, causing the Labour Party’s finances to decrease by 35 per cent.
What happened in the 1929 General Election?
Labour won the election with 287 seats, more than any other party, but still not enough to form a parliamentary majority, forcing MacDonald to form another minority government. MacDonald returned to power but his government would not prove strong enough to weather the economic storms that were to break later in the year
What were Macdonald’s social reforms?
MacDonald had much more ambitious reforms planned in his second ministry than his first. His lack of an overall majority once again made him dependent on the Liberals to pass legislation, though he had a largely co-operative working relationship with them. As a result, the government was able to pass some social reforms:
• The 1930 Housing Act cleared three-quarters of a million slum houses and replaced them with modern homes by 1939.
• The Coal Mines Act of 1930 attempted to ensure better pay for workers and more efficient pits, but the weakness of the legislation ensured that the mine owners could ignore it.
• MacDonald amended the Unemployment Insurance Act, giving the government powers to create public works schemes to alleviate unemployment. It was funded with £25 million of government money.
The government was also limited in what it could achieve by the growing economic crisis. MacDonald referred to the next two years of crisis in Britain as an ‘economic blizzard’, and it had significant political repercussions as well.
What were the economic problems MacDonald faced in 1931?
During the summer of 1931 there were rumours that the forthcoming budget would be unbalanced - meaning that the government had plans to spend more than it could afford - leading to an increase in borrowing. This caused the banks in America to engage in panic selling of the pound, exchanging it for other currencies, and the pound slumped in value.
In order to reassure financiers that their investments were safe, the government proposed spending cuts and tax hikes, the main measure being the introduction of a 10 per cent cut in unemployment assistance. This would keep the value of the pound stable, but caused hardship for many of Britain’s poorest, the members of society that labour was supposed to represent. The threat of this cut split the Labour Party and MacDonald’s cabinet, leading the government to resign on 24 August 1931
Why was Macdonald’s government and Britain so reliant on American Banks?
The second Labour government under Ramsay MacDonald struggled to finance its spending commitments and, by 1931, came under intense pressure from international banks, particularly in the USA. The banks did not want the British government to spend large sums on welfare, even though unemployment in Britain was rising. These banks had significant power over Britain as they held large currency reserves of the British pound, due to the amount of debt Britain had accrued by borrowing from the USA to finance the war.
These banks could lose millions at a stroke if the value of the pound went down and so did not want to see economic policies introduced that might cause that to happen. A high- spending government would either have to tax or borrow, both actions that would reduce the pound’s value and cause the Gold Standard to be readjusted.
How was the national government formed?
After negotiating with the other main political parties, and at the urging of King George V, MacDonald formed a National Government from the three main parties with himself as prime minister. Both MacDonald and his chancellor of the exchequer, Lord Philip Snowden, were viewed as traitors to the Labour Party, which passed a motion expelling them. They formed a new National Labour Committee which was designed to sponsor Labour parliamentary candidates who supported the National Government
What was MacDonald’s premiership of the National Government like?
MacDonald’s premiership was dominated by the economic challenges caused by the Great Depression and attempts to alleviate it and effect an economic recovery. The government made some moves to rearm, given the increasingly threatening situation in Europe and the rise of fascism there. At the same time it had to deal with the threat of fascism at home.
What were MacDonald’s NG economic policies?
The National Government implemented the spending cuts which had caused the previous government’s downfall. Public sector pay cuts of 10 per cent were felt to be so harsh that they led to a mutiny in the Royal Navy at the naval base of Invergordon.
In addition to the spending cuts the National Government was able to introduce a limited number of tariffs. By 1933 the end of the Gold Standard and low interest rates had begun to stimulate an economic recovery (see page 31). The National Government’s popularity increased, even though MacDonald became increasingly isolated in the government and was replaced as prime minister by Stanley Baldwin in 1935
What was the labour party like in opposition to MacDonald’s NG?
The Labour Party managed to reorganise itself throughout the first half of the 1930s and become the official opposition to the government. Under its new leader, Clement Attlee, it managed to gain 154 seats at the 1935 General Election, demonstrating that the Labour vote was rapidly recovering from the slump in votes in 1931.
What was the growth of extreme political ideas under MacDonald NG?
Throughout the 1930s there was in increase in support for extreme ideas on both the far left and far right. Communist and fascist parties saw an increase in their membership as more people became convinced that liberal democracy no longer had the answers to the economic crisis.
• By 1934 the British Union of Fascists had 50,000 members.
• In the same year the Communist Party of Great Britain only had 9,000 members but throughout the 1930s organised the National Unemployed Workers Movement, which some historians have argued represented hundreds of thousands of unemployed men.
• Many intellectuals on the left, including Fabians Sidney and Beatrice Webb, visited the Soviet Union, believing that communism was an economic success. This had an impact on Britain from the 1930s onwards as these influential figures argued convincingly in favour of state planning.
Who was Oswald Mosley and what did he achieve?
Mosley, a labour MP, frustrated at the National Government, resigned and set up his own organisation - the New Party - in March 1931. Mosley’s New Party put forward a manifesto for change, titled the ‘Mosley Memorandum’, which temporarily attracted support from both the right and left. It demanded a co-ordinated national economic plan to deal with the economic crisis. Moderates from the Conservative and Labour parties who had supported him soon withdrew their backing when Mosley established his own group of violent enforcers called ‘Biff Boys’, who were given the task of attacking his opponents.
In 1932 Mosley drew all the fascist organisations in Britain together with the New Party to form the British Union of Fascists (BUF). The union’s impact on the political system overall would prove to be negligible, but it briefly presented a challenge to law and order. The National Government passed the Public Order Act in 1936, banning groups from wearing uniforms and requiring permission for marches and demonstrations. Mosley never became a threat to the National Government and his movement began to decline after 1936.
Even though his movement dissipated after 1936, Mosley’s BUF demonstrated that there were significant numbers of people (the movement had 50,000 members at its height) who did not believe the existing political system of parliamentary democracy was capable of working at the height of the depression.
How did Britain disarm and rearm during the 1930s?
From 1933 onwards many British people began to take a much more active interest in world events. The appointment of Adolf Hitler as chancellor opinion to divide betweller in Germany caused publicsent. With traumatic memories of the previous war, hundreds of thousands of people were attracted to organisations such as the Peace Pledge Union, and the League of Nations Union that supported peaceful resolution to conflicts.
By the early 1930s, the idea that Germany had been solely responsible for the First World War was rejected by most British politicians and civil servants. Instead a different view prevailed, one which blamed arms races and secret treaties. The government negotiated with other powers to disarm at the World Disarmament Conference, which ran for two years between 1932 and 1934. However, the conference broke down in 1933 when Germany withdrew expressing its right to rearm to levels equal to France, Britain and the USA. Following Germany’s exit, Baldwin argued not for disarmament but for agreements limiting arms so that nations could have ‘parity’.
Breain started to rearm from 1934 onwards
The RAF was increased in to 40 squadrons, a recognition of the importance of air power in future conflicts.
The British Army was reorganised.
• The Royal Navy was expanded
• The munitions industry was developed in partnership with private capital.
What was the peace ballot and pledge?
In 1934, millions of householders were asked their opinions on war and security. This Peace Ballot was organised by the League of Nations Union. The 11 million people who answered the questions made it clear that they supported the idea of ‘collective security’, (Under a collective security arrangement, an aggressor against any one state is considered an aggressor against all other states, which act together to repel the aggressor.)
The Peace Ballot was followed by the Peace Pledge Union. organised by Father Dick Sheppard, the Cannon at St Paul’s Cathedral. Over 100,000 men and women sent Sheppard postcards pledging to oppose war.
How did Stanley Baldwin become NG prime minister?
By 1935 Ramsay MacDonald was very unwell and was forced to step down. He was replaced by Baldwin who became prime minister for a third time and called a general election in October that year. In his manifesto he pledged new houses, jobs and government help for the most economically deprived parts of the country. He also pledged to improve Britain’s defences, although there was little desire among the public for rearmament.
How did Stanley Baldwin become NG prime minister?
By 1935 Ramsay MacDonald was very unwell and was forced to step down. He was replaced by Baldwin who became prime minister for a third time and called a general election in October that year. In his manifesto he pledged new houses, jobs and government help for the most economically deprived parts of the country. He also pledged to improve Britain’s defences, although there was little desire among the public for rearmament.
What was the abdication crisis?
In January 1936, when King George V died, a constitutional crisis began that was to dominate political events that year.
After George V’s death his eldest son Edward VIII inherited the crown. Edward was a handsome and popular monarch, his glamorous playboy lifestyle as heir to the throne had made him popular with the public. His many affairs with married women were known about by the government but the details were hidden from the general public by self- censoring newspapers. Public attitudes towards sexual morality in the 1930s were very conservative and an heir to the throne behaving in such a manner would have brought the monarchy into disrepute.
In the months after his coronation rumours circulated about a relationship with an American divorcee, Wallis Simpson. In November 1936 he informed Baldwin of his intention to marry her and Baldwin replied that the marriage would be
seen by many in Britain as morally unacceptable. The British cabinet and the Dominions rejected even a morganatic marriage and presented him with three choices: abandon the marriage plans, marry and risk a constitutional crisis with the government, or abdicate. He chose the final option on 11 December 1936, making way for his brother, George VI.
What were the divisions in the opposition labour party about collective security during the NG?
Throughout Baldwin’s premiership and Neville Chamberlain’s which followed, the opposition Labour Party continued to be divided on the question of peace and security. The left of the party believed that rearmament made war more likely, not less. The centre of the party, led by Clement Attlee, argued that collective security would make war impossible, and therefore rearming unnecessary. However, world events made collective security seem more and more difficult.
Why did Chamberlain become PM of the NG?
Stanley Baldwin resigned in 1937 due to ill health, making way for his chancellor, Neville Chamberlain, to become prime minister. Chamberlain was prime minister during a period of economic recovery, falling unemployment and stable prices.
The main problem that the National Government under Chamberlain, and Baldwin before him, would face was that the breakdown of international order made war increasingly likely, but the antiwar movement in Britain was growing in strength, a factor which made rearmament more difficult.
Due, in part, to a desire for peace among the electorate, the National Government allowed a series of concessions to Nazi Germany, as Hitler continued to tear up the Treaty of Versailles.
What was Chamberlain’s policy of appeasement?
He is often associated with the policy of appeasement of Hitler; on three occasions he went to Germany in 1938 to try to prevent an outbreak of war by negotiating with Hitler. The Munich Agreement of September 1938 granted nearly all of Hitler’s demands and allowed him to annex the Sudetenland of Czechoslovakia. Chamberlain returned to England promising ‘peace for our time’. When Hitler attacked Poland in September 1939 Chamberlain declared war on Germany.
Why did Britain emerge from the WW1 economically damaged?
-The British government had not expected the war to last as long as it did and to command so much of the nation’s resources.
-America’s banks on Wall Street had loaned Britain large sums of money to enable it to continue the unexpectedly long and expensive conflict.
-Britain had been cut off from many of its most valuable export markets by German U-boats, which sank 40 per cent of British merchant shipping. In 1914 Britain’s exports accounted for one-third of its total wealth, but by 1918 it had declined to one-fifth.
-Britain’s industries had been forced to switch to war production instead of supplying export markets.
-By 1918 the country had lost over three-quarters of a million men, many of whom were essential to its economic output.
-The total financial cost of the war was £3.25 billion.
How was the UK poorly affected by WW1 during the 1920s.
-The British continued to import the same pre-war level of goods from abroad, but the decline in exports meant that the country experienced a negative balance of payments throughout the 1920s.
-The debts that Britain had incurred (amounting to 136 per cent of the country’s entire annual economic output in 1919) and the damage to its trade left it greatly weakened.
-By 1920 the total British debt was £8 billion. In that year, the government’s annual budget came to £800 million, but £300 million went directly on debt repayment.
-In 1908 the standard rate of income tax had been one shilling in a pound (5 per cent), but had risen to five shillings (25 per cent) by 1924. Much of this increase was necessary to repay the nation’s debts.
What was unemployment like in the 1920s?
-After a brief post-war boom from 1919-20, caused by consumer demand for scarce goods that had been rationed during the conflict, the interwar period was characterised by two recessions, 1920-21 and 1929-34, which hit Britain’s heavy industries and the regions they supported hardest.
-Even during boom times Britain’s overall level of unemployment remained high, on average it remained at approximately 10 per cent of the working population between 1921 and 1938; this figure was double the average unemployment rate of the period 1870-1913.
-In the mid-1920s consumer demand gradually increased and unemployment declined across much of Britain, however in declining industrial areas such as south Wales and Tyneside, it stayed persistently high.
-Between 1934 and 1939 rearmament and new light industries in the south east and the Midlands developed as a result of growing consumer demand, but heavy industry continued to decline. In some parts of the coal-producing south Wales valleys it stood at over 80 per cent of the adult population.
What was the short post-WW1 economic boom?
-The end of the war in 1918 was followed by a short-lived economic boom in Britain that ended in a recession in 1920.
-Because of wartime restrictions and rationing, both individuals and businesses had been unable to spend and had accumulated considerable savings in cash and bonds.
-Throughout 1919 consumers and businesses spent their savings. Individuals bought luxury items that had been rationed during the war such as coffee, soap, clothes and cigarettes.
-There was a huge speculative boom as businesses issued new shares for traders, investors and other businesses to buy and more money poured into the London stock market than at any other time previously in British history. The total amount of new shares issued dramatically increased from 65 million in 1918 to 384 million in 1920.
-Investors were keen to buy British shipyards, cotton mills and coal mines, but these were all poor investment choices. The monopoly that Britain had over these industries had vanished during the war and Britain now had new competitors in the USA, Japan and South America.
-In addition to this, these industries had become outdated and had received little investment throughout the war years, making them uncompetitive. I
-n the case of shipping, there was an assumption by investors that global trade would quickly resume to pre-1914 levels and merchant ships would be in demand. Not only did this resumption of trade not happen as quickly as desired, but by 1919 there was a global surplus of ships.
-British wartime industries still in the process of returning to civilian usage could not keep up with the level of demand. Goods in short supply became excessively expensive and, as a result, demand declined and the boom came to an end
What was the 1920-21 recession?
The recession that followed was one of the most severe slumps experienced by Britain prior to 1929. Unemployment levels rapidly increased to 12 per cent of the working adult population.
By 1921, 2 million workers were unemployed and areas of the country like south Wales and Tyneside were deeply depressed as old industries like coal and ship building collapsed. The crisis in the coal industry led to a wave of strike action. The cost of living had increased by 25 per cent between 1918 and 1920 and wages stagnated, meaning that unions were far more likely to strike to secure higher living standards for their members.
What were the reasons for the 1920-21 recession?
Deflation:
The government cut spending by 75 per cent between 1918 and 1920. In addition, in order to return the value of the pound to its pre-war levels, the Bank of England raised the interest rate to 7%. This meant that it suddenly became very expensive to borrow money. These two factors drained available money for spending from the economy. Both the Bank and the government took these measures to try to repay Britain’s wartime debts, but by the end of the decade debt had risen from 120% of GDP to 160%.
Loss of export trade:
The global economy had been transformed by the war. It was no longer dominated by Britain. There were several new foreign manufacturing and financial competitors who had taken advantage of the disruption to British trade during the war. One example of market loss was in textiles. Japan began to supply India and South East Asia with cotton and silk during the First World War, causing the textile industry in the northwest of England to decline.
Underinvestment:
British industry suffered from long-term underinvestment and by the 1920s this had begun to cause serious problems. In the steel industry, output throughout the interwar period was lower than that of Britain’s rivals. By 1920, a growing number of British manufacturers were importing American steel because of its superior quality and price. By 1937 British steel foundries were producing 83,000 tonnes per year, but American foundries were producing 210,000 tonnes and Germany was producing 125,000 tonnes.
Industrial relations:
In order to prevent a general strike in 1919 Lloyd George had bought off British workers in the main industries (coal, rail, docks) with generous pay and working hours. These workers, many of them former soldiers, were unwilling to lose these conditions when times became tough. The creation of an eight-hour working day (48-hour week) resulted in a 13% decrease in working hours, but no increase in productivity during the hours worked. Wage rates also stayed high, meaning that products remained overpriced and uncompetitive.
What were the attempts to solve the 1920-21 recession?
Lloyd George believed that there was little choice but to wait for the economy to improve on its own. He was anxious to appease middle-class voters who were experiencing financial hardship after 1920, many of whom wanted to see tax cuts and less government spending. He advocated a policy of spending cuts known as retrenchment.
The Geddes Axe:
In 1921 Lloyd George appointed Sir Eric Geddes to implement greater cuts in public expenditure. High taxes were blamed on high spending and Lloyd George hoped tax cuts would stimulate the economy. Geddes recommended £87 million of cuts in the 1922-23 budget. Most of these came from the government’s military budget, but the health, welfare and housing budgets were reduced from £205.8 million in 1920-21 to 182.1 million in 1922-23.
Tariffs and free trade
One of the most important economic questions of the interwar years was that of tariffs. For most of the previous century Britain had adopted free trade. The switch to protectionism helped to protect the British domestic industries that are struggling from competition by making the foreign imported goods more expensive, protecting the profits of British manufacturers. The downside to protectionism is it could result in other countries applying tariffs to British exports in retaliation.
Because of the depth of the post-war recession, many members of the government began to consider introducing tariffs in order to protect British industry and prevent further increases in unemployment. Lloyd George had always believed in free trade and had opposed tariffs. When he left office in 1922 some in the Conservative Party sought an election victory that would give them a mandate to impose tariffs on imports and protect industry (see box above). This divided the party and led to the establishment of the first Labour government.
What was McDonald’s impact on the 1920s economy?
MacDonald had campaigned on the issue of unemployment, criticising Baldwin’s failed attempts to bring the numbers of jobless down. However, when MacDonald became prime minister he was unable to make any real improvement to Britain’s economic fortunes.
MacDonald lacked a parliamentary majority with which to carry out major economic measures to deal with unemployment. He was unable to increase spending and taxation to help revive the economy or create jobs, but he was also reluctant to do so. He wanted to present Labour as a moderate party, one that was ‘fit to rule’, not a party of radical socialist ideas. He wanted the other two political parties, the largely Conservative-supporting press and Britain’s upper and middle classes to feel that they had nothing to fear from a Labour administration.
Between 1921 and 1924 unemployment had declined from 12 per cent to 6.5 per cent, but started to climb again throughout MacDonald’s year in office and rose to 8 per cent in 1925. One positive side effect was the dramatic fall in inflation from 15 per cent in 1920 to just under 1 per cent in 1924. This was not the result of economic strategy however. Inflation fell because spending had collapsed due to unemployment.
Why was returning to the Gold standard bad?
Stanley Baldwin’s chancellor of the exchequer was Winston Churchill. He had never held the post of chancellor before, and presided over one of the most catastrophic economic blunders of the decade. By reintroducing Britain to the Gold Standard it has been argued that the economic slump was prolonged.
The war had led to the suspension of the Gold Standard, but Churchill reintroduced it in his 1925 budget for two reasons. First, a pound that was decreasing in value was bad for British prestige and second, Churchill believed that a competitive economy could not be built by the government simply making things easier for manufacturers.
The exchange rate in 1925 was £1 to US $4.85 (the economist John Maynard Keynes believed that the value of the pound was fixed 10 per cent too high). In order to make the pound nearly five times as attractive to foreign investors, interest rates had to be kept high. This meant that foreign investors were attracted to Britain and put their money in British banks, but it also meant that the cost of borrowing money was equally high. As a result businesses found it more difficult to borrow money in order to expand and take on new workers, which added to Britain’s problems with unemployment.
In September 1931 the Bank of England was forced to concede that it could no longer keep the pound in the Gold Standard. Interest rates were already at 8 per cent and would have to dramatically increase in order to prop up the value of the pound. That month a decision was taken to withdraw the pound from the Gold Standard and devalue; a measure that enabled the British economy to recover more quickly from the depression than many other countries.
What was the Great depression?
In October 1929 a stock market crash on Wall Street in the USA sent shock waves through the US economy, resulting in economic depression. The USA had replaced Britain as the world’s largest importer of overseas goods and the financial crisis had consequences for nearly every other country in the world. Global trade contracted by 66 per cent over the next five years. Britain’s exports declined by 50 per cent. They were worth one-third of the country’s Gross National Product (GNP) and the collapse in trade was catastrophic for several key industries:
-coal
-dock work
-cotton
- iron and steel
- ship building.
What was the Great depression?
In October 1929 a stock market crash on Wall Street in the USA sent shock waves through the US economy, resulting in economic depression. The USA had replaced Britain as the world’s largest importer of overseas goods and the financial crisis had consequences for nearly every other country in the world. Global trade contracted by 66 per cent over the next five years. Britain’s exports declined by 50 per cent. They were worth one-third of the country’s Gross National Product (GNP) and the collapse in trade was catastrophic for several key industries:
-coal
-dock work
-cotton
- iron and steel
- ship building.
In addition to these industries, the shops and markets where miners, dock and mill workers spent their wages were also seriously affected. Unemployment, which had stood at 1 million in 1929, leapt to 2.5 million in 1930. The increase in unemployment put additional pressures on the government - tax revenue declined, but the number of people applying for financial assistance rapidly increased. In 1931 the British economy shrank by nearly 5 per cent, but despite these problems the government’s main priority was keeping the pound in the Gold Standard system and supporting its value through spending cuts and high interest rates.
What was the labour gov’s response to the Great Depression?
Britain’s huge debts, along with her rising level of unemployment, led to a debate within the new Labour government. The chancellor of the exchequer, Philip Snowden, believed that unemployment relief should come from taxing the wealthy and from corporate profits. However, as these profits slumped, and private, wealthy individuals with money were anxious to protect or conceal it, the cost of providing for the unemployed became unsustainable.
The economist John Maynard Keynes suggested government spending on public works, such as new roads, to create jobs, but Snowden refused. He knew that the bankers in New York and London had little patience for further spending, as the value of British government bonds they had purchased during the war would decrease. The only part of the economy that the government invested in and created jobs in during the depression was the defence industry.
What were the Hunger marches in the 1930s?
The desperation of workers and their families in the most deprived parts of the country from 1921 onwards had led the Communist Party of Great Britain to establish the National Unemployed Workers’ Movement. The organisation, which was boycotted by the Labour Party because of its links with communists, organised a series of marches to protest the means test throughout the 1930s, which quickly came to be christened the hunger marches. The protesters were unemployed men from the depressed regions of Britain who walked to London, encountering both support and opposition along the route. The most famous of the marches was from Jarrow in Tyneside in 1936, called by the marchers the Jarrow Crusade.
The northeast of England felt particularly forgotten and ignored by the far wealthier southeast and London, and the marchers sought to bring to the attention of the government the scale of the deprivation and poverty in which the region was mired.
How did Britain recover from the Great depression?
The depression did not last as long in Britain as it did in other countries such as America. On average between 1932 and 1937:
- real incomes rose by 19 per cent
-industrial production rose by 46 per cent
-GNP rose by 23 per cent
- exports increased by 28 per cent
- unemployment fell from 17 per cent to 8.5 per cent.
How did the decision to move Britain back off the Gold Standard effect its economic recovery?
-A cut in interest rates. Borrowing for businesses and individuals became cheaper, which enabled more spending and job creation. It also made it less attractive to save money so people investing their wealth bought property instead. This fuelled a housing boom in the southeast and Midlands in the second part of the decade as more people could afford to buy houses and the number of new houses built dramatically increased (see Table 2). The cut in rates was referred to as a ‘Cheap Money’ policy. The total value of mortgages taken out in 1930 was £316 million, but by 1937 it was £636 million, with an extra half a million borrowers buying new homes.
-The government was able to allow a degree of inflation by the end of the decade. Instead of trying to prevent inflation completely (therefore protecting the value of the pound and its place in the Gold Standard), the National Government stimulated spending, which had the consequence of letting prices rise slightly. For example, the government spent money on road building, which in turn stimulated the car industry.
-The devaluation of the pound made British exports cheaper and more competitive.
-Banks became more willing to spend again
-The national government also stimulated economic growth by restructuring British war debts, ensuring they cost the country 25 per cent of its tax revenue, as opposed to 40 per cent.
What was the effect of the government military expenditure in the 1940s?
Britain had managed a degree of rearmament before the war, however by 1939 there were still significant shortages in military equipment.
In 1940, when Britain appeared to be losing the war, the growth of state intervention resulted in a huge increase in war production and military expenditure. Britain produced 15,000 aircraft in 1940, rising to 47,000 in 1944 and between 6,000 and 8,000 tanks per year.
What was the effect of Economic aid from the USA during ww2?
Between 1939 and 1941 the USA offered Britain considerable economic help, despite the fact that the USA was neutral.
The 1939 American Neutrality Act initially allowed the British to buy supplies with cash only, but by December 1940 Britain’s cash and gold reserves were spent.
Winston Churchill arranged a credit agreement, known as the Lend- Lease Agreement. America would supply Britain with the resources it needed but the bill would be paid after the war.
Equally as important were American ‘Liberty Ships’ - large cargo vessels full of oil, coal, timber, foodstuffs and essential raw materials for the war effort. These provided Britain with an economic lifeline throughout the war as German U-boats in the Atlantic prevented British merchant ships from bringing goods to Britain.
