Interwar Economics Flashcards
1
Q
Solomou (4)
(Inter-war)
ME, HY, AT, CD, EN
A
- Macroeconomic models are inadequate to help us understand the new phenomenon of mass unemployment - IW unemployment cannot be explained either by simple neoclassical auction market or Keynesian aggregate demand deficiency models.
- Hysteresis effects are observed in the path of unemployment, with the development of unemployment in the long term
- Unemployment leads to the atrophy of human capital, alongside cognitive dissonance - the concept that mental degradation further reduces
- Demographic trends were adverse, given the level of aggregate demand and other unfavourable shocks in the 1920s and 1930s - even if a component on the labour force growth rate can be seen as exogenous this can only explain a small part of aggregate unemployment
2
Q
Broadberry (7)
- General*
- TFP, HCA, LES, TEC, STA, CAP*
A
- Failure to shift resources out of agriculture
- Investments in networks = human capital accumulation, with individuals acquiring specialised client-based knowledge as well as reputation
- America’s rise of corporation not confined to manufacturing - consumers seen as willing to accept standardised goods rather than Europeans desire for individualist goods.
- International Economic Relations - War made it difficult for the reintegration of Britain into the liberal economic world system
- Technology and Organisation in the 1980s - Britain has been behind US in market services, where £££ made. Due to lack of investment in human capital post-WWII
- The Role of Capital - US and Germany overtook Britain by investing more - Capital per employee grew faster in the US and GER, so Britain fell behind in terms of output per employee
3
Q
Crafts
- General*
- TEC, McC, CAR, GA, DER, INC*
A
- From an endogenous standpoint (determined within the economy system)… (10 points)*
1. Dominant mode of thinking is neoclassical - Sources of economic growth as growth in the capital stock and the labour forces together with improvements in technology which raised the productivity of these inputs. Flawed: assumes catch up is automatic and does not consider impact of policy on growth rate
2. ‘New’ growth economics more favourable - technological advanced informed by incentive
3. McCloskey thesis: Britain pre-WWI was growing as much as it could given restraints
4. Interwar protectionism may have been damaging - no evidence to suggest that cartelisation increased manufacturing output
5. 1950-1973 - rapid catch-up growth during which Western European economies rapidly reduced the productivity gap with the US. Enhanced based on ‘social capability’ and improved ‘technological congruence’ compared w/ interwar period
6. Britain experienced its fastest ever economic growth, but relative decline occurred compared to Europe
7. During the Golden Age, development of corporatist ‘social contracts’ which were based on bargaining equilibria between capital and labour that featured wage restraint for high investment (Eichengreen)
8. Deregulation to allow ICT to rise also allowed financial sector decline in 2008 to heavily impact British economy
9. British economic history should always be looked at comparatively
10. Incentive structures fail to exploit growth opportunities
4
Q
Eichengreen (6)
CON, DEF, TAR, UND, ART
A
- Interwar period had conflicting implications for short-run macroeconomic stabilisation and long term growth.
- In a strongly deflationary environment, anything that pushed up prices was good for employment, profitability and financial stability.
- Cheap money, tariff and inducements to industrial collusion to prevent bankruptcy
- Creating an anticompetitive environment however slowed the pace of structural and organisational change, which prepared Britain poorly for Post-WWII
- “If 1913-1950 was a turning point, it was not because this was when the British economy began to dramatically underperform compared to rivals”
- Results of TFP analysis shows growth was scarcely half the arithmetic average for other countries - heavily influenced by exceptional growth in USA, which pioneered mass production. British industry’s failure to emulate the U.S. example is disturbing
5
Q
O’Brien (3)
GD, WST, HOU
A
- The argument that new industries mitigated impact of the GD - severely qualified - through quantification which showed deceleration in the growth of consumer expenditure in 1929-32 economy
- Growth in new industries cannot be compared to housing - -accounting for 3/4s of net capital formation 1924-37
- Wage-stickiness hypothesis is first, that rather high wages contributed to the deterioration in the competitive position British industry, 1924-9, and secondly, detectable moderation in the growth of money wages provided some but probably minor assistance towards Britain’s recovery in the 1930s
-
Keynesian panacea” for a restoration of “full employment” implied politically unacceptable and economically implausible increases in government expenditure — equivalent according to one calculation to 70 per cent of public
revenue for 1932. Other public works expenditure (proposed at the time by Lloyd George) were not carried out and (even if implemented) would probably have reduced unemployment bymodest %.
6
Q
Supple (4)
- General*
- UNA, ANX, DEI, DEC*
A
- British declinism is unambiguous. Inherent and natural, given resources proportionate to other nations. Physiological affinity of the British surrounding the economic decline can be attributed to three factors:
- Anxiety around world position, hardened by the fact Britain was once top dog
- The effects of de-industrialisaiton on the economy - movement of money to industries where wealth is not created, but moved
- Chaining interpretations of objectives from government expenditure - appetite for consumption outstrips wealth Despite the growing wealth and living standards year-on-year, obsession with decline has been pathological in the British mindset.
7
Q
Hatten
DUR, BK,NAI, COL
A
- Support for notion of duration impacting unemployment
- Rejection of BK on empirical basis of econometric assessment
- Non-Accelerating Inflation Rate of Unemployment (NAIRU) - fall in demand for labour pushes employment below NAIRU
- WWI overhauled collective bargaining
8
Q
Glynn and Booth (6)
MON, DUA, EXP, MAR, TUS
A
- Interwar unemployment too complex to have monocausal analysis
- Keynesian approach to interwar unemployment - essentially structural and regional problem
- Dual economy in UK developed - old industrial vs new industrial. supporting one would damage the other
- Liberals and Labour sought revival of export demand as solution to unemployment Benjamin and Kochin’s analysis - unemployment benefits encouraged unemployment + prolonged
- Issues: - Married man with two dependents was the focus on study = only 10% - Failed to account for complexity of benefit system - only dealing with the unemployment insurance benefits
- TUs had major influence - preserved wages and shorter hours - Wage inflexibility and excessive wages
9
Q
Benjamin and Kochin
VOL
A
- Over generous unemployment benefit allowed more people to be voluntarily unemployed than without benefit 2. Evidence for benefit induced unemployment rested principally on the results from econometric equation estimated on annual observations from 1920-38. BK calculated, had the benefit to wage ratio remained at a low level (specifically 0.27) unemployment rate would have averaged between 9.6 and 6.9% between 1921 and 1938 - rather than 14.2% observed.
10
Q
Gillespie
UNE, UND, SHO
A
- The definition of unemployment is too homogenous - does not account for underemployed. Resultantly, the account of unemployment must be interpreted differently - underlying issues much more pronounced in earlier period.
- Demonstrates trend of underemployment - Decasualisation was not effectively enforced- led to job sharing in overcrowded market. In an overstocked Labour market, underemployment was found in both declining industries and prosperous areas
. 3. - Upto mid-1924, few short timers appear to have registered as unemployed - Changed in 1926 - more short time miners claimed state benefits
11
Q
Auction market theory of labour market
A
- With enough wage flexibility - market clearing in the labour market will occur - Unemployment will be frictional or voluntary - Presence of institutional changes that impose rigidity on the economic system, preventing the price mechanism from working.
12
Q
Pigou
TUS, NIS
A
persistence of mass unemployment, creative to the past, in terms of greater safe rigidity introduced by two major institutional changes: - Rapid spread of unionisation between 1900-1920 - Intro of fairly comprehensive national insurance system 1911-20
13
Q
Anglo-American labour productivity differences
A
Persistence of productivity differences in manufacturing has been roughly 2:1
14
Q
what fuelled US growth?
A
US grow dependent on the mineral extraction of value-added oil. Britain did not have such a moment until the rise of the North Sea Oil industry in 1973, running down the low productivity of coal
15
Q
Dutch Disease
A
“Dutch Disease” - improvement in the balance of trade leads to an exchange rate appreciation and adverse effects on the competitiveness of manufacturing
16
Q
British GDP stats
A
- British GDP: - 2% p.a. - 1873-1913 - ~2% p.a. - 1924-1937 - 3% - 1951-1973
