To what extent were government policies successful in tackling the economic problems facing Britain in the years 1918-1939?

Question 1

P1
P2
P3

Answer 1

Failure to tackle the post-war recession
Failure to tackle the economic slump of the 1920s
Success in tackling the effects of the ‘Great Depression’

Question 2

P1 evidence

Answer 2

E1:The post-war coalition government (led by David Lloyd George) failed to tackle the economic problems facing Britain in
the immediate aftermath of the First World War: the government failed to stimulate overseas trade and, by prioritising
spending cuts, only worsened the problem of unemployment:
Britain faced many economic problems in 1918:
 Britain had been forced to take on a total debt of £850 million (£3.25 billion modern equivalent).
 The German U-boats had destroyed Britain’s exports: by 1918 they had fallen by 12%.
 Unemployment stood at 12% as industry collapsed

E2:Lloyd George (1918-22) pursued a policy of ‘retrenchment’ with an aim to ‘balance the budget’ and reduce total debt:
 Taxes were increased by 30% and £87 million of spending cuts to government spending were introduced by Sir
Eric Geddes (this became known as ‘Geddes Axe’) in the budget of 1922
 These dramatic cuts in public spending (including to welfare programmes and investment in industry) meant
that industry was not provided with the post-war investment needed for modernisation / efficiency
 Lloyd George’s government prioritised spending cuts (retrenchment) over investing in the damaged UK
economy: Britain’s industry continued to struggle against foreign competition (US / Japan) and overseas trade
continued to suffer – UK exports barely recovered in the early 1920s
 The continuing problems in the industrial sector translated into job losses and rising unemployment as
companies were forced to shed workers: unemployment soon reached 10% by 1924

Question 3

p2 Evidence

Answer 3

Following the collapse of the Conservative-Liberal coalition, Baldwin’s Conservative government (1924-29) was elected
on a protectionist platform (1924) with the stated aim of protecting British industry from foreign competition. However,
protectionism suppressed (rather than encouraged) overseas trade:
Protectionism marked a decisive shift in economic priorities from free trade to protection of British trade
 Baldwin introduced tariffs on foreign goods (1925) to stimulate domestic demand: in the short-term this provided
a much needed boost to British industry as demand for home-grown good rose
 However, in the longer term: protectionism only led to our European trading partners creating tariffs in retaliation
which suppressed the overseas demand for British goods and led to a crash in UK exports.

E2:Baldwin’s Chancellor, Winston Churchill, also made a series of devastating economic blunders:
 Churchill increased interest rates to attract foreign investors in UK businesses, however, the high interest rates
also made borrowing very expensive and so encouraged the UK public to save, rather than spend = this
suppressed demand for goods/services meaning companies couldn’t expand
 Churchill also returned Britain to the ‘Gold Standard’: the value of the pound rose from $3.18-4.86
 As a result, British goods became too expensive abroad which worsened the exports slump and set in motion
the long term economic collapse of British industry
The cumulative impact of these policies was a collapse of overseas trade, declining domestic demand for UK goods,
and rising unemployment:
 unemployment remained above 1 million from 1924-1929 and was particularly bad in traditional industries
 60% in shipbuilding and 41% in iron industry

Question 4

P3 evidence

Answer 4

E1:Following the Wall Street Crash, Europe was plunged into the ‘Great Depression’ which had significant economic
consequences for Britain:
 Britain’s exports declined by 50% which had a catastrophic impact for Britain’s struggling traditional industry.
 Unemployment rose from 1 million in 1929 to 2.5 million in 1930 and the British economy shrank by 5%.
 The growth in unemployment put huge pressure on the government as tax revenue declined while demand for
financial assistance increased: the government simply could not afford to help such a vast number of
unemployed.
In response to the crisis, a National Government was formed (involving Labour, Conservative, and Liberal politicians)
which was to be led by Ramsay MacDonald:
 The National Government (1931-45) established a new style of economic policy which emphasised spending
cuts and fiscal responsibility
 The National Economy Act (1931) introduced the ‘means test’ and introduced 10% cuts to unemployment
benefits

E2: oNCE public spending was under control, the government introduced measures to help Britain’s struggling industry and
boost international trade:
 To make British goods more attractive abroad, the government abandoned the Gold Standard which decreased
the value of the currency $4.80 - 3.40 = exports increased by 28%, industrial production rose by 46%
 With industry booming, real wages began to increase (which helped to stimulate consumer spending and
increased demand for goods) and unemployment steadily fell as industry employed more workers:
unemployment fell from 17% - 8% by 1939
Finally, the government introduced measures to encourage consumer spending (in order to increase demand for goods):
 The government introduced a ’cheap money’ policy: interest rates cut from 6-2% = encouraged spending
 Lower interest rates made cheap mortgages available: 500,000 new homeowners = housing and borrowing
boom
Overall, the British economy recovered from the depression more quickly than other nations: the economy grew by 4%
each year in the period 1934-1939.