Economics 1914-1939

• 1916-1922 Lloyd George government's response :

  • Followed retrenchment policy (austerity) which led to squandermania (wasting money) accusations.
  • 1921 LG appointed Sir Eric Geddes to implement Geddes axe.
  • caused 87m cuts in 1922-23 budget.
  • Welfare, health & housing budget reduced from £206m in 1921 to £182m in 1923.
• Conservatives 1922-1923:

  • Baldwin proposed tariff reform to protect from foreign competition but ended up losing popular vote & resigned.
• Conservatives 1924-1929:

  • Chancellor of the exchequer Churchill in Baldwin's government put Britain back on the Gold Standard in 1925 at pre war rate of the pound to gold which was too high making British exports uncompetitive.
  • Baldwin broke off relations with Soviet Russia which stopped the revival of Anglo-Russian trade.
• However:

  • New industries developed from Second industrial revolution (chemicals, motor vehicles, electrical goods & canned goods).
  • Motor ca production in 1920s was 3x it had been in 1913.
  • Central electricity Generating board set up in 1926.
  • National Grid developed increasing employment .
  • Service sector grew due to spread if retailing, mass entertainment & administration with as many as million jobs created in 1920s.
• Industrial action:

  1. Miner's strike 1921 & black Friday-Ending of govt control of mines in 1921 led to privately owned mines which reduced wages & prices fell dramatically. Government used emergency powers act to send in troops. Triple alliance of miners, dockers & railways.
  2. Hands of Russia strike 1920-British Socialists in 1919 to organise opposition to the British intervention on the side of the White armies against the Bolsheviks in the Russian Civil War
• 1926 General Strike:

  Long term causes-

  • Underinvestment, lack of modernisation, competition from other countries e.g. USA & Germany.
  • TU membership doubled during WW1 to 4milion by 1920.
  • WW1 mines under govt control but DLG returned them to private ownership which caused post war slump so exports & wages fell.
  • 1921 failed strike 'Black friday'.
  • TUC formation.
• Short term causes-

  • 1925 return to Golden standard £1 vs $4.85.
  • To prevent strike Baldwin agreed to subsidise wages but ended in 1926.
  • 1925 Samuel commission investigated long teem solutions.
  • 1926 Samuel commission reported & opposed nationalisation.
  • Miners locked out because MFGB leaders opposed wage cuts & longer hours (which mine owners imposed to combat falling price)
  • 'Not a minute on the day, not a penny off the pay'.
  • Labour defeat in 1924.
• Immediate term-

  • TUC declared strike as negotiations with Baldwin failed.
  • Baldwin abruptly ended a meeting with the TUC leaders after an unofficial strike by printers at the Daily Mail broke out.
• Outcomes-

  • Baldwin passed 1927 Trades disputes act which introduced the opt in, removing Labour's political levy (Labour loses 1/3rd of its funding)
  • Disillusionment with the TUC-TU membership fell from 5.5 mill to 4.4 mill in 1933.
  • Union members affiliated with Labour due to need for parliamentary action.
  • 1929 election- Cons 260, Lab 288, Libs 59.
• Why did General strike fail?

  Government had advantage-

  • Under the emergency power act 100,000 volunteer workers to supplement armed forces.
  • Baldwin won public sympathy with speeches, newspaper articles e.g. British gazette arguing strike was a threat to the British constitution.
• Inflexibility of miner leaders-

  • Smith & Cook refused to compromise which caused the TUC to withdraw support & called the General Strike off 9 days later.
• Failures of TUC leadership-

  • Only began preparations a week before it started and poor coordination strike action.
  • TUC couldn't initially utilise news papers because print workers were on strike but government had British gazette.
  • TUC was also divided with moderates were against the General strike like Thomas whereas Cook wanted strike action.
• Long term Great depression causes:

  Lost markets:

  • British colonies (like India) stopped importing British goods ( India placed tariffs on British goods).
  • British manufacturing was focused on war effort.
  • America & Japan took opportunity to take markets in the Ottoman Empire & China.
• Debt:

  • National debt in 1918- £7980 million.
  • Government expenditure:£200 mill in 1913 £2,600 mill in 1918.
  • Government expenditure far exceeded what public could pay.
• The world economy:

  • US was number 1 trading power-International economy became unbalanced.
  • World too economically reliant on US after Wall Street Crash.
  • Harding retreated to isolationism-so Britain couldn't export to the US.
• Britain's staples-

  • Lack of investment in new staple industries.
  • Employment was always above 1 million.
• Short term Long depression:

  • John Maynard Keynes objected to re-introduction of the Gold Standard.
  • Food imports & raw materials made cheaper.
  • Strengthening the pound would help Britain pay off debt.
  • 1931 Interest rates at 8% & Bank of England left gold standard to allow for reductions in interest rates which prevented deflation but other countries also came off Golden Standard.
• Wall Street Crash:

  • too much speculation, overproduction & market saturation- results in panic selling.
  • Worldwide depression- British exports fell by 50%.
  • 1930 unemployment at 2.5million & concentrated in South Wales, North of England relative to Midlands & South East.
• Jarrow Crusade-

  • Jarrow was incredibly dependent on staple industries.
  • Male unemployment in Jarrow at 70%.
  • Attempts to set up a steel works failed due to lack of government support so no alternative employment.
  • 200 Employment men marched to petition parliament to bring work back to Jarrow.
  • Baldwin refused to meet marches but did raise awareness of depressed areas.
• Labour government's response:

  • Economic advisory council established.
  • May committee recommended balancing the budget & cuts to public sector employees.
• • Mosley's memorandum proposed-Govt borrows loans to increase public spending which would give unemployed jobs & spending power. Pensions & benefits to increase public spending further.
  • Vs
  • Snowden (chancellor of the exchequer)- wanted maintenance of gold standard & a balanced budget.
  • MacDonald opts for balance of budget.
  • Cabinet splits 1931 & MacDonald offers resignation.
• 1924-1929 National government Baldwin's response:

  • Masterly inactivity
  • Minimal intervention of Bank of England & govt
  • Austerity