3.7 Depression and the dole

• The Depression


  A severe, sustained, worldwide downturn in economic activity that began immediately after the Wall Street Crash and lasted for some countries, until 1939
• Wall Street Crash (October 1929)


  The ending of speculation on Wall Street, the American stock exchange. Thousands of Americans had borrowed money to invest in stocks and shares until there was more money out on loan than there was circulating in the economy. Banks crashed, many people lost all their money, as it had been invested in shares, and more than 13 million people became unemployed
• In the years immediately after the First World War, the British economy experienced a post-war boom
• Technological developments made during the war meant that labour productivity improved after 1918 as semi-skilled labour could take on work previously undertaken by skilled workers
• Between 1918 and April 1920, 2.9 million extra workers found jobs, although 500,000 women let the work they had taken on during the war
• The boom was short lived and collapsed in 1921, once the losses and shortages of the war years had been made good
• It was then that Britain's dependence on the old staple industries of iron and steel, textiles, coal and shipbuilding became clear
• These industries experienced persistent levels of high unemployment in the 1920s as British industry struggled to compete in international markets
• High unemployment, of course, led to poverty for many families
• In the Midlands and the south of England new light industries specialising in, for example, electrical goods, cars and chemicals, developed and flourished
• The areas that supported heavy industries were in decline, and with decline came unemployment and poverty. Unemployment in these areas ranged between 40 and 80 percent and had a huge impact, not only on individuals but also on governments as they struggled to provide sufficient benefits in a time of worldwide economic decline
• The situation was exacerbated by the Depression. This began in 1929 with the Wall Street Crash in the USA, and affected nearly every developed country in the years 1929-39
• There was a huge drop in the US demand for exports, which led to a fall in British industrial output with consequent unemployment. This mainly hit the staple industries that were already struggling
• The Depression led to a flight of capital from Britain and a series of currency crises across Europe. This instability in the world's currency markets resulted in a
• The 1920s and 1930s were, for many people living in Britain, years of reasonable prosperity. They experienced a rise in real wages, employment in new industries, improvements in health care, housing and education.
• Yet many others experienced the depths of desperate poverty, particularly in the old industrial heartlands of South Wales, the west of Scotland, Lancashire, Tyneside and West Yorkshire.
• The decline of heavy industry

  • The British economy faced huge problems of adapting from a war-based economy to a peacetime one, involving shifting to new technologies and changed markets
  • The old, staple industries that were worst affected were coal mining, shipbuilding, iron and steel production, and textiles, particularly cotton
• Specific staple industries were affected in different ways

  1. Shipbuilding had a brief post-war boom but then collapsed due to lack of demand

  2. Coal exports fell from 100 million tonnes per year to 50 million tonnes by 1930 due to European countries reviving their own coal industries and poor management, under-investment and dreadful industrial relations within the coal industry

  3. Cheap iron and steel flooded in from Europe in the 1920s, causing British production to fall by 45% for steel and 54% for pig iron in 1929
• • Special Areas Act
  • Unemployment Act
  • Incitement to Disaffection Act


  1934
• • Rowntree's second study of poverty in York
  • Publication of Keynes' General Theory of Employment, interest and Money
  • Jarrow march against unemployment


  1936
• George Orwell's The Road to Wigan Pier published


  1937
• Before the First World War, 75 percent of the British production of cotton goods was exported
• After the war, cheaper cotton goods from the USA, India and the Far East flooded the market and undercut the British cotton industry
• The situation was worsened during the Depression, and by 1938 the number of people employed in the British cotton industry had fallen by about 50 percent, and Britain's share of world trade had fallen from 65 percent in 1911 to 28 percent in 1938
• The impact of the decline of these old staple industries was heightened because of their geographical concentration
• There were simply no other jobs because the traditional industries had been so dominant
• When these industries declined, workers were laid off and became reliant on private or government schemes for relief
• Many were thrust into long-term poverty
• McKenna duties


  Tariff of 33.33% on importing of commercial vehicles, introduced in 1915 and remained in place until 1956
• Safeguarding of Industries Act 1921


  Act intended to protect strategic industries against foreign competition by levying a 33.33% tariff for 5 years
• Heavy industry was consistently refused tariff protection, making it vulnerable to cheaper foreign imports
• The steel industry suffered from differential pricing, where foreign steel was sold in Britain at a price that consistently undercut the price of home-produced steel
• The refusal to give tariff protection to the staple industries was in part a result of Britain's long-held adherence to free trade and the belief that the consumer would drive the markets
• The immediate post-war boom of 1919-20 had resulted in considerable investment in the staple industries, in the hope that they would return to their pre-war level of success, but they didn't
• Cotton, iron and steel, and shipbuilding were heavily overcapitalised in a market where few wanted what these industries produced
• The Fine World War changed the structure of world trade
• British exporters lost markets abroad because of the fighting and in any case, their industries were geared up to war production
• In the early years of the was the USA took over many of these markets and continued to export to them
• Japan, too benefited from Britain's temporary withdrawal from world trade and began flooding the developing world with Japanese products
• Countries such as India developed their own in, steel and textile industries and, in 1919 introduced tarifs against British goods even though they were still part of the British Empire