n14. Economic Issues

wall street crash

wall street crash

29th October 1929

unemployment was worst in

wales

insured workers

workers on the national insurance scheme and therefore entitled to claim benefits

why was britain one of the first countries to be affected by the wsc

• exporting was already difficult due to gold standard

• america put up high tariffs to protect its product

• america called in all loans made after ww1

• countries that owed britain money e.g. italy were also affected and could not pay back their money

unemployment in 1931

almost 3 million

how was the budget not balanced?

• receiving less taxation (fewer employed)

• expenditure rose paying unemployment benefit

crisis came to a head in

july 1931

banking crisis

a loss of confidence in the banking system that led to a run on banks, as individuals and companies withdrew their deposits

foreign investors began to withdraw gold at...

£2.5 million a day in july 1931

attempt to resolve banking crisis

1st august bank borrowed money from french and american banks

the crisis of july 1931 was in part caused by the

failure of the labour government to deal satisfactorily with the situation

5 different economic perspectives

• orthodox -keynes's view

• mosley's view

• conservative

• extreme left wing socialist

orthodox view

(held by snowden)

• free trade, balanced budgets, gold standard

• cut spending to keep confidence of intl bankers

• keep value of £ based on gold

keynes's view

• borrow money to spend on job creation projects earn more wages, more tax revenue, etc (multiplier effect)

mosley's view

• borrow money for roads, schools. hospitals, services would give the unemployes jobs and spending power

• introduce tariffs to protect jobs

• increase pensions and benefits to boost spending

conservative view

• same as orthodox view

• BUT argued for protectionism over free trade

extreme left-wing socialist views

• capitalism was collapsing, no need to save it

• use it to create a socialist economy and society by taking state control of banks and key industries

run on the pound

september 1931 due to a mutiny among naval troops over pay cuts in invergordon scotland

gold standard suspended

due to the run on the pound, which depleted the country's gold reserves

value of the pound

from $4.86 to around $3.40 30% devaluation

effects of the devaluation

beneficial, as it made goods easier to export limited, as other countries also came off the gold standard, and introduced protective tariffs

sterling area

countries that had the pound as their reserve currency most trade occurred within this area (the empire)

interest rates were reduced

6% in 1931 2% in 1932 "cheap money"

"cheap money" helped recovery by (2)

• easier for industries to borrow and invest in modern machinery

• easier for consumers to borrow on mortgages and buy new houses

private house building boom

2million homes built in 1930s provided work, demands for furniture and fittings, revival in construction industry

much less local governemnt house building

700000 council houses built in total 1931-40

import duties bill

1932 general duty of 10% on all goods entering britain goods from empire were exempt

ottawa conference

july - august 1932 concern that free trade would mean australian/canadian goods would fall in competition with british goods agreement that britain would give preference to dominion imports, and vice versa

impact of protectionism on the economy

not significant

1935 election national government quote

"under this leadership we have emerged from the depths of depression to a condition of steadily returning prosperity"

jarrow unemployment

unemployment over 70% due to closures of uncompetitive shipyards, mills, and mines

economic recovery

limited, but certainly obvious in the south east of the country new industries had not suffered in the depression

output of motor cars

1929-1939 doubled

employment in motor car industry 1939

400,000

britain was the ______ largest car maker in the world

second

output of electricity

1925-39 quadrupled

coal production

227mil tonnes in 1938 nearly the same as 1928

stainless steel production

more in 1938 than 1928

international trade

in january 1933 only a third of what it had been in january 1929

cereal prices fell by

50%

marketing boards guaranteed prices for farmers

by 1939 there were 17 such boards milk, potatoes, bacon protected

rural wage

1/3 of the average urban wage

agricultural workers not included in national insurance schemes until

1936