Chapter 14: Economic Issues

wall street crash

oct 1929

usa response

put up high tariff barriers which worsened selling british goods already made difficult by gs

trade with usa allowed britain to pay off debts but usa called in all loans made after war

italy unable to pay britain back

july 1931 banking crisis

£2.5mil gold withdraw by foreign investors a day, caused a 'run on the pound'

1 auguts: borrowed from french + us bank but run continued

failure to deal with this caused crisis, labour split + nat gov

orthodox view

keep to traditional economic policies

free trade, balanced budgets + gold standard

cutting gov spending to maintain confidence in traders

keynes' view

borrow money to spend on public works scheme

unemployed workers earn more and employers make more profits so increased spending money; increases demand and helps industries

'multiplier effect' money invested used over and over again

oswald mosley's views

borrow money and spend more on roads, schools, hospitals and services

gives jobs to the unemployed, increasing spending power

introduce tariffs to protect jobs and increase benefits to boost consumer spending

conservative view

orthodox view except tariff protection, not free-trade

extreme left-wing socialist view

create a socialist economy

state control over main industries, banks and services

invergordon mutiny, sep 1931

troops protested against pay cuts in scotland

caused run of the pound and depleted the country's gold standards so the BoE suspended the gold standard

1931 devaluation of pound

fell from $4.86 to $3.40

beneficial as it made exports easier to sell, other countries followed but introduced protective tariffs so exports made difficult (sold more exports to empire)

interest rates

reduced from 6% (1931) to 2% (1932)

'cheap money'

made it easier for industries to borrow money and invest

easier for consumers to borrow money to buy new homes

house-building boom

2mil homes built in the 1930s (rising consumer demand)

provided work + demand for furniture and fittings; revived construction industry

for middle classes as built by private sectors

only 700,000 council homes built (1931-40)

import duties bill 1932

10% general duty on all goods entering britain except from countries of the empire; did not help uk recover much

hoped to create a self-supporting economic unit

conservatives united on protective tariffs

liberal free-traders resigned in protest

ottowa conference 1932

dominions e.g. canada concerned their industries would suffer

britain agreed to give preference with lower taxes from the dominions which did the same for british exports

national government manifesto

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

ng policy towards industry

cuts in spending (retrenchment)

lowered demands for good and services

schemes to close down uncompetitive shipyards, mills + mines

surviving ones attracted new investment but employed fewer

jarrow unemployment

70%

where was recovery?

mid-lands and south east, not industrial areas

new industries

motor vehicles, chemical + aircraft

enjoyed growth

1939: motor industry employed 400,000

staple industries

took a while to recover: coal production at 1928 levels by 1938

reasons for economic recovery

not due to gov policy but increase in consumer spending

lower prices + general social trends (smaller families)

rising consumer remand (housing market) - encouraged jobs

trade

international trade 1/3 of 1929 levels in 1933

british shipping act 1935

gov loans to scrap old ships and build new ones

increased jobs in ship-building

agricultural condition

low price of wheat fell 50%

amount of arable land declines; farmers abandoned or switched to egg/poultry production

britain became more dependent on food imports

1/3 of urban labourers' wages, not included under national insurance scheme

agriculture reforms

taxes imposed on agricultural goods from europe but not long-term

gov assistance in land drainage + soil improvement schemes

guaranteed prices for farmers, giving security

17 marketing boards by 1939

included under national insurance scheme (1936), not poor law