There is a dual picture here; there was decay in the old industries contrasted with steady growth in the new industries, particularly after 1934. The British economy could no longer rely on the strength of her basic industries, but had to adapt to conditions of rapidly changing technology.
The basic industries, based on the coalfields, suffered a dreadful slump for the following reasons:
During the war Britain had lost markets overseas as other countries developed their own industries or turned to other suppliers.
Most of Britain’s competitors protected their industries by erecting tariff barriers. Britain remained a free trade country until 1932. Some countries like Germany, Italy and the USSR aimed at self-sufficiency (autarchy).
Much of Britain’s industrial plant equipment was outdated and in need of modernisation – this did not happen.
The return to the Gold Standard 1925-31 (it had been abandoned during the war) hampered Britain by making her exports more expensive.
The coal industry was poorly equipped with outdated machinery, found it difficult to compete overseas because of the return to the Gold Standard, felt competition from Poland, Spain and the Netherlands as well as from oil and HEP.
The cotton industry was in decline because she was a high wage economy and could not compete with manufacturers in Japan and India, had lost markets during the war and had failed to modernise.
Iron and Steel
This industry suffered a slump between 1920–33. Export markets were lose during the war, free trade meant that other countries could dump cheap iron and steel on the home market and there was a drop in demand in the depression of 1929-33 as iron and steel using industries (ship-building) were doing virtually no business.
New industries included motorcar assembly, chemicals and electrical engineering and were located around London. They were much less dependent on the export market, were more modern and paid more attention to research into production. Electricity began to be efficiently generated stimulating the industry in domestic appliances, railways and electrical engineering. Mass production of cars was adopted which reduced prices and generated demand. The chemical industry flourished producing a range of new products like synthetic fibres, explosives, fertilisers and cosmetics.
Background to the General Strike
Trade Union history of this period is dominated by the General Strike of 1926. In the fullest sense of the phrase, a general strike is a strike by the whole labour forces at the same time. The General Strike was really a sympathy strike, with many workers coming out in support of fellow-workers. Much analysis has been produced on the strike and it is a part of union folklore. Martin Jacques writing in 1979 saw it as ‘a period of great militancy’ and Mark Stephens (1981) says it was a watershed as it created a ‘desire on all sides to see less destructive means used to achieve political and industrial ends’. During WWI, there had been co-operation between the government and the unions, and union membership had expanded during the war. Militancy returned after the war and the government was suspicious of the unions (their fears were increased by the Russian Revolution).
What caused the General Strike?
It was the outcome of many years of strife between the unions on one hand and the government and employers on the other. After 1920, trade depression set in and unemployment began to increase. The demand for coal dropped and exports fell. The mine-owners wanted a wage cut as the only way to operate. The Miners Federation of GB resisted and workers were locked out in 1921. Initially they had the support of the transport workers and railwaymen (the ‘triple alliance’) but this was quickly withdrawn on ‘Black Friday’. British exports became more expensive with the return to the Gold Standard in 1925. Mine-owners stated that the only way to keep going was for there to be a reduction in wages and an increase in hours. Industrial trouble looked imminent when the government agreed to subsidise miners’ wages on ‘Red Friday’. In the meantime, a government commission under Lord Samuel would report on the situation. This was, more than anything else, a decoy enabling the government to buy time. While the Samuel Commission was sitting, the government made preparations for the eventuality of a general strike and ensured that the country would be supplied with essentials in the event of a strike and by mobilising voluntary labour.
The Samuel Report, 1926
Miners should accept wage reduction temporarily.
Longer working hours should not be implemented
There would be no nationalisation
The govt subsidy was to end.
A J Cook, the secretary of the Miners’ Federation said: “not a penny off the pay, not a minute on the day”. The mine-owners also rejected the report. On 30 April 1926, the mine-owners locked out the miners.
The General Strike
On May 4th the General Strike began. About 2m workers came out in support of the miners. Printers, dockers, railwaymen, metal-workers and power-station workers came out in sympathy. The government’s preparations were quickly put into effect and troops were called in to maintain supplies of food and run the power stations. The government standpoint was p and a ‘revolutionary threat’. The government view was put across in the British Gazette; Churchill called the strike ‘unconstitutional’ and a ‘revolutionary threat’. The TUC point of view was put across in the British Worker. In essence a propaganda battle was being fought. The role of the BBC has been hotly debated but the balance seems to have been with the government.
Why did the Strike come to an End?
On 12th May, the TUC called off the strike partly because of concerns over the legality of the action. Moderates within the TUC were also concerned about Communist activists. There was a suggestion that the government was prepared to renew the subsidy but there was no formal guarantee. There was a great deal of bitterness and disunity in the union movement. There was a drift back to work but the miners decided to carry on the struggle alone. By November 1926, the miners were forced back to work and had to accept reduced wages, longer hours and pit closures.
The Effects of the Strike
Divisions within the Labour movement.
Great financial cost to the unions.
Humiliation for the unions and a great loss of membership.
The government passed the Trades Disputes Act, which banned sympathetic action, mass picketing and the ability of council workers to strike.
The TUC rejected the tactics of a general strike and emphasised more constructive methods.
The Labour Party increased its support and was able to form a minority government in 1929.
During the Great Depression, the unions adopted a low-key stance.
The Wall Street Crash and the Depression of the Thirties
The Wall Street Crash was a slump in share prices, which resulted from excessive speculation during the boom years of the 1920s, over-production and a slump in demand for electrical goods as saturation of the market occurred. It affected the rest of the world for the following reasons:
America imposed tariff barrier and this sparked off retaliatory measures, damaging world trade.
A web of indebtedness had built up throughout the world due to US loans, which Germany used to pay reparations and Britain used to pay war debts. Serious problems soon developed as America stopped and recalled all loans.
Shrinking world trade led to unemployment and prices lowered as manufacturers competed for business.
The Economic and Political Crisis of 1931
In Britain, industrial decline and unemployment were already in evidence and the Wall Street Crash simply made things worse. The economic crisis of 1931 had the following root causes:
Banks in Germany and Austria collapsed and international financiers withdrew their gold from London, anticipating disaster.
With growing unemployment the government was forced to spend increased amounts on dole payments and there was less money being generated by income tax.
The May Committee
The withdrawal of money from London continued to give concern and the May Committee published a report, which shocked the nation by predicting a budget deficit of £120m and proposed a number of measures. The Labour cabinet feared bankruptcy with pressure on the banks. It proposed cuts in unemployment benefit and this split the cabinet. Ramsay MacDonald, the Labour Prime Minister offered his resignation. However, a National Government (a coalition) was formed under MacDonald with the support of the Conservatives. MacDonald was heavily criticised by the Labour movement.
What Steps were taken by the National Government to deal with the Crisis?
Snowden's Budget - the formation of the National Government reassured American bankers and they advanced a loan. The budget included some of the following measures:
Increases in indirect taxation.
Direct taxation (income tax) increased by 10%.
Unemployment benefit was reduced by 10%.
Salary cuts for government employees.
The Bank of England increased interest rates to make it expensive to borrow.
It was not enough and Britain came off the Gold Standard at the end of 1931. This devalued the Pound Sterling, which made it easier to export goods. The government ‘went to the country’ and was able to win a victory. Although Ramsay MacDonald was Prime Minister, it was a Conservative Government. The Labour Party had been blamed for the crisis of 1931.
Which areas were most badly hit by the depression of the 1930s?
It was those areas where the old, staple industries predominated - cotton, textiles, ship-building, coal-mining etc - Lancashire, Ulster, Clydeside, Tyneside, South Wales. The Midlands and the South suffered much less. If one was in employment, one could afford the cheaper food and the 'luxuries' such as vacuum cleaners etc.
What measures did the government adopt to deal with the effects of the depression?
A return to protection - tariffs were put on goods coming into the country.
An attempt was made at Ottawa to come to a free trade agreement with the Dominions (former British colonies) but this was largely rejected.
The government brought the interest rate down to attempt to stimulate industry.
Subsidies were given to the ship-building industry.
Concerning unemployment, the government was faced with a difficult problem. After the crisis of 1931, unemployment benefit had been reduced to a low level. After a certain period on benefits a man had to submit to the hated ‘Means Test’.
A Special Areas Act was passed to try to improve the lot of certain very deprived areas but it did not achieve much. There was an attempt to move Scottish steelworkers to Corby (in the Midlands) but this simply split up families and destroyed communities.
The Social effects of long-term unemployment
There was an atmosphere of despair, humiliation and misery in certain areas like Cumbria, Lancashire, Tyneside and South Wales, which was captured in the literature of the period such as George Orwell's The Road to Wigan Pier.
The humiliation was deepened by the ‘Means Test’, which was deeply resented - it could split up families so younger members of the family moved away in order that payments would not be reduced.
The feelings of the unemployed were often vented in hunger marches, the most famous of which was the Jarrow march of 1936. Since the mid 19thc, Jarrow had been dominated by Palmer's shipyard, which had provided the town with work - at its height 10,000 men had been employed. The yard was depressed after WW1 and by 1932 the order books were empty. The shipyard closed down and 75% of the labour force was put out of work. The town's labour M.P. was moved to write a book called The Town that was Murdered and she was instrumental in organising the Jarrow march. 200 of the town's unemployed walked a distance of 291 miles to London to present a petition to parliament, hoping the situation would be improved. The march was widely reported and there was a great deal of public sympathy. The marchers drew a negative response from the government, being informed that they should return home and seek work for themselves.
How progressive was the Government in solving the Social and Economic Problems?
To begin with, it applied traditional policies such as balancing the budget, cutting expenditure and trying to protect Britain's role in the international banking world.
From 1932 on there was some attempt to get more directly involved in the economy by planning.
Long-term unemployment in depressed areas remained and it was only rearmament in 1939 that got Britain back to work.
Unemployment did fall from 2.7m in 1931 to 1.4m in 1937.
New industries continued to grow - industrial production in 1937 was 25% up on 1929.
The low bank rate stimulated a housing boom.
Imports were cheaper and this raised the standard of living for some.
Oswald Moseley was a labour M.P. and he advocated government spending to provide employment. It was a well thought-out idea, but rejected and Moseley left to form the Fascist party in Britain. Ernest Bevin also came up with an imaginative scheme involving reductions in the working week, earlier retirement etc. The most widely publicised idea was that of John Maynard Keynes, who wanted huge increases in spending on public works to generate employment. He advocated massive government intervention in the economy in terms of planning and direction. These ideas were bold and revolutionary but were not accepted in the 1930s
The 1930s had a double-edged aspect: long-term depression in the north and prosperity in the south.
Although the government was impotent in dealing with the depression, lessons were learned and Keynesian policies were adopted in the 40s, 50s and 60s.