Great Depression in the United Kingdom

The Great Depression in the United Kingdom, also known as the Great Slump, was a period of national
economic downturn in the 1930s, which had its origins in the global Great Depression. It was Britain's largest
and most profound economic depression of the 20th century. The Great Depression originated in the United
States in late 1929 and quickly spread to the world. Britain had never experienced the boom that had
characterized the U.S., Germany, Canada and Australia in the 1920s, so its effect appeared less
severe.[1] Britain's world trade fell by half (1929–33), the output of heavy industry fell by a third, employment
profits plunged in nearly all sectors. At the depth in summer 1932, registered unemployed numbered 3.5
million, and many more had only part-time employment.
Particularly hardest hit by economic problems were the industrial and mining areas in the north
of England, Scotland, Northern Ireland and Wales. Unemployment reached 70% in some areas at the start of
the 1930s (with more than 3 million out of work nationally) and many families depended entirely on payments
from local government known as the dole. Politically the Conservative Party dominated the era and
the Labour Party was seriously hurt.

Background
The Great Depression of 1929–32 broke out at a time when the United Kingdom was still far from having
recovered from the effects of the First World War. Economist Lee Ohanian showed that economic output fell
by 25% between 1918 and 1921 and did not recover until the end of the Great Depression,[2] arguing that the
United Kingdom suffered a twenty-year great depression beginning in 1918. Relative to the rest of the world,
economic output declined mildly in the UK between 1929 and 1934.
The Great Depression began in Britain, not only due to the depression occurring across the ocean but with
the failure of Austrian Credit Anstalt Bank. These accounts were frozen due to the inability for foreign
countries to pay their debts back to the bank. Foreign exchange controls were implemented at this time to
prevent war.
A major cause of financial instability, which preceded and accompanied the Great Depression, was the debt
that many European countries had accumulated to pay for their involvement in the First World War. This debt
destabilised many European economies as they tried to rebuild during the 1920s.
Britain had largely avoided this trap by financing their war effort largely through sales of foreign assets. Britain
had a net loss of £300 million of foreign investments, less than two years' investment on a pre-1914
average.[3] The largest material loss during the war was in the British Merchant Navy, which lost 40 percent of
its merchant fleet to the U-boat attacks (but this was replaced soon after the war). Along with loss of assets
through enemy action, such divestiture reduced British investments abroad by around 20% by 1918.
The resulting loss of foreign exchange earnings left the British economy more dependent upon exports, and
more vulnerable to any downturn in world markets. But the war had permanently eroded Britain's trading
position in world markets through disruptions to trade and losses of shipping. Overseas customers for British
produce had been lost, especially for traditional exports such as textiles, steel and coal.
Heavy industries which formed the bedrock of Britain's export trade (such as coalmining, shipbuilding and
steel) were heavily concentrated in certain areas of Britain, such as northern England, South Wales, Northern
Ireland and central Scotland, while the newer industries were heavily concentrated in southern and central
England. British industrial output during the 1920s ran at about 80–100%, and exports at about 80% of their
pre-war levels,[5] so there was little chance of Britain being able to amass enough capital to restore her
overseas investment position.

Gold standard
From about 1921, Britain had started a slow economic recovery from the war and the subsequent slump. But
in April 1925, the Conservative Chancellor of the Exchequer, Winston Churchill, on advice from the Bank of
England, restored the Pound Sterling to the gold standard at its prewar exchange rate of $4.86 US dollars to
one pound. This made the pound convertible to its value in gold, but at a level that made British exports more
expensive on world markets. The price of gold was over-estimated by 10–14% leading to coal and steel as an
export becoming less competitive. The economic recovery was immediately slowed. To offset the effects of
the high exchange rate, the export industries tried to cut costs by lowering workers' wages.
The industrial areas spent the rest of the 1920s in recession, and these industries received little investment
or modernisation. Throughout the 1920s, unemployment stayed at a steady one million.

Economic crisis and the Labour minority government

In May 1929, a minority Labour government headed by Ramsay MacDonald came to office
with Liberal support. This was only the second time a Labour government had been in office (they had briefly
been in office in 1924), and few of the government's members had any deep knowledge of economics or
experience of running the economy. MacDonald's Labour Party was not radical in economic thinking, and was
wedded to the orthodoxy of classical economics with its emphasis on maintaining a balanced budget at any
cost.
In October 1929, the Stock Market Crash in New York heralded the worldwide Great Depression. John
Maynard Keynes, who had not predicted the slump, said, "'There will be no serious direct consequences in
London. We find the look ahead decidedly encouraging."
Doomsayers on the left such as Sidney and Beatrice Webb, J.A. Hobson, and G.D.H. Cole repeated the dire
warnings they had been making for years about the imminent death of capitalism, only now far more people
paid attention. Starting in 1935 the Left Book Club provided a new warning every month, and built up the
credibility of Soviet-style socialism as an alternative.
The ensuing American economic collapse shook the world: World trade contracted, prices fell and
governments faced financial crisis as the supply of American credit dried up. Many countries adopted an
emergency response to the crisis by erecting trade barriers and tariffs, which worsened the crisis by further
hindering global trade. The British Empire tried to hang together by lower tariffs among the members while
raising them against the U.S. and others.[10]
The effects on the industrial areas of Britain were immediate and devastating, as demand for British products
collapsed. By the end of 1930, unemployment had more than doubled from 1 million to 2.5 million (20% of
the insured workforce), and exports had fallen in value by 50%. Due to the 50% decrease in the value of British
exports the unemployment in the United Kingdom rose to 20% (where it had previously been high, but only
reaching 12%). During this time there were little to no unemployment benefits, so this mass unemployment
lead to many of Britain’s population becoming impoverished. Government revenues contracted as national
income fell, while the cost of assisting the jobless rose. The industrial areas were hardest hit, along with
the coal mining districts. London and the south-east of England were hurt less. In 1933, 30%
of Glaswegians were unemployed due to the severe decline in heavy industry.
Under pressure from its Liberal allies as well as the Conservative opposition, the Labour government
appointed a committee to review the state of public finances. The May Report of July 1931 urged public sector
wage cuts and large cuts in public spending (notably in benefit payments ("dole") to the unemployed) to avoid
incurring a budget deficit. The sense was that the deficit was dangerous and had to be reduced; the proposal
was to meet £24 million by increased taxes on the rich, and £96 million by economies, of which £64 million
would come from unemployment relief.[11] This proposal proved deeply unpopular within the Labour Party
and among its main supporters, the trade unions, which along with several government ministers refused to
support any such measures. The Chancellor of the Exchequer, Philip Snowden, insisted that the Report's
recommendations be adopted to avoid incurring a budget deficit.
In a memorandum in January 1930, one junior government minister, Oswald Mosley, proposed that the
government should take control of banking and exports, as well as increase pensions to boost purchasing
power. When his ideas were turned down, he left Labour to form the New Party, and later the British Union
of Fascists.

Consequences of the Great Depression

Following the end of the Second World War, the majority of the British people, and particularly the working
class and returning servicemen and women, did not want a return to pre-war Conservative economic policies,
which they blamed for the hardship of the 1930s, and there was a mood for widespread social change. At
the 1945 general election, to the surprise of many observers, Winston Churchill was defeated by the Labour
Party headed by Clement Attlee.
The Labour government built up from pre-war foundations what was to become a comprehensive 'cradle-to-
grave' welfare state, and established a tax funded National Health Service, which gave treatment according
to need rather than ability to pay as the previous tax funded system had been. The Labour government also
enacted Keynesian economic policies, to create artificial economic demand leading to full employment. These
policies became known as the "post-war consensus", and were accepted by all major political parties at
different times.
There were noted disagreements about the involvement of the state with the steel industry. With one
government, it was state owned, to then be sold off with the following conservative administration only to be
then re-nationalised by the following labour government. For the most part, the post-war consensus lasted
until the late 1970s. Throughout the 1970s, it was becoming clear from all sides that radical change was
needed as a result of such economic crises as the 1973 oil shock, high inflation, industrial unrest and sterling
devaluation. But 1970s governments lacked the necessary political will, leadership and the House of Commons
majority from which to change the system until the Conservatives led by Margaret Thatcher won the 1979
general election.

Labour Party (UK)

The Labour Party is a centre-left political party in the United Kingdom. It has been described as a broad
church, bringing together an alliance of social-democratic, socialist and trade-unionist outlooks.[9] The
party's platform emphasises greater state intervention, social justice and strengthening workers' rights.
Labour is a full member of the Party of European Socialists and Progressive Alliance, and holds observer
status in the Socialist International. As of 2017, the party is considered the "largest party in Western Europe"
in terms of party membership, with more than half-a-million members.[10]
The Labour Party was founded in 1900, having grown out of the trade union movement and socialist parties
of the nineteenth century. It overtook the Liberal Party to become the main opposition to the Conservative
Party in the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and from 1929 to
1931. Labour later served in the wartime coalition from 1940 to 1945, after which it formed a majority
government under Clement Attlee until 1951. Labour was next in government from 1964 to
1970 under Harold Wilson, and from 1974 to 1979, first under Wilson and then under James Callaghan.
The Labour Party was most recently in government from 1997 to 2010 under Tony Blair and Gordon Brown,
during the "New Labour" era, first elected with a landslide majority of 179, reduced to 66 in
the 2005 election. Since leaving government the party has been led by Ed Miliband from 2010 and Jeremy
Corbyn from 2015.
Labour is currently the Official Opposition in the Parliament of the United Kingdom, having won the second-
largest number of seats in the 2017 general election. The Labour Party is currently the largest party in
the Welsh Assembly, forming the main party in the current Welsh government. The party is also the third
largest in the Scottish Parliament and sends the second most MEPs from the United Kingdom to
the European Parliament, sitting in the Socialists and Democrats Group. Whilst the party organises
in Northern Ireland, it does not contest elections there, instead supporting the Social Democratic and
Labour Party.
Second Labour government, 1929–1931
In the 1929 general election, the Labour Party became the largest in the House of Commons for the first
time, with 287 seats and 37.1% of the popular vote. However MacDonald was still reliant on Liberal support
to form a minority government. MacDonald went on to appoint Britain's first woman cabinet
minister; Margaret Bondfield, who was appointed Minister of Labour.
MacDonald's second government was in a stronger parliamentary position than his first, and in 1930 Labour
were able to pass legislation to raise unemployment pay, improve wages and conditions in the coal industry
(i.e. the issues behind the General Strike) and pass a housing act which focused on slum clearances.
The government, however, soon found itself engulfed in crisis: the Wall Street Crash of 1929 and
eventual Great Depression occurred soon after the government came to power, and the slump in global
trade hit Britain hard. By the end of 1930 unemployment had doubled to over two and a half million.[34] The
government had no effective answers to the deteriorating financial situation, and by 1931 there was much
fear that the budget was unbalanced, which was born out by the independent May Report which triggered a
confidence crisis and a run on the pound. The cabinet deadlocked over its response, with several influential
members unwilling to support the budget cuts (in particular a cut in the rate of unemployment benefit)
which were pressed by the civil service and opposition parties. Chancellor of the Exchequer Philip
Snowden refused to consider deficit spending or tariffs as alternative solutions. When a final vote was taken,
the Cabinet was split 11-9 with a minority, including many political heavyweights such as Arthur
Henderson and George Lansbury, threatening to resign rather than agree to the cuts. The unworkable split,
on 24 August 1931, made the government resign. MacDonald was encouraged by King George V to form an
all-party National Government to deal with the immediate crisis.
The financial crisis grew worse and decisive government action was needed as the leaders of both the
Conservative and Liberal Parties met with King George V, and MacDonald, at first to discuss support for the
spending cuts but later to discuss the shape of the next government. The king played the central role in
demanding a National government be formed. On 24 August, MacDonald agreed to form a National
Government composed of men from all parties with the specific aim of balancing the Budget and restoring
confidence. The new cabinet had four Labourites (who formed a "National Labour" group) who stood with
MacDonald, plus four Conservatives (led by Baldwin, Chamberlain) and two Liberals. MacDonald's moves
aroused great anger among a large majority of Labour Party activists who felt betrayed. Labour unions were
strongly opposed and the Labour Party officially repudiated the new National government. It expelled
MacDonald and his supporters and made Henderson the leader of the main Labour party. Henderson led it
into the general election on 27 October against the three-party National coalition. It was a disaster for
Labour, which was reduced to a small minority of 52 seats. The Conservative dominated National
Government, led by MacDonald won the largest landslide in British political history.
In 1931 Labour campaigned on opposition to public spending cuts, but found it difficult to defend the record
of the party's former government and the fact that most of the cuts had been agreed before it fell. Historian
Andrew Thorpe argues that Labour lost credibility by 1931 as unemployment soared, especially in coal,
textiles, shipbuilding, and steel. The working class increasingly lost confidence in the ability of Labour to
solve the most pressing problem.
The 2.5 million Irish Catholics in England and Scotland were a major factor in the Labour base in many
industrial areas. The Catholic Church had previously tolerated the Labour Party, and denied that it
represented true socialism. However, the bishops by 1930 had grown increasingly alarmed at Labour's
policies toward Communist Russia, toward birth control and especially toward funding Catholic schools.
They warned its members. The Catholic shift against Labour and in favour of the National government
played a major role in Labour's losses.
Edward VIII (1894 - 1972)
The only British sovereign to abdicate voluntarily, Edward stepped down in 1936 to marry the American
divorcee Wallis Simpson. He was king for less than a year.
Edward was born on 23 June 1894 in Richmond, Surrey, the eldest child of the duke of York. He was always
known in his family as David, one of many middle names. In 1910, Edward's father became George V and
Edward, prince of Wales. He joined the Grenadier Guards in World War One, although he was not allowed to
see active service. Throughout the 1920s, Edward undertook extensive foreign tours particularly in the
empire, representing his father. These tours, together with Edward's visits to areas of high unemployment
and deprivation in Britain during the economic depression of the early 1930s, made Edward very popular.

Edward had affairs with a number of married women in the 1920s, but then met and fell in love with Wallis
Simpson, the wife of an American businessman. In January 1936, George V died and Edward became king. In
October, Wallis Simpson was granted a divorce from her husband, and it became clear that the new king
wished to marry her, against the advice of many of his advisors who did not believe that Edward, as head of
the Church of England, should marry a divorced woman. All attempts to find a solution failed and so, on 10
December, Edward signed an instrument of abdication. The following day, after broadcasting to the nation
and the empire to explain his actions, he left for Europe. Edward's brother became George VI.

In June 1937, Edward married Wallis Simpson and the couple were given the titles of duke and duchess of
Windsor. For the next two years they lived mainly in France. On a visit to Germany in 1937, they had a
controversial meeting with Adolf Hitler. After the outbreak of war, Edward was appointed governor of the
Bahamas. He remained in this post until the end of the war, when he and the duchess returned to France.

In the remaining years of his life, the duke paid only short visits to England to attend the funerals of family
members, and there continued to be much bitterness between the duke and his family. Edward died of
throat cancer on 28 May 1972 in Paris, and was buried near Windsor.

Neville Chamberlain (1869 - 1940)

Chamberlain was British prime minister between 1937 and 1940, and is closely associated with the policy of
appeasement towards Nazi Germany.
Arthur Neville Chamberlain was born on 18 March 1869 in Birmingham into a political family. His father,
Joseph, was an influential politician of the late 19th century and Neville's older half-brother Austen held
many Conservative cabinet positions in the early 20th century and won the Nobel Peace Prize.

Chamberlain was educated in Birmingham. After a successful career in business, in 1915 he was appointed
lord mayor of Birmingham. In 1916, Lloyd George appointed him director-general of the department of
national service, but disagreements between them led Chamberlain to resign. In 1918, Chamberlain was
elected Conservative member of parliament for Ladywood in Birmingham and was rapidly promoted. He
served as both chancellor of the exchequer (1923 - 1924) and minister of health (1923, 1924 -1929, 1931).
In 1937, he succeeded Stanley Baldwin as prime minister.

Like many in Britain who had lived through World War One, Chamberlain was determined to avert another
war. His policy of appeasement towards Adolf Hitler culminated in the Munich Agreement in which Britain
and France accepted that the Czech region of the Sudetenland should be ceded to Germany. Chamberlain
left Munich believing that by appeasing Hitler he had assured 'peace for our time'. However, in March 1939
Hitler annexed the rest of the Czech lands of Bohemia and Moravia, with Slovakia becoming a puppet state
of Germany. Five months later in September 1939 Hitler's forces invaded Poland. Chamberlain responded
with a British declaration of war on Germany.
In May 1940, after the disastrous Norwegian campaign, Chamberlain resigned and Winston Churchill
became prime minister. Chamberlain served in Churchill's cabinet as lord president of the council. He died a
few weeks after he left office, on 9 November 1940.

Distribution of Industry Act 1945

The Distribution of Industry Act 1945 (8 & 9 Geo. VI c. 36) was an Act of Parliament in the United
Kingdom intended to help redevelop areas, such as south-western Scotland, which depended heavily on
specific heavy industries, and which had been hard-hit by unemployment in the inter-war period.

Contents
The Act gave the government two main powers, namely:

 To schedule "development areas" where the Government was able to build factories for rental to
private enterprise, and to manage industrial estates itself
 To require that the site for any factory above a certain size should be decided on by discussion between
the firm proposing to build it and the Board of Trade.
This plan, mostly prepared by Hugh Dalton, the President of the Board of Trade, was contentious; it was felt
by many to be encouraging a planned economy. John Sydney Wardlaw-Milne, a Conservative MP, described
it in debate as "the very antithesis of private enterprise ... bureaucracy and Socialism carried to the last
limit".

Significance
From June 1945 to January 1950, some 481 government-built and 505 private-built installations (factories,
factory extensions, etc.) were built in development areas under the Act, creating an estimated 200,000 jobs
(40% of which were taken by women); unemployment in depressed areas fell from 550,000 before the War
(July 1938) to under 100,000 in July 1950. A further 279 installations were under construction, with 356
approved but not yet under way; these were predominantly private projects.
In Scotland, projects in the main Scottish Development Area in the central belt created 60,000 jobs by the
beginning of 1950, with 15,000 elsewhere in the country; this was expected to rise to 120,000 once planned
projects had been completed. Unemployment in the region stood at 41,000 (3½%), compared to 115,000
(12%) before the War. Outside the main development area, major projects included a new industrial estate
in Dundee, diversifying local industry away from a dependence on jute, and the Inverness area becoming a
scheduled area in 1948, to develop industry in tandem with a new hydro-electric power scheme.
In Wales, most of the industrial areas in South Wales were scheduled as a development area, along with
the Wrexham region in the north. 264 installations had been built by May 1950, with 81 under construction
and 104 approved; more than half of the factories completed had been Government-funded. Twenty-six of
the factories built or planned were intended to provide special employment for those disabled through
mining work.