MANAGING THE ECONOMY

Recession, 1920-21

by 1921, 2 mill workers unemployed, centres of old indust such as S.Wales and Tyneside suffered depression.

Decline of Old Staples

• markets lost during the war, countires such as India (textiles) developed own industries
• new competitors emerge, notably USA, Japan and some of S.America; more cost-effective than Britain
• trad industires in UK were outdated and had suffered from under-investment= uncompetitive e.g:
• by 1937, UK produce 83,000 tons of steel per year // 210,000 in USA // 125,000 in Germany

Unemployment Worsens (The 1930s)

The world economic crisis of 1929-31 turned unemployment from serious to desperate. 1929=10% of the workforce unemployed, in 1931&32' about 22%. It was still at 13% in 38'.   70% of fam of the unemployed living below pov line

The Geddes Axe, 1921

LG, greater cuts in public expenditur; Geddes recommneded £87 mill cuts, mostly coming from military budget; but the health, welfare and housing budgets reduced, £205.8 mill to £182.1 million in 1922-23.

Return to the Gold Standard, 1924

Aim was to restore confidence in sterling but the effect was to overvalue it -by 10%- and make Brit exports too expensive. Result: trade failing even more. Britain came off the Gold Standard in 1931.

The May Report, 1931

The May Committee set up in July 31 to report on the economy forecast that, by April 1932the deficit could be as high as £120 mill. Proposed signif cuts such as reductions in the salries of public sector workers and welfare benefits. It was the  response to this report which led to the fall of the second labour government. Its successor, the Nat Gov, implemented 10% cuts in salaries across the board, including welfare.

However, reductions in income led to reductions in consumption which impeded economic recovery

Careful Reform

• The Nat Gov of the 1930s set up careful limited measures such as the Specific Areas Act. The thinking was that the econ would sort itself.
• By 1934, some prosperity was returning, esp in areas with newer industries e.g midlands and south east.
• As prices fell, those in employment enjoyed prosperity during the inter-war period.
• The Economic Depression was regional in nature; old indus worst affected.
• It took rearmament to bring signif improvements to the economy.

POST WAR SLUMP 1919-22 // econom problems, industs.

• taxes raised, gov spending cuts
• interest rates and value of the pound
• protectionism (for 'key industries)

THE WALL STREET CRASH // mass unemployment through cuts (international loans //Germany)

• Spending cuts
• leaving the gold standard // brit exports became 25% cheaper, more competitive
• rate of long term government borrowing from 5 to 3.5%, slashing debt repayments&spend +
• this 'chep money' allowd buisnesses to borrow and invest.
• most importantly, availability of cheaper mortgages = boom in house construction // almost one in 3 jobs created between 1931 &1934
• employment was boosted by rearmament in 35' 15% of the unemployed found work in old industries // America's Great Depression didn't hit Britain as hard as on continental Europe.

Centralised and managed because of challenge of war - contrast with pre-1940

- while major industries were nationalisd, with no attempt to undermine private enterprise. Britain: mixed economy of public and private enterprise.

The Wartime Economy

The government created ministries e.g. Supply and Food to control the wartime economy. Each was given extensive legal powers to intervene and if needed, take over the running of essential war industries

POST WAR AUSTERITY, 1945-51

continuing rationing and austerity to:

• pay for the cost of the war
• concentrate domestic production on exports
• pay for the development of the Welfare State

DEBTS

• £4 million with the USA // with interest, £70 mill a day
• led to a 30% decrease value of the £££

TRADE DISRUPTION SHRANK BY AS MUCH AS 66%

BRITAIN'S EXPENSIVE // MARSHALL AID; BRITAIN CONSUMING UP TO £2.7 BILL

NATIONALISATION

LABS ECONOMIC RECORD 1945-51// full emp 47&51', %+ world trade , econ 4%+ each year after 1948

Seeing a sustained economic growth lasting till the early 70s; there were signs of econ problems:

• underinvestment in industry leading to low productivity
• trade decifit , leading to a weak sterling
• inflation and worsening of industrial relations      ... there were temp improvements at times...

POST-WAR BOOM // STOP-GO ECON

GOV ECON STRATS //PLANNING ECON GROWTH

1961, Con gov set up 2 organisations for a planned econ:

• National Economic Development Council (NEDDY) // employers, unions, & gov planned growth
• the National Incomes Commission (NICKY) to regulate wage demands