The Great Depression is often referenced as the catalyst for the rise of fascism in the 1930s, with fascism ultimately leading to World War II. In the United Kingdom, despite the economic devastation being felt all over the world, Britain managed to avoid the onset of the Great Depression. Despite the country’s best efforts to stay out of it, economic woes would eventually catch up with the country. Today, historians agree that Britain did not experience an outright Great Depression, but that it passed through a period of significant economic hardship similar to the Great Depression in the early 1930s.
At the end of World War I, Britain was in deep economic turmoil. With large amounts of its national debt incurred during the war and its industrial base destroyed, the country was unable to climb out of its post-war economic slump. This worsened in late 1920s when, due to budget cuts, the government was forced to lower both import duties and income taxes. This made many of the country’s industries uncompetitive with foreign markets and resulted in massive unemployment.
Throughout the 1930s, the country’s rising debt, mounting unemployment, and deflationary prices meant the nation was in dire straits, and the government was desperate to come up with a solution. After two years of consideration, Britain adopted the gold standard once again in 1925, which aimed to control inflation. This had the unintended consequence of hurting employment as deflation quickly led to pay cuts.
In the early 1930s, economic mismanagement and international economic turmoil caused prices for materials like food and coal to suffer. In Great Britain, unemployment rates increased drastically as wages continued to be slashed and people were unable to make ends meet. By 1932, unemployment had reached 3 million, and millions more people were struggling to get by with diminishing incomes.
To push back on the growing financial woes, the British government passed the Emergency Powers Act, which established the Ministry of Labour and set out a system of welfare benefits. This allowed some of the worst affected the government assistance they needed. Although this allowed the British to withstand the plummeting economic situation, it also came at a great cost to the country’s taxpayers, which further exacerbated the already bad financial situation.
By the end of the decade, the economic situation had not improved, with unemployment remaining high and wages continually dropping. This was a stark contrast to what the British government had hoped to achieve with their economic plans. In an effort to ease the burden on taxpayers, the government began to borrow heavily from the US in order to finance its budget. This resulted in a national debt of 1.3 million pounds.
When World War II finally ended in 1945, the British economy was still in a fragile state. Despite the government’s attempts to help the economy, the country was still reeling from a series of financial missteps. It would take years of economic reform, increased taxes, and U.S. foreign aid before the UK would recover. By 1951, the government had finally managed to reduce unemployment to just below 1 million people and the economic outlook had finally begun to improve.
Effects On Population
The Great Depression and the government’s effort to prevent it from taking hold in the UK had a dramatic effect on the country’s population. Mass unemployment saw an exodus of workers from the cities and towns to the countryside and overseas. Some of these people eventually found jobs and stayed outside the UK, but the majority returned with no income or employment prospects.
The government also introduced a system in which benefits were given to families or people who met the criteria, as well as providing free healthcare and education for children from these same households. The effects of this are still felt today, as the social safety net introduced during this time still exists and is still widely used.
The government also implemented policies aimed at stimulating the economy, such as a series of import quotas on some goods. This policy was partially successful, although it did create a trade deficit that took years to fill. Furthermore, the policy had a devastating impact on the consumer, with prices for many basic goods increasing dramatically.
Economic Recovery
The recovery of the British economy was gradual but, ultimately, successful. Government spending, reforms, and foreign aid all contributed to the country’s improved economic standing over the coming decades. With the economy stabilised, the British population were able to enjoy a newfound prosperity in the post war years thanks to the government’s economic policies.
One of the most significant changes that took place as a result of the government’s recovery plan was an increase in the number of private businesses in the country. Between 1951 and 1973 the number of businesses grew from just over 160,000 to nearly 500,000. This massive increase in private enterprise had a transformative effect on the economy, providing jobs and infrastructure that had been lacking prior to the recovery.
In addition to this, the government also began to invest in infrastructure and public services, such as the National Health Service. This was also beneficial to the country in terms of economic growth, as this increased the availability of labor and decreased the cost of goods. This, combined with an increase in consumer spending, meant the country was able to dig itself out of the economic doldrums.
Britain’s Global Influence
The economic recovery that the UK experienced in the aftermath of the Great Depression also enabled Britain to expand its global presence in the post-war years. This newfound confidence and economic strength allowed the nation to once again become a leading player on the world stage and helped to strengthen its international diplomatic ties.
The UK was also able to benefit from growing trade agreements and investments made in countries in the Commonwealth, which enabled the country to continue to build its wealth and influence. By the time the country joined the European Union in 1973, it had become a major player in global politics and economics.
Economic Recession of 2008
In the 21st century, Britain has not been immune to the effects of economic hardship. In 2008, the country was in the grips of a full-blown recession, with unemployment soaring and consumer spending plummeting. The government tried to mitigate the effects with stimulus spending and tax cuts, but these could only do so much. As a result, Britain felt the economic repercussions of the Great Recession far into the past decade.
While this may have resembled the state of the British economy during the Great Depression, the UK has not yet seen a similar level of economic devastation. The UK has managed to survive the 2008 recession without entering a deflationary spiral, and, as a result, the British economy has returned to pre-recession levels and has been steadily growing since.
Britain’s Economic Strategy
The contrast between the UK’s response to the Great Depression and the response to the recession of 2008 showcases the success that the country has had in developing a long-term economic strategy. Since the Great Depression, the British government has taken a proactive approach to economic management, implementing policies that have helped to ensure consistent economic growth and stability.
This proactive approach has seen the UK’s budget deficit decrease from 7.3% in 2010 to 2.3% in 2019, unemployment fall from 7.8% to 3.9% in the same time period, and wages increase significantly. This demonstrates the efficacy of the country’s long-term economic plan and the success that it has experienced in dealing with financial shocks in the modern era.
Brexit Impact On The Economy
The effects of Brexit, of course, cannot be overlooked when discussing Britain’s current economy. The UK’s decision to leave the European Union in 2016 has had ramifications on the country’s economy, and it is still unclear what the long-term effects of this decision will be. For the most part, the British economy has continued to grow despite the uncertainties that have arisen since the referendum.
However, the UK’s decision to leave the EU has caused disruption in certain areas, including tariffs, customs duties, and immigration. While the long term affects of Brexit on the economy are yet to be fully seen, it is clear that this period of economic insecurity is not as extreme as that of the Great Depression.
Modern Impact Of The Great Depression On Britain
Today, the effects of the Great Depression can still be seen in the UK. As a direct result of the economic policies implemented in the 30s, the country has evolved into a modern state with a social welfare system, a diverse workforce, and a high level of economic prosperity. As a result of this, the general population in the UK is now much more economically secure than it has been in decades.
However, it is important to remember that if not for the government’s response to the Depression, the UK would likely be in a much different place today. While it is true that the country was able to avoid the depths of a full-blown economic crisis, the effects of the Depression remain apparent.
