It could be argued that Britain had a decisive role to play in the fight against the Great Depression. While it is uncertain if all of Britain’s methods were entirely successful in curbing the economic crisis, they still provide an interesting analysis of the strategies used by policy makers at a time of intense economic uncertainty.
One of Britain’s immediate responses to the Wall Street Crash of 1929 was to introduce tariff’s as a means of protecting the home market from foreign competition. This was seen as a way of allowing the home industries to have a time to readjust and recover the losses without the added pressure of external competition. Such tariffs were designed to be gradual, however, increasing the number of products which faced tariffs. Some experts have argued that this increased protectionism made the effects of the Great depression in both Britain and abroad even worse, though others have commended the UK for protecting at least its own economy from further turmoil.
Britain also adopted a highly monetized approach to government intervention. This meant the government sought to use the Bank of England to influence the financial system in such a way as to ease the effects of the depression. This intervention commonly took the form of introducing low interest rates on bonds taken up by the Bank of England and in issuing a reserve currency which could be used to make loans to other countries.
Other initiatives included attempting to revive industry through investment into area’s such as transport and coal mining. In addition, the government increased the level of taxation to attempt to cover the losses caused by the depression. This was designed to provide a short-term solution while industry could slowly build up the strength and production levels again.
All of this paints an impressive picture of resilience and determination in the face of crisis. Yet there is another side to this; a darker picture with serious consequences which still show their effects today. This is the fact that these measures had a serious impact on the poverty and hardship experienced by many workers due to the increased taxation, leading to famines and increased levels of unemployment. This was particularly severe in areas with strong industry such as the North East and Scotland.
It is clear that Britain used a wide range of measures in an attempt to combat the Great Depression. Ultimately, while many of these measures may have helped to ease the pain of the crisis slightly, the fact remains that it simply cannot be argued that they had any form of long-lasting success. This was seen in the fact that Britain’s economy did not recover until well into the 1940’s.
Governmental Regulation and Interference
One of the key decisions made by the British government during the Great Depression was to increase their level of regulatory and industrial interference in the economy. This meant attempting to steady the flow of the economic sector by attempting to control the vast majority of the markets, including areas such as the banking and investment sectors. This interference was seen as a means of preventing the market from over-expanding, allowing the market to recover gradually with as few losses as possible.
While many welcomed the decision, some experts argued against the over-regulation of the market, claiming it would reduce the effectiveness and resiliency of the market in the long term. This had a particular impact on the banking and financial sector, as tighter controls on lending by the government were seen as damaging both consumers and businesses alike due to the reduction in available capital.
In addition, the government increased their use of taxation, especially higher levels, as a way of collecting the money needed to help recover the economy. Such measures were seen as necessary by some, while others argued that it would lead to further hardships for those on the lower end of the economic scale. Unfortunately, this argument did turn out to be true, as unemployment and poverty rose to unprecedented levels in areas of Britain.
Expansion of Governmental Spending
In an attempt to fight the Great Depression, the British government sought to increase their levels of spending by introducing various strategies. This included expanding the public sector, focussing on areas such as transport and coal mining. These investments were seen as a way of stimulating the economy, providing jobs for those who had been left unemployed due to the Great Depression.
The government also provided grants and incentives for businesses to encourage them to produce more, as well as offering financial support to those in greatest need. This was seen as a way of easing the hardship caused by the Great Depression, while at the same time providing the much-needed economic stimulus to try and bring back some stability to the markets.
The UK government was also keen to foster stronger links with foreign countries in order to encourage further exchange of goods and services. This was seen as a way of accessing capital markets which may have otherwise been inaccessible due to the troubles back home. It is interesting to note that, in spite of the unfavorable economic situation of the time, this strategy proved quite successful in boosting Britain’s economic position, possibly to a greater degree than the other means adopted.
The Gold Standard
Perhaps the most daring decision taken by British policy makers during the Great Depression was to remain on the gold standard. This was a bold move, as the gold standard put a limitation on the ability of the government to increase the amount of money available to the markets. Providing capital was seen as of paramount importance in attempts to curb the economic crisis, yet the gold standard was seen as an increasingly outdated and ineffective way of dealing with the problem. This was to prove a fatal mistake, as Britain’s recovery was doomed due to the lack of liquidity.
Yet while the decision to remain on the gold standard was seen as unwise by many, there were those who argued for the decision, claiming that it provided a buffer against external factors and was necessary in order to preserve the monetary integrity of the nation. Ultimately, those against the gold standard were proven right as Britain’s recovery lagged behind others who abandoned the standard.
The Labour Party’s Response
The UK’s Labour Party was in power when the Great Depression hit, and therefore they were in a position to take the lead when it came to responding to the crisis. This saw the Labour Party focus more heavily on social welfare policies than to economic reforms, with the aim of providing assistance to those worst affected by the economic hardship. Such policies included introducing a free health service, building public housing and providing relief payments to the unemployed.
In addition, the Labour Party sought to revive industry and create jobs through investment in areas such as transport and coal mining. This was seen as a way of stimulating the economy and getting people back into work. However, while these measures may have helped to ease the pain of the Great Depression, ultimately they proved highly ineffective in solving the core problems of the crisis.
Impact and Legacy
The methods and strategies used by the British government to fight the Great Depression had a large impact and left a lasting legacy. As mentioned previously, the policies had a severe impact on the lower and middle classes of society, leading to poverty, unemployment and famines. This was particularly felt in areas which had formed a bedrock of the industry such as the North East, where declines in the industrial sector led to a fall in wages and living conditions.
However, the legacy of the Great Depression was not all negative, especially in terms of the economic strategies adopted. For example, the government’s intervention in the economy and the increased levels of taxation and regulation which came with it provided a template for the future of the economy, paving the way for the eventual recovery from the crisis.
The outlook of the Great Depression was not always rosy, and it is clear that the various measures adopted by the British government had mixed successes. Yet, regardless of the ultimate outcome, it is evident that the UK government made a valiant attempt to steer the country through a difficult economic period.
