The Impact of the Great Depression on the British Economy

**Evaluate the impact that the Great Depression had on the economy of Britain.**

The depression in the British economy inevitably caused wide unemployment in the county. By 1933 world unemployment topped 30 million people of whom some 3 million were British, around 13 million were American, and 6 million were German. According to official figures, unemployment never dipped below 1 million. However, this number is only derived from those on unemployment benefit, so the actual number is likely larger. Mass unemployment was a human tragedy that led to a loss of dignity and a sense of hopelessness. Rising unemployment affected women as well as men. In many cases, the man was the sole breadwinner so that when he lost his job the whole family suffered. Women were forced to ‘make ends meet’ either by maintaining the home on a limited budget or, if they were fortunate, by seeking (often poorly paid) employment in domestic service or in retail as shop assistants. Unemployment led to poverty which affected the health, both physical and mental, of those who suffered from its effects. However, it must be noted that unemployment in Britain was not as bad as in other countries. This was because:

* There was a rise in real wages compared to other countries.
* British banking institutions also did not crash as they did in America and Europe.
* The decision to leave the Gold Standard immediately stopped any extreme further impact.

There was great regional disparity in the levels of unemployment around the country. The worse unemployment was in industrial areas which were overly-dependent on the staple industries which were already in a terminal, structural decline. For example, the unemployment rate was Scotland 20%, Wales 30%, and Newcastle 36.4%. The two worst affected areas of Britain were in south Wales and in the north-east of England. By 1938 the unemployment rate in each of the four basic heavy industries of coal, cotton, shipbuilding, and steel was twice what it was in other forms of employment. In these areas, and in these industries, unemployment became a way of life. Whereas in places which were not dependent on these old industries, the unemployment rate remained very low with London 8% and Essex 1.6%.

Britain had suffered in the late 1920s early 1930s due to lasting effects of the First World War and the crash of the stock market in the USA. In Britain ''around eight million people, including dependents, lived on the dole in the worst months of the depression''.(Robert Pearce).The Labour government under MacDonald split in the summer of 1931 over the issue of making more expenditure cuts (including cuts to unemployment benefit) in order to secure loans from New York and Paris. The division in the Cabinet meant that MacDonald and Snowden were unable to secure acceptance for their proposals. MacDonald went to resign but after the King's instance he instead agreed to head a National Government formed on the 24th August. The proposed Expenditure Cuts that split the last government were implemented. (10% reduction in unemployment benefit and government-controlled salaries).

**Devaluation of the pound:** Britain came off the gold standard in 1931 and the pound fell in value by about 20%. Devaluing the pound was forced on the government but they soon came to realize the benefits of having a 'weaker' pound. British exports were cheaper and therefore more competitive. A policy of Low-Interest Rate 'Cheap Money' as it was called. Interest rates were lowered from 6% in 1931 to 2% the following year and stayed at this level until 1939. This encouraged the expansion of private enterprise because the business community was more willing to borrow money when interest rates and thus repayments were low.

**Protection:** Throughout the 1920s politicians had debated whether Britain should abandon free trade and introduce protection. Now a policy was implemented. After criticism, the government began to focus on helping struggling areas. The Special Areas Act was passed in 1935 then revised later tried to encourage people to move out of depressed areas then tries to encourage firms to establish factories in the distressed areas by offering remission of rates, rent, and income tax. In theory, this did little to help the areas who were really struggling however in some circumstances it helped create more jobs. Unemployment remained at around 2.5 million from August 1931 to January 1933 then began to fall steadily it stood at 1.6 million after July 1936.

**Consumer boom:** Cars, radios, TVs, and other household goods were purchased rapidly the number of cars on the roads doubled in the 1930s and the number of radios trebled. The cost of living had fallen by almost 13% in the 30s and there was a Housing Boom, but the staple industries of coal, textiles, iron, and steel remained as depressed in the 30s as they were in the 20s. The government made no real attempt to help the worst areas, the Special Areas Act achieved very little and was heavily criticized. In 1936 the Jarrow march took place. Men marched from Jarrow all the way to London to protest the worsening conditions in Jarrow. Economic recovery was slow and in general terms, very slight. Some would claim that economic recovery occurred not because of government action but the 'natural' recovery of the trade cycle was responsible.