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8 Britain between the Wars, 1919–1939
XXX Britain between the Wars, 1919–1939 In this chapter we will examine the economic8
and social problems faced by successive governments in Britain in the inter war period. The most important of these were industrial unrest, the decline in traditional industries such as coal mining and the impact of the Great Depression.
A British newspaper from 1926 reporting on the General Strike. Caption
Useful terms
Conservative Party: Political party that strongly supported the empire and favoured little role for the government in the economy. Strongly supported by wealthier people.
Exports: Goods and services sold to other countries.
Free trade: No taxes placed on imported goods – traditional British trade policy.
General strike: When trade unions join together to stage a nationwide strike, as happened in 1926 in Britain.
Gold standard: Traditional British policy whereby money issued was backed by gold.
Imports: Goods or services bought from other countries.
Labour Party: Moderate socialist party in favour of a fairer society, greater government spending and government control of major industries, such as coal mining.
Liberal Party: Until 1918, one of the ‘big two’ in British politics. Favoured moderate reform and free trade. It went into decline after World War I as it lost votes to the Labour Party.
Introduction
In the 19th century Britain had been the world’s leading economic and political power, with a vast empire spanning the globe. By the turn of the 20th century, Britain had been overtaken economically by both the US and Germany. Nonetheless, Britain was still a major force in the world economy and London was a major financial and banking centre. Many in Britain believed that the reasons for their economic success were based on a number of factors. One was sound financial management of the nation’s finances.
This meant that government spending was funded by taxes raised and not by borrowing. Other factors included a strong currency backed by gold (called the Gold standard) and free trade.
The economic problems Britain faced in the 1920s and 1930s were to challenge these traditional views. British politics had usually been dominated by the Liberal and the Conservative parties. From 1900 the Labour Party grew in popularity and after World War I it replaced the Liberals as the main rival of the Conservatives.
Within the country there was a large difference in wealth between the richer south and poorer north. The north was the centre of traditional industries such as mining and shipbuilding, but these went into decline after World War I. Meanwhile, new industries were established in the south of the country, such as car manufacturing. As a result, unemployment and poverty were much greater in the north of the country. This difference will be reflected in the events surrounding the case study on the Jarrow March in October 1936 (see Chapter 9). There were also serious class divisions between the upper, middle and working classes. This division was reflected in the vast gulf in wealth between the rich and the poor.
?KEY CONCEPTS EXPLAINED
The Depression: A period of prolonged decline in economic growth, resulting in mass unemployment. It was caused by the Wall Street Crash of 1929. Inflation: An annual rise in prices. Rising prices can see workers looking for higher wages, which can lead to strikes.
Protectionism: The introduction of taxes (tariffs) on imports to make them more expensive. It is hoped that this will encourage domestic industry by reducing competition from imported goods. The British government imposed tariffs on goods from outside its empire in 1932, but left trade free with countries in the empire. This policy was called Imperial Preference.
?KEY QUESTION
What were the economic and social problems facing Britain in the inter-war years?
What were economic conditions like in Britain after World War I?
World War I, or the Great War, as it was known, had left over 750,000 British men killed and millions injured. The war had cost a lot of money, which the British government had borrowed, mainly from America. Repaying the loans reduced the amount of money the government had to spend on improving services and helping the poor.
The post-war election of December 1918 resulted in a large majority for the wartime coalition made up of Conservatives and Liberals led by David Lloyd George. The government immediately began the process of
returning soldiers to civilian life. This was called demobilisation. By the summer of 1919, over four million men had left the army and most found jobs. Women who had replaced the men in the factories during the war lost their jobs to the returning soldiers.
Industries that the government had taken control of during World War I, such as mining and the railways, were returned to their owners.
At first there was an economic boom in the immediate aftermath of war, but soon a number of serious economic problems developed. Controls that limited price and wage increases and the size of profits during the war were removed. This caused inflation, which reduced what workers could buy with their wages. As a result there were many strikes as workers looked for higher wages. These strikes were organised by trade unions made up of workers such as miners. The unions had grown considerably in size and importance since the early 1900s. In 1919 and 1920 there were over 2,000 strikes, including a national strike of railway workers.
In the mining industry there were particularly poor relations between the miners and the mine owners, going back to before the war. Demand for British coal was falling both at home and abroad. Matters were made worse by the end of the post-war boom in 1921, with unemployment rising to two million. The mine owners looked to cut wages, leading to a bitter industrial dispute. The owners won when the other unions would not back the miners.
Lloyd George’s government did try to improve conditions for workers. The amount of money paid in sickness and unemployment benefits was increased, as was the number of those who were eligible for these payments. However, the payments were still small and workers who lost their jobs suffered real hardship.
How did Labour come to power in 1924?
In 1922 Lloyd George was replaced by the Conservative Andrew Bonar Law, who had to resign soon after due to ill health. He was succeeded by fellow Conservative, Stanley Baldwin.
David Lloyd George (1863–1945), credited by many as being the architect of the British victory in World War I.
The Conservatives did badly in the election of December 1923, partly because of economic problems and industrial unrest in the country. The Labour Party, led by Ramsay MacDonald, formed its first ever government with Liberal support. The new government introduced a number of moderate reforms. The most important of these was the Housing Act, which helped to overcome a severe post-war shortage. In 1923 it was estimated that over 800,000 new houses were needed for lower-paid workers to rent at an affordable rate. The new Act gave financial help to local authorities to build these houses. As a result, over 500,000 new houses were built.
The moderation of the government did little to lessen the fear of socialism, especially in the Conservative Party. Many people looked to the USSR. They equated socialism with communism, revolution, bloodshed and chaos. These suspicions seemed to be confirmed when the government decided to establish diplomatic relations with the USSR. A proposed trade agreement between both countries was bitterly attacked by both the Conservatives and many newspapers.
In the autumn of 1924, matters came to a head when the government was accused of interfering in the course of justice after a charge against a left wing newspaper editor was dropped. The Liberals withdrew support from the government and a new election was called. The election was famous for the publication of the Zinoviev Letter in The Daily Mail. Almost certainly a forgery, the newspaper claimed the letter was from the leading Russian Communist Grigory Zinoviev. It set out plans for a communist revolution in Britain. It created a ‘red scare’ and helped to ensure the victory of Baldwin and the Conservatives.
Ramsay MacDonald (1866–1937) was the first Labour prime minister of Britain.
Why was there a general strike in Britain in 1926?
In 1925 the new Chancellor of the Exchequer (Minister of Finance), Winston Churchill, announced a return to the Gold Standard, which had been dropped during World War I. It was hoped that this would increase confidence in the British currency (sterling). This proved to be a disastrous decision and was strongly criticized by the leading British economist, John Maynard Keynes.
While it made the British currency stronger, it made the price of British exports more expensive in other countries. As a result, demand for British exports fell and British industry suffered, especially coal mining. In response, mine owners wanted to reduce wages and increase working hours. The unions refused to agree. In response the mine owners threatened to lock out the miners if they did not agree to their terms.
The Trades Union Congress (TUC), which represented unions from different sectors of the British economy, decided to back the miners. It threatened to call a nationwide strike of workers across all industries, known as a general strike, to support the miners. The government demanded that the TUC call off the general strike. The TUC refused and the strike began on 4 May 1926. For the only time in British history, most of the workforce went on strike in support of one particular group of workers. Throughout the country, many feared that the strike was the beginning of a communist takeover of Britain.
Military vehicles on the streets of London during the general strike. This picture reflects how seriously the government took the threat of the strike.
The government was determined not to back down. With the help of volunteers and emergency powers, food supplies and a reduced train service were maintained throughout the country. A very effective propaganda campaign was waged against the strike, including the use of the recently founded BBC radio station. The government portrayed itself as a force for moderation while the strikers were labelled as extremists. Baldwin claimed, ‘The general strike is a challenge to Parliament, and is the road to anarchy and ruin.’
It soon became clear that the strike lacked public support and the leadership of the TUC was divided. Contrary to the claims of the government, most were moderate socialists who had not intended to take on the government politically. They had also completely underestimated the determination of the government to defeat the strike. The Labour Party was unhappy about the strike, as it damaged their attempt to portray themselves as a moderate party. To make matters worse, there was also a strong possibility that the strike was illegal and the TUC could be sued for damages by the employers.
Stanley Baldwin (1867–1947) was one of the most important political figures of the inter-war period.
On 12 May, the TUC accepted defeat and called off the strike. In a gesture of goodwill, Baldwin called on employers to take back their employees without any reprisals, although this did not always happen. The miners were left to fight on without support. They held out until December, when they were forced to accept reduced wages and increased hours.
In 1927 the government passed the Trades Disputes Act, which made a general strike illegal. Unions suffered a loss of membership, but the moderates now dominated the leadership of the TUC. Industrial relations improved as both employees and employers increasingly looked for compromise in disputes.
The Conservatives were not totally opposed to social reform. The government improved old age pensions and in 1928 finally gave the vote to women on equal terms to men. Nonetheless, the Conservatives lost the 1929 election and the Labour Party under MacDonald returned to power. One of the reasons the Labour government had been elected was its promise to tackle unemployment, which had stood at one million. The new government was soon to face a far greater economic crisis – the Great Depression.
REVIEW QUESTIONS
1 Why were there so many strikes in the years immediately after World War I?
2 Why did the Labour government of 1924 last only a year?
3 Explain why there was a general strike in 1926.
4 How would you describe the government’s reaction to the strike?
5 List two effects of the general strike.
How did the British government deal with the economic problems caused by the great depression?
In 1929 the Wall Street Crash occurred in the USA and the economic effects spread worldwide. The British government soon found the economic situation worsening rapidly as exports decreased. Unemployment spread to all of the major industries. As the table below shows, unemployment rose sharply to 2.6 million by 1931.
This presented the government with a severe problem. Rising unemployment – 25% of the workforce was unemployed by 1933 – meant that the government would have to increase spending to pay unemployment benefit. This threatened the stability of the nation’s finances, as the government would spend more money than it collected in taxes, forcing it to borrow. This placed the Labour government in a dilemma.
On the one hand it was the party of the working class, who were suffering the most in the economic downturn. On the other hand, it wanted to demonstrate that it could manage the country responsibly, and the test of this was maintaining the nation’s finances.
MacDonald and his government were unsure how to tackle the economic difficulties. In 1931 a financial crash throughout Europe made matters worse and as a result the value of the pound fell considerably. In
Poverty in the 1920s.
July 1931 the May Commission set up by the government predicted economic disaster unless there were severe tax rises, cuts in public sector pay and a 20% reduction in unemployment benefit.
When MacDonald made it clear that he supported the recommendations of the report, he found that he was opposed by most of his cabinet colleagues. The report was not an acceptable solution for the Labour Party. On the advice of King George V, MacDonald then transformed his government into a national government made up of his few supporters in the Labour Party, the Conservatives and the Liberals. As a result, MacDonald was expelled from his own party but he remained as PM.
The cutbacks were implemented a month later. The election of the same year resulted in massive victory for the National government, with over 500 MPs elected – the vast majority of whom were Conservatives.
Year Number 1929
Britain: Unemployment 1929–1933
1930 1931
1932 1,200,000 1,900,000 2,600,000 2,700,000
Source: Stephen Lee, British Political History 1914–1995.
1933 2,500,000
Unlike Weimar Germany, why did the economic crisis not pose a threat to democracy In Britain?
As we have read, at the height of the crisis, nearly 25% of the British working population was unemployed. In contrast to Weimar Germany, where the Great Depression had led to the collapse of democracy, this did not happen in Britain.
A number of factors explain this:
The ease with which a National government had been formed to deal with Britain’s economic crisis pointed to the deep political stability of the British political system. There was very little support for the political extremes of fascism or communism.
The British Union of Fascists, led by the former Labour Party minister Sir Oswald Mosley, failed to make any significant impact.
The Communist Party also attracted little support, even in an era of high unemployment. It followed instructions from Moscow and annoyed many of its supporters when it cut connections with the British
Labour Party and the TUC. Though influential in a few areas, it remained outside the mainstream of
British political life, which had a tradition of peaceful and non-revolutionary politics.
A further factor was the success of the government policies in dealing with the crisis:
The government abandoned the Gold Standard, which caused the value of the pound to fall. This made it easier for exporters to sell their goods in other countries.
It replaced the traditional British policy of free trade with protectionism. It placed tariffs (taxes) on imports from outside the empire to encourage industry at home. This new government policy was called Imperial Preference.
Interest rates were cut, which made it cheaper for businesses and individuals to borrow money.
These measures helped to deal with the worst of the Depression and Britain recovered quite quickly from its economic problems. This was helped by the fact that the British economy had not performed as well as Germany or the US in the late 1920s, so it was not as severely affected as those countries were by the economic downturn.
During 1933 unemployment fell by ½ million and by 1934 the economy had recovered. The tough measures implemented in 1931 were reversed. Income tax was reduced, unemployment benefit was increased and the salaries of public servants returned to their pre-1931 levels. In 1935 Ramsay MacDonald resigned as prime minister and was replaced by Baldwin.
By now domestic issues were being overshadowed by events in Europe, with Hitler’s actions posing a threat to the peace of Europe. The prime minister from 1937, Neville Chamberlain, felt he could prevent war in Europe by negotiating with Hitler and giving in to ‘reasonable’ German demands. By 1939 it was clear that this policy, called appeasement, had failed. Britain guaranteed Poland their support in the event of a German attack. On 1 September 1939 Hitler attacked Poland, and Britain declared war on Germany two days later – World War II had begun.
