• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

How successful was the National Government in tackling the economic problems faced from 1931-39?

Extracts from this document...


How successful was the National Government in tackling the economic problems faced from 1931-39? In order to evaluate the success of the National Government in tackling the economic problems from 1931-39, one must split these economic problems into categories, and then look at the successes and failures of the government. The categories to look at are the balancing of the budget, the gold standard, unemployment (and assistance), cheap money and regional policies. Firstly the failures of the National Government will be looked at. With the Budget, there was the almost immediate incorrect prediction that the budget was heading for a large deficit. This was an immediate failure because it was completely wrong, and because of this incorrect prediction, there was the speculative selling of the Sterling and the decrease in expenditure and 10% reduction in unemployment benefit. Spending continued to rise as unemployment continued to rise up to a peak of 2.8 million in 1932. The key point is that the government could not possibly conceivably tackle the economic problems unless they knew the correct situation; and with the predicted budget deficit of �120m, it is clear just how wrong they were when one looks at the figures, and sees that only once was the budget in deficit (1933) between 1927 and 1939, and this was a mere �6m. ...read more.


Secondly, the successes of the National Government must be looked at. The Budget was considered a failure, especially with the incorrect prediction, however the figures demonstrate that the government achieved its aim - the books had been balanced and the government was only in deficit once. Leaving the gold standard was seen as a great failure in theory for the government, however, ironically, it proved to be one of the government's greatest contributions to economic recovery. This was because a lower value for the sterling meant that exports increased and imports decreased, and so more production occurred and so unemployed decreased. Also it now became possible for Bank of England to reduce interest rates which in turn stimulated business investment. The government tried to run a budget surplus, as according to conventional economic opinion, this would supposedly have the effect of reassuring business confidence, encourage investment and recovery. This was in practise the wrong thing, but it was a success for the government as they achieved their aim and the budget was in surplus or equilibrium every year but one. Furthermore it used the policy of cheap money to keep interest rates low in order to encourage investment in new factories. This was relatively successful as it helped the recovery process and it contributed to the housing boom. ...read more.


Furthermore regional unemployment remained in some areas. However in order to address the question, one must look at the role of the National Government in tackling the economic problems and thus the recovery. In general, the given view is that the government did not play a big role in the recovery. L.J. Williams, in Britain and the World Economy 1919-70, said, 'The general verdict must be that conscious government policy contributed little to recovery'. Some of the policies undertaken by the government were successful, such as the leaving of the gold standard, introduction of protection, cheap money, regional policy, and budgetary policy. However the consequences of leaving the gold standard were not what they had aimed to do, protection had a rather minimal effect on the recovery, cheap money did help however the links between interest rates and investment are weak, regional policy again had a minor effect and with the budgetary policy - this made the depression worse. Therefore while these policies may have helped overall, they are not enough to account for the economic recovery. A more important reason was the rise in real wages of those in work, meaning people had a higher amount of money to spend. This in turn stimulated the multiplier effect meaning aggregate demand shifted outwards, thus increasing employment. However this was only a short-term process and the underlying economic problems, such as unemployment, remained. 10/05/2007 History (ISJ) Aman Janmohamed (NPS) Page 1 of 3 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Budget 2004-05 and Economic Analysis of Pakistan

    (Rs.in Million) 2003-2004 2004-2005 Classification Budget Revised Budget * EXTERNAL LOANS(A to D) 116246 110337 133105 * PROJECT LOANS (1+2) 41236 38119 52346 o Federal Government 25513 28751 33113 Ministries/Divisions 11833 18801 17123 Corporations/Autonomous Bodies 13680 9950 15990 o Provinces 15724 9368 19233 * PROGRAMME LOANS 51930 31366 54614 * EURO BONDS

  2. Governments set economic objectives - Discuss the relative importance of each of these objectives ...

    Increases in participation rates - in the UK almost all of the increase in the labour force in the foreseeable future will result from women returning to, or starting work 3. Immigration - e.g. employing migrant labour 4. Sufficient education [e.g.

  1. What ended hyperinflation in Germany, Austria and Hungary in the 1920s? Do the facts ...

    Sargent argued that this increase was minor compared with the $220 billion GNP that would be lost in the United States per one percentage point inflation reduction. However, Wicker criticized that this obscured the seriousness of the measured employment effects.

  2. Comparing the effects of immigration on GDP in Malaysia, Japan and South Africa.

    The decrease in GDP will cause low productivity due to the shortage of labour force. Therefore, employment rate will decrease and unemployment rate will increase. 5.3 South Africa Dependency Level on Foreign Workers Graph 5: Percentage Distribution of Documented Immigrants to South Africa, 2003 Source: Documented Migration 2003, Report No.

  1. Pakistan is in the grip of a serious energy crisis that is affecting all ...

    although NEPRA is a government authority to settle the tariff issues but the fact remains that once the question of WAPDA comes the authority has a very little influence. EXPLORING COAL Pakistan is blessed with large amount of the coal.

  2. What steps were taken to tackle Germany's economic problems between the Nazi takeover in ...

    The confidence of big business had been lost. Hitler was therefore upcoming with a vision of a stronger Germany, which inspired confidence in big businesses who saw this as an opportunity to prosper again. This coincided with the danger of inflations, as there was increased demand and money supply.

  1. This report will highlight how Government policy could change to try to: Increase economic ...

    * Raising mortgage interest payments to reduce homeowners' real 'effective' disposable income and their ability to spend, so as to encourage saving. * Business investment may also fall, as the cost of borrowing funds will increase. Some planned investment projects will now become unprofitable and, as a result, aggregate demand will fall.

  2. Critically examine the hypothesis that economic recovery in the 1930s was based upon the ...

    In fact, by 1934, the nominal effective sterling rate had risen significantly relative to the exchange rates of Britain's European competitors. Some argue that it was not the depreciation of sterling, however, but British trade policy, that was responsible for the trade-driven recovery.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work