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

        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. The government also used protection, and this was the most distinctive recovery policy and it did help recovery, however not by much. This was to reduce imports of manufactured goods and between 1932-33 they fell by 45% in volume. Effectively what actually happened over the period was that imports were only increasing in line with the actual economy and so tariffs just helped to slow the growth of imports. This was successful in preventing a balance of payments crisis, and so we see that tariffs were a facilitating factor as they gave the economy room to grow. By reducing foreign imports, this increased the domestic market, e.g. the car industry benefited from protection. Furthermore these tariffs were very successful as they boosted the confidence of businessmen and they were encouraged to invest. With regional policy, some measures were taken in order to redress the balanced of the regional unemployment. This was done with the ‘Special Areas Act 1934’ which meant the appointment of some commissioners to encourage new firms to set up in their areas by contributing to their rents, rates, tax bills, setting up government trading estates, encouraging foreign firms to settle in these areas and setting up retraining courses. The effectiveness of such policies will be discussed in the second paragraph, however this was a clear positive as the government actually publicly recognised this regional unemployment and it actually came up with a solution of some kind to address it. The Special Areas Act created about 50,000 jobs in the respective areas. As a result, from the mid-30s, the level of unemployment in the depressed areas did begin to fall, e.g. in North East in was 31% in 1932 but fell 15% to 17% just 4 years later. This reflected the beginnings of a recovery among the staple export industries and a continual drain of the population from depressed areas to the midlands and south. The government also had to support the unemployed – unemployment assistance. There were many problems, as discussed later, however the ‘Unemployment Act of 1934’, brought about by Neville Chamberlain, removed the issue of unemployment benefits away from the Ministry of Labour and the local public assistance committees. This was a success because in theory it was ‘above’ politics, by creating an independent Unemployment Assistance Board.

        In conclusion, the years 1932-39 were actually years of economic recovery in Britain, and in comparison to the 1920s, the 1930s were more economically prosperous. The period is often thought of one of depression, poverty and mass unemployment, this is incorrect. The depression was from 1929-31, and by 1932 the economy began to improve and was even the strongest and most sustained growth since the 1890s. GDP grew at 4% per year, industrial production grew 46% (1032-37) and unemployment fell by 50% by 1937. Therefore one could say that the economic record of the 1930s was relatively successful. However one must note that due to the depression, the figures reflect a stronger recovery than what actually took place, and by 1939 – the underlying unemployment problem still had not been solved, and there were still 1.5 million unemployed in 1939. 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.