However, there was one foreign policy issue that threatened to undermine the good work of the government. MacDonald wanted a commercial treaty with Russia and, after negotiations, it emerged that Russia was to receive a £30 million loan. In return, Britain would be compensated for assets seized in the Bolshevik revolution of 1917. MacDonald had entered into a controversial situation, and one that he could have avoided. By showing a willingness to bargain with communists in Russia, MacDonald was merely fuelling speculation that his Labour Party was secretly communist itself. This is one reason why some historians have questioned the competency of the first Labour administration.
Other historians have stressed Labour’s poor industrial relations during their first term in office, claiming that this indicates a degree of governmental incompetence. MacDonald was determined that the Labour Party would be representative of the nation as a whole, and not merely a political wing of the TUC. Therefore, MacDonald did not want to be seen as giving in to strikers or other industrial activists. In February 1924 there was a national dock strike for higher wages which ended in success for the workers, but MacDonald had been planning to use troops to unload ships had it continued. The following month he proclaimed a state of emergency during a London tram and bus strike. Some historians have argued that the fact that MacDonald was determined to stand up against the TUC and strikers suggests that his party was competent at running the country, since it was not simply pandering to the industrial movement. But others claim that MacDonald was unable to deal with the strikes sufficiently, making his government look weak and incompetent.
Some historians have argued that the cabinet of the first Labour government was chosen poorly, with many of the ministers knowing little or nothing about their departments. For example, J.H Thomas, the former railwaymen’s leader, became Colonial Secretary despite knowing very little about the Empire. It was even said that he thought “Uganda” was a term of abuse rather than an East African protectorate. Also, the fact that MacDonald felt the need to make himself Foreign Secretary as well as being Prime Minister may suggest that there were very few competent politicians in the first Labour Government. However, other historians have said that MacDonald’s cabinet was well constructed, as it enabled him to take control of foreign policy, which was his speciality, and also prevented members of his party from attempting to implement hard-line socialist policies, as it would take them “time to learn the ropes” and not interfere unduly with the work of their civil servants. Furthermore, most historians agree that Philip Snowden was a competent Chancellor of the Exchequer, as he was an orthodox financier who believed in minimising borrowing.
In September 1924 Labour’s Attorney-General decided to withdraw a prosecution against J.R. Campbell, the editor of the left-wing “Worker’s Weekly”, for urging troops not to fire on their fellow workers. The Conservatives complained that the withdrawal had been politically motivated, ie – Labour was interfering with the course of justice and perhaps even supporting extreme left-wing views. Asquith called for the appointment of a committee of enquiry. This would have taken some time to report and so would have allowed the Labour Government to survive. The Conservatives were prepared to accept this compromise, but MacDonald was not. He insisted that his government would resign if MPs voted in favour of the enquiry, as a majority did. Asquith said that the Labour Party had “committed suicide”, and many historians have argued that MacDonald showed poor leadership and incompetence during this episode. However, other historians have claimed that MacDonald knew from the beginning of Labour’s time on office that his administration would not last long, and merely wanted to show the public that Labour could govern competently, and that their fears about a socialist revolution had been unjustified.
Most historians believe that the 1924 election was a success for the Labour Party because, although they lost 40 seats, they gained a million extra votes. Many voters had clearly been impressed by Labour’s moderation in office and were immune to the “Red Scare”. Large sections of the public seemed to believe that Labour had moved into the middle ground of British politics. Therefore, many historians have argued that MacDonald had achieved his aim of presenting the Labour Party as a national party able to represent the interests of all sections of society, and his government had shown competency in their governance, thus disproving Churchill’s jibe that a Labour Party would “not be fit to govern”.
Labour won the election of 1929, giving MacDonald the chance to form his second minority government. Again, the fact that Labour did so well in the 1929 election indicates that large sections of the public had been impressed by the first Labour government’s competence. The second Labour government was stronger than the first, since Labour had already had experience in office, and also since they formed the largest single party in their second term, winning 288 seats – 28 more than the Conservatives. In foreign policy the second Labour Government, like the first, achieved definite success. This time MacDonald, now 62, did not double as Foreign Secretary. He gave this position to Arthur Henderson, even though he did not like or trust him. But MacDonald was not prepared to completely stand aside in foreign affairs, as this was his speciality, and this resulted in friction between the two men. But despite this, most historians claim that the second Labour Government’s record on foreign affairs was highly successful, and showed a great deal of governmental competence.
MacDonald was aware that naval rivalry had been harming Anglo-American relations for some time, and he himself took charge of this area of foreign policy. He visited Washington at the end of 1929, and held a naval conference in London the following year. Here agreement was reached on the relative tonnages of the British and American navies. MacDonald did allow Henderson to take control of European affairs however, and he too enjoyed considerable success in foreign policy. Diplomatic relations were resumed with the Soviet Union, and a new reparations deal, the “Young Plan” was agreed with Germany at the end of 1929. The following year it was arranged that the last allied troops occupying the Rhineland under the “Treaty of Versailles” would be removed five years ahead of schedule. Most historians agree that the second Labour Government showed a great deal of competency in foreign affairs, just as the first had.
However, the real problems came in domestic affairs, although even here Labour did have some success. For instance, the rules were changed so that an applicant for unemployment benefit no longer had to prove that he was “genuinely seeking work”. Instead, officials had to show that he had turned down a reasonable offer of work if they wished to stop his benefit. Also, the “Coal Mines Act” reduced the standard eight-hour shift by 30 minutes. Therefore, the second Labour administration did show some competence in domestic affairs. However, these achievements were overshadowed by the economic crisis.
Between 1929 and 1931, the value of British exports fell by half, while unemployment rose month after month, from 1.1 million to 2.8 million. Government revenue plummeted as fewer people were paying taxation; but government expenditure, especially on unemployment benefit, rose steeply. Most traditional thinkers believed that the country could not go on living beyond its means and that the only viable option was to cut expenditure and balance the budget, even though this would mean reducing benefit. This was the course favoured by Labour’s Chancellor, Phillip Snowden. Cambridge economist John Keynes and trade union leader Ernest Bevin advised coming off the “Gold Standard”, which had been fixed since 1925, and probably over-valued. Abandoning the “Gold Standard” would allow Sterling to float downwards and thus make British exports cheaper and so more competitive abroad; but the consensus among economists was that abandoning the “Gold Standard ” would generate runaway inflation. Labour simply hoped that the depression would cure itself. Hence when a junior minister, Sir Oswald Mosley, put forward a wide-ranging package of proposals in 1930, he was turned down flat. There seemed to be a certain satisfaction, even smugness, among leading Labour figures that the Capitalist economy was failing. MacDonald and the Labour Party followed the economic policy of “Drift”, which was hardly a policy at all. This did not help matters, and in some cases made the economic situation worse. Also, some historians have argued that the fact that Labour did not take Britain off the “Gold Standard” immediately after the 1929 slump, showed that they were economically incompetent, and unable to govern effectively in times of national crisis.
On the 31st July, the “May Report” was published. It issued an alarmist report predicting a massive budget deficit of £120 million and recommending increased taxation of £24 million and expenditure cuts of £96 million, including a 20% cut in unemployment benefit. Some historians have argued that MacDonald’s cabinet responded poorly to the “May Report”, and showed incompetence and a lack of understanding about the economic crisis. They set up a committee to consider May’s recommendations and then dispersed for the summer holidays. To many historians, such a leisurely approach at a time of economic crisis seems to suggest a degree of governmental incompetence.
Snowden later drew up a package of cuts totalling $78 million, including a 10% cut in unemployment benefit. The proposals were put to the cabinet on 19th August, in a session lasting almost 12 hours. But the whole cabinet would only agree to cuts totalling £56 million, leaving benefits intact. The TUC put its weight against cuts, and Arthur Henderson also opposed Snowden’s cuts. On 23rd August a final vote was taken – 11 members voted for cuts of £78 million and 9 (including 8 trade unionists) voted against. This showed the division within the Labour Party, and how the powerful trade unions were more concerned with the narrow interest group of the workers rather than doing what was best economically for the country as a whole. Therefore, Labour may be labelled incompetent in the way in which they handled the 1931 economic crisis, as they appeared unable to reach a consensus on what action to take.
In conclusion, it must be said that the Labour Government did, in many instances, show that it could govern Britain effectively in the years 1924-31. But Labour was very unfortunate in that it came to power during difficult circumstances. For example, the first Labour administration came to power at a time when there were vicious fears and rumours about socialism. MacDonald also had to deal with ideological divisions within his party, particularly those between the socialist groups and the trade unionists. The second administration came to power the same year as the Wall Street Crash, which was a cruel twist of fate for MacDonald, as for the first time he was in control of the single largest party in the Commons. The 1931 banking crisis was also very unfortunate for the Labour Government. Most historians argue however that, despite the immense difficulties that the Labour Party was confronted with, it actually did a good job of governing, and showed itself to have the ability of representing the nation as a whole, rather than just being a narrow-sighted pressure group for the TUC. MacDonald had fulfilled his aims of disproving the Conservative’s jibes about both socialism and the Labour Party. Labour’s successes in foreign policy as well as in economic policy showed a great deal of competence, despite the fact that most of the cabinet ministers had little or no governmental experience.
