In the 1930’s and 1940’s Britain was in very bad shape, both the post war Labour government and the National government of the 1930’s faced similar problems both dealing with social and economic crisis. But the situations were different. The National government during an economic crisis triggered off by the 1929 Wall Street Crash, and the worldwide economic depression that followed; the 1945 government after a terrible war, in which more civilians than ever before had been killed, and the economy of many countries in Europe had been devastated.
There had been a major downturn in the British economy since the end of the first word war. The government had not fulfilled promises of a better society with employment security and higher standards of living. There was too much reliance on the traditional heavy industries of cotton, coal mining, and ship building, which were struggling to compete in world markets because they did not have the means to adopt modern techniques. Many countries, which had relied on British goods, were now making their own. To escalate the problems in1929 a worldwide depression triggered by the Wall Street crash occurred. The Wall Street crash resulted in financial loans to foreign countries being recalled by America, which caused rising of world tariffs and a massive loss of demand for British exports.
When the second labour ministry collapsed in 1931The National Government was set up following emergency measures to address the severe economic depression that Britain fell into. It was supposed to be in the best interests of the country but was dominated by conservative members. The conservatives believed in the ideology laissez-faire. This was a policy of reduced government interference. They set up the May committee to look at the problems the country faced. The government cut spending due to the mass employment. The mass unemployment caused there to be much less income from taxtion to the government and much more expenditure on benefit. In 1931 the May report was implemented which cut employment benefit, to cope with the mass unemployment and financial crisis. Also 10% pay cuts in the public sector were made with 15% and then 20% pay cuts to teachers. To add to this unemployment benefit was then cut by 10%. But nevertheless after the invergordon mutiny (September 1931) the government having realised they could not just cut their way out of dpression were forced to abandon the gold standard. This move had been strongly avoided. This is because it would strongly reduce the value of the currency which could lead to inflation. However the move actually benefited british exports; the value of the currency dropped but this reduced the cost of british goods in other countries. Also the government raided tarrifs on foreign imports to encourage people to buy british goods. However this did not help as many other countries followed suit and did the same thing. The bitterly despised means test was introduced causing great uproar among the working class. This meant that people who had been careful with their money and hyad a little bit of savings maybe or a valuable item in their hous such as a piano were forced were given less money than some one who had spent all there money not thinking about the future. In 1934 the special areas act was passed to allow the government to provide money for factories to be built in areas of extremely high unemployment. This act also gave subsidies and loans to already established industry which was suffering. Also Bank interest rates were reduced greatly to only 2% onloans to encourage failing businesses to take loans. Agriculture was also affected by the depression. The government tried to aid agriculture by protecting them from imported food. Wheat farmers were garantied a minimum price for their crop, and this was soon extended to other types of farmers. Marketing boards were also set up for agricultural products such as milk. By 1933 economic recovery was underway but this was not due o the government policies or actions. The recovery was due to the housing boom which was stimulated by the low bank interest rates and the revival of world trade. Although unmployment had fallen greatly (1937-just over 1 millin) most of this unemployment was concentrated into the old industrial areas, where it remained a serious pronlem. In contrast the second half of the 30’s for places in the midlands and the south was a time of growing affluence; new industries were springing up such as car and electrical goods manufacturing. The number of private cars doubled, annual holidays to the seaside were common and sales of electrical appliances such as radios, electric cookers and vacuum cleaners were increasing rapidly. The north west and south east were like 2 different worlds. The final recovery of Britain came with the threat of Hitler prompting Britain to begin rearmament. The older industrial areas were rejuvenated by the need for battle ships, coal and many more essential resources needed for rearmament.
