The 1923 elections left the Labour Party in government, with its political program, which supported increased social security measures, including a national minimum wage, railways and electricity and the imposition of higher taxation to pay for social welfare and to reduce the burden of the National Debt. The “Dole” (unemployment benefit) allowed workers to survive unemployed. It is possible, however, that the existence of the dole would just further the problems of the government, as Keynes explained, “ The existence of the dole doubtless diminishes the pressure on the individual man to accept a rate of wages or a kind of employment which is not just what he wants or what he is used to.” In brief, the dole could help further unemployment by encouraging the worker to be choosier about the work they do. This policy was not re-invented during the depression, by either the labour government or National government, so whilst the government was trying reduce expenditure, having abandoned the policy of ‘laissez-faire,’ it was increasing the difficulty of achieving this.
After the introduction of a Conservative government in 1924, following the collapse of the Labour Party minority government, the problems in Britain were made worse. In 1925 the decision to return to the gold standard, implicated by Churchill, the Chancellor of the Exchequer further damaged Britain’s economy. “By the return to the gold standard in 1925 at an unsuitable parity the Bank had set itself a problem of adjustment so difficult as to be well-nigh impossible” Keynes. Through the restoration of the gold standard, although Keynes believed this to be a very middle course, logical resolution to aid in balancing the budget deficit, he thought, “ the inevitable price of this temporary ease was the accumulation of a heavy burden of short term liabilities. “ Sooner or later, for good reasons or for bad, some loss in confidence might arise and then the insecure structure would tumble. This gave a disincentive to buying British as the pound had been devalued, and led to the growing tendency for British goods to be priced out of the market, increasing the effects of the depression in the 1930’s. However, after the Wall Street Crash in 1929, and the failure of the gold standard, Britain left it for good in 1931 and Sterling became a managed currency. This was a considerable success for the National government and showed diligence to the people, promising further adjustment until the depression was alleviated.
The defeat of the Conservative government in 1929, following much legislation because it had proved ineffective to deal with the nation’s industrial problems, meant Britons turned once more to Labour. Under this new government, the ‘laissez-faire’ free trade philosophy of the 1920s was abandoned, and the country moved closer to economic management. This was much to Keynes’ delight, “if we continue to apply the principles of economics, which was worked out on the hypothesis of laissez-faire and free competition, to a society which is rapidly abandoning these hypotheses, {something serious is going to happen}.” Although they weren’t yet following his General Theory where Keynes comprehensively challenges the classical orthodoxy, by arguing the government should run a budget deficit if the private sector wasn’t prepared to spend to boost demand, the government seemed to be headed in this general direction. These ideas are explained in Keynes’ counter cyclical demand management policies. In terms of the depression this was a move that, although certain to encounter some opposition, would later prove to be a success. However, this encouragement of government intervention tended to result in economic nationalism that, although it has negative short-term effects, in the long run would lead to the establishment of the World Bank and institutions such as the IMF, which showed worldwide recognition of the importance of economic co-operation. The new government, however, had come to power at the beginning of a worldwide depression, triggered by the Wall Street Crash, but like the Conservative government before it, could do little to remedy the situation at home.
In the 1930's things improved a little under a National government comprised of members from all parties, led by Ramsey MacDonald. The abandonment of the gold standard and the decision to let the pound find its own value against the US dollar made British export prices more competitive in world markets. Agriculture was aided by the adoption of a protective tariff and import quotas in 1931. A building boom followed the increase in population that made new health measures possible. Newer industries such as automobiles, electrical manufactures, and chemicals replaced the older, traditional ones. There were also changes made in the relationship of Britain to her colonies.
In the late 1930's Britain's foreign policy stagnated; there were too many problems to worry about at home. While domestic policies still had to find a way out of the unemployment mess, it was vainly hoped that the League of Nations would keep the peace, and while the aggressive moves by Germany, Italy and Japan may not have been totally ignored in Westminster, their implications were not fully grasped.
Overall, although some of the policies employed by the governments were unsuccessful and furthered the effects of the depression, they set up success for later governments when these would be changed. Under the circumstances the governments had acted in the way that they thought best for the country, however, most policies failed to note the long-term effects they may suffer. Therefore the British governments, during the depression, were not too successful in dealing with the depression until later years when the old policies were withdrawn and what had to be done was accepted. In this respect, the later governments were perhaps more successful at dealing with the depression.
