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‘The economic policies of British governments between 1918-1939 were a complete failure’. How far do you
agree with this view?
The economy of Britain during the 1920s and 1930s suffered from high unemployment, recession
and balance of payments crisis so it could be argued that economic policies were a complete
failure. However, this essay will argue that although there were many failures, there were also
successes and it cannot be said that the economic policies were a complete failure.
Some historians would argue that the economic policies of British governments 1918-39 were a
complete failure. For example, Lloyd George’s post war government’s economic policies could be
viewed as a complete failure. Lloyd George believed there was little choice but to let the economy
recover on its own and he was reluctant to increase taxes as this would annoy middle class voters
and he did not want to get voted out of power. His government instead introduced cuts known as
the Geddes Axe and overall the economy performed badly whilst Lloyd George was Prime
Minister. Unemployment remained stubbornly high throughout the 1920s and on average it was
10% of the working population.
Another reason why some historians would argue that the economic policies of successive British
governments were a complete failure was because of the disastrous errors of Churchill as Stanley
Baldwin’s Chancellor of the Exchequer. Churchill decided to re-join the Gold Standard and this
had the effect of making British exports more expensive and meant that for much of the 1920s
Britain’s economy suffered from a balance of payments deficit.
Economic policies can also be considered a complete failure because when MacDonald became
Prime Minister in 1929 he and his Chancellor of the Exchequer introduced cuts which failed to
stimulate the economy and MacDonald’s economic policies have been criticised as economically
orthodox. Economists of the time such as Keynes were arguing governments should have been
spending money to stimulate the economy but MacDonald and Snowden did the opposite
introducing cuts to unemployment benefits that saw him leave the Labour Party and become the
figurehead of the National Government.
Another reason why economic policies can be seen as a complete failure are because Britain
experienced recessions in 1920-21 and 1929-34. Unemployment remained high throughout the
1920s and Britain’s traditional industries suffered from a lack of investment and the country was
economically depressed in regions such as the North East. The government seemed to have little
answer to these problems and so it can be argued that their economic policies were a complete
failure.
However, it could be argued that the economic policies of successive governments were not a
complete failure. Immediately following World War One, because of wartime restrictions and
rationing, both individuals and businesses had been unable to spend and had accumulated
considerable savings in cash and bonds. Throughout 1919 consumers and businesses spent their
savings. Individual’s bought luxury items that had been rationed during the war such as coffee,
soap, clothes and cigarettes. This meant the economy was doing well and so this can hardly be
considered a complete failure.
Another reason why it can be argued that economic policies were not a complete failure is
because although there were periods of recession there were also periods of further recovery. For
example, although there were recessions there were also periods of recovery: 1921-22 and 193439. In the mid-1920s consumer demand gradually increased and unemployment declined across
much of Britain, however in declining industrial areas such as South Wales and Tyneside, it stayed
persistently high. Between 1934 and 1939 rearmament and new light industries in the south east
and the Midlands developed and this means that the economic policies of successive British
governments cannot be considered a complete failure.
A further reason why it can be argued the economic policies of successive British governments
were not a complete failure is because of the economic policies of the National Government. In
1929, Britain was hit by the Wall Street Crash and the Great Depression but surely the fact that
the Depression did not last as long as in other countries is evidence that the economic policies of
the National Government were not a complete failure. The National Government left the Gold
Standard which helped British exports become cheaper and improved Britain’s balance of
payments deficit. The National Government also introduced the Special Areas Act of 1935, which
provided £2 million in aid to depressed areas in Wales, Scotland and the North East (this was
extended by the Special Areas Amendment Act of 1937). The National Government also tried to
help the traditional industries through various measures to rationalize and reorganize struggling
industries: the Iron and Steel Federation in 1934, the Shipping Act of 1935, and the Cotton
Industry Reorganisation Act of 1936 all helped these traditional industries to recover. Moreover,
the Unemployment Act of 1934, which set up the National Unemployment Assistance Board,
aimed to help unemployed workers retrain and move to areas of employment. The economic
statistics demonstrate that the economic policies of the National Government were not a complete
failure. On average between 1932 and 1937 real incomes rose by 19%; industrial production rose
by 46%; GNP rose by 23%; exports increased by 28%; unemployment fell from 17% to 8.5%.
Economic growth averaged 4% a year between 1934 and 1937.
In conclusion, were the economic policies of British governments 1918-39 a complete failure? This
essay has argued that there is evidence to support both sides of the argument. Some historians
would argue that economic policies were a complete failure. Lloyd George believed the economy
should recover on its own and was anxious not to annoy middle class voters with tax increases;
Churchill (as Baldwin’s Chancellor) re-joined the Gold Standard; MacDonald has been criticised
for introducing cuts and having little else to offer, and there were periods of recession such as
1920-21 and 1929-34. However, it is not true to suggest that the economic policies were a
complete failure. This is because although there were failures there were also successes and
many of these are associated with the National Government. The National Government left the
Gold Standard and helped the economy recover by introducing measures to reorganise the
traditional industries. The National Government introduced the Special Areas Act to help
depressed areas and also introduced the Unemployment Act of 1934. Therefore it cannot be said
that economic policies were a complete failure.