Evaluate the impact that the Great Depression had on the economy of Britain.
Level
A Level
Year Examined
2021
Topic
European history in the interwar years, 1919–41
👑Complete Model Essay
Evaluate the impact that the Great Depression had on the economy of Britain.
The Impact of the Great Depression on the British Economy
The Great Depression, a period of global economic downturn lasting roughly from 1929 to the late 1930s, had a significant impact on the British economy. While its effects were less severe than in other countries, such as the United States or Germany, the Depression led to widespread unemployment, regional disparity, and a shift in economic policy. This essay will evaluate the extent to which the Depression affected Britain, analysing both its negative repercussions and the government's response.
Mass Unemployment and Regional Disparity
The Depression inevitably caused a surge in unemployment across Britain. By 1933, official figures reported 3 million Britons unemployed, representing a significant portion of the estimated 30 million unemployed worldwide. This figure, however, only accounts for those receiving unemployment benefits, suggesting the actual number was likely higher. This mass unemployment, while not as severe as in other nations, resulted in a loss of dignity and widespread hardship, particularly for families reliant on a single breadwinner.
The impact of unemployment was not uniformly distributed. Industrial areas heavily reliant on staple industries, already in decline, suffered disproportionately. For instance, unemployment reached 20% in Scotland, 30% in Wales, and a staggering 36.4% in Newcastle. The two most severely affected regions were South Wales and Northeast England, where unemployment in heavy industries like coal, cotton, shipbuilding, and steel was double that of other sectors by 1938. In these areas, unemployment became a way of life. In contrast, regions less dependent on these declining industries, like London (8%) and Essex (1.6%), experienced significantly lower unemployment rates.
Government Response and Economic Policies
The Labour government under Ramsay MacDonald faced the daunting task of addressing the Depression's impact. The government's initial response involved seeking loans from New York and Paris, which necessitated expenditure cuts, including reductions in unemployment benefits. This decision proved divisive, leading to a split within the Labour Party and the formation of a National Government in 1931.
The National Government implemented several key policies in response to the crisis:
Devaluation of the Pound
In 1931, Britain abandoned the gold standard, leading to a devaluation of the pound by roughly 20%. While initially forced upon the government, this devaluation ultimately made British exports cheaper and more competitive in the global market.
Low-Interest Rates
Interest rates were slashed from 6% in 1931 to 2% in 1932, remaining low until 1939. This "cheap money" policy encouraged businesses to borrow and invest, stimulating economic activity.
Protectionism
Abandoning its traditional free trade stance, Britain adopted protectionist policies. The government imposed tariffs on imports, aiming to protect domestic industries from foreign competition.
Special Areas Act
Recognizing the need to address regional disparities, the government passed the Special Areas Act in 1934 and revised it in 1937. This act aimed to encourage both population movement out of depressed areas and the establishment of new factories in these regions by offering incentives like tax breaks. While its impact was limited, it did provide some relief in certain areas.
Evaluation and Conclusion
The Great Depression undoubtedly had a profound impact on the British economy, causing widespread unemployment and exacerbating regional inequalities. While the government's response was initially marked by division and austerity measures, it subsequently adopted a more interventionist approach, characterized by devaluation, low-interest rates, protectionism, and some attempts at regional aid. Whether these policies were directly responsible for the eventual economic recovery, or whether it was a natural cyclical rebound, remains a subject of debate. Nevertheless, the Depression forced Britain to confront its economic vulnerabilities and adapt its policies, ultimately laying the groundwork for the postwar economic order.
**Sources:**
Pearce, Robert. "The Great Depression." In European history in the interwar years, 1919–41.
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Outline
This outline will explore the impact of the Great Depression on the British economy, emphasizing the long-term consequences and the government's response.
I. Introduction
Introduce the Great Depression and its impact on Britain.
State the essay's argument: The Great Depression had a significant and lasting impact on the British economy, leading to widespread unemployment, regional disparities, and a shift in economic policies.
II. The Human Cost: Mass Unemployment
Describe the devastating effects of mass unemployment on individuals and families.
Highlight the regional disparities in unemployment, with a focus on the worst affected areas (South Wales, Northeast England).
III. The Government's Response
A. The National Government
Explain the formation of the National Government and its early austerity measures.
B. Devaluation of the Pound
Discuss the devaluation of the pound and its impact on exports and economic recovery.
C. Low-Interest Rate Policy
Explain the "cheap money" policy and its intended stimulation of private enterprise.
D. Protectionist Policies
Analyze the introduction of protectionist measures and their impact on industry.
E. The Special Areas Act
Describe the Special Areas Act and its effectiveness in addressing regional disparities.
IV. Signs of Recovery
Discuss the emergence of a consumer boom and its impact on certain sectors.
Acknowledge the ongoing depression in staple industries and the inadequacy of government measures.
Highlight the Jarrow march as a symbol of the continued suffering in depressed areas.
V. Conclusion
Reiterate the main impacts of the Great Depression on the British economy: widespread unemployment, regional disparities, and a shift towards protectionist policies.
Consider the long-term consequences of the Depression on the British economy and its role in shaping future economic policies.
Extracts from Mark Schemes
Evaluate the impact that the Great Depression had on the economy of Britain.
The depression in the British economy inevitably caused wide unemployment in the county. By 1933 world unemployment topped 30 million people of whom some 3 million were British, around 13 million were American, and 6 million were German. According to official figures, unemployment never dipped below 1 million. However, this number is only derived from those on unemployment benefit, so the actual number is likely larger. Mass unemployment was a human tragedy that led to a loss of dignity and a sense of hopelessness. Rising unemployment affected women as well as men. In many cases, the man was the sole breadwinner so that when he lost his job the whole family suffered. Women were forced to ‘make ends meet’ either by maintaining the home on a limited budget or, if they were fortunate, by seeking (often poorly paid) employment in domestic service or in retail as shop assistants. Unemployment led to poverty which affected the health, both physical and mental, of those who suffered from its effects. However, it must be noted that unemployment in Britain was not as bad as in other countries. This was because:
⭐There was a rise in real wages compared to other countries.
⭐British banking institutions also did not crash as they did in America and Europe.
⭐The decision to leave the Gold Standard immediately stopped any extreme further impact.
There was great regional disparity in the levels of unemployment around the country. The worse unemployment was in industrial areas which were overly-dependent on the staple industries which were already in a terminal, structural decline. For example, the unemployment rate was Scotland 20%, Wales 30%, and Newcastle 36.4%. The two worst affected areas of Britain were in south Wales and in the north-east of England. By 1938 the unemployment rate in each of the four basic heavy industries of coal, cotton, shipbuilding, and steel was twice what it was in other forms of employment. In these areas, and in these industries, unemployment became a way of life. Whereas in places which were not dependent on these old industries, the unemployment rate remained very low with London 8% and Essex 1.6%.
Britain had suffered in the late 1920s early 1930s due to lasting effects of the First World War and the crash of the stock market in the USA. In Britain ''around eight million people, including dependents, lived on the dole in the worst months of the depression''.(Robert Pearce).The Labour government under MacDonald split in the summer of 1931 over the issue of making more expenditure cuts (including cuts to unemployment benefit) in order to secure loans from New York and Paris. The division in the Cabinet meant that MacDonald and Snowden were unable to secure acceptance for their proposals. MacDonald went to resign but after the King's instance he instead agreed to head a National Government formed on the 24th August. The proposed Expenditure Cuts that split the last government were implemented. (10% reduction in unemployment benefit and government-controlled salaries).
Devaluation of the pound:
Britain came off the gold standard in 1931 and the pound fell in value by about 20%. Devaluing the pound was forced on the government but they soon came to realize the benefits of having a 'weaker' pound. British exports were cheaper and therefore more competitive.
Low-Interest Rate 'Cheap Money':
Interest rates were lowered from 6% in 1931 to 2% the following year and stayed at this level until 1939. This encouraged the expansion of private enterprise because the business community was more willing to borrow money when interest rates and thus repayments were low.
Protection:
Throughout the 1920s politicians had debated whether Britain should abandon free trade and introduce protection. Now a policy was implemented. After criticism, the government began to focus on helping struggling areas. The Special Areas Act was passed in 1935 then revised later tried to encourage people to move out of depressed areas then tries to encourage firms to establish factories in the distressed areas by offering remission of rates, rent, and income tax. In theory, this did little to help the areas who were really struggling however in some circumstances it helped create more jobs. Unemployment remained at around 2.5 million from August 1931 to January 1933 then began to fall steadily it stood at 1.6 million after July 1936.
Consumer boom:
Cars, radios, TVs, and other household goods were purchased rapidly the number of cars on the roads doubled in the 1930s and the number of radios trebled. The cost of living had fallen by almost 13% in the 30s and there was a Housing Boom, but the staple industries of coal, textiles, iron, and steel remained as depressed in the 30s as they were in the 20s. The government made no real attempt to help the worst areas, the Special Areas Act achieved very little and was heavily criticized. In 1936 the Jarrow march took place. Men marched from Jarrow all the way to London to protest the worsening conditions in Jarrow. Economic recovery was slow and in general terms, very slight. Some would claim that economic recovery occurred not because of government action but the 'natural' recovery of the trade cycle was responsible.