- Created by: campbellmonster
- Created on: 30-11-19 21:35
Initial effects of the Oct 1929 Wall Street Crash
-World wide economic problems and depression
-Any government would've struggle to survive under this pressure. First ever financial crash of it's time, in comparison to Italy and Germany, affect was minor.
-Exports dropped 50% from 1929-1931
-Unemployment benefit costs went up from £12m in 1928 to £125m by 1932
-Unemployment rose from 1m in 1929 to 2.5 million in 1930
Lab Gov initial response
-Overall can be characterised as uncertain and divided. Oswald Mosley (of later fascist fame) had memorandum in May 1930 -> tariffs (reduce imports), government loans for public works, raising of pensions to encourage early retirement (borrowed ideas from Cons and Maynard Keynes)
-Snowden (Chancellor) orthodox economist, cutting spending to BALANCE THE BUDGET (retrenchment or deflation)
-By 1931 crisis so bad RMD sets up 15 man think tank, includes Keynes, asks for Massive Gov spending to kick start econ - "Reflation".
-RMD does neither and hopes for the best (appoints 2 commissons which both recommended cuts in spending of up to 20% of budget) (Lab MPs obs not keen)
Developments by July 1931
-Decision needed to be made-> Banks in europe (Geneva) collapsed required being bailed out by British banks, investors worried so looked like british banking sector might collapse
-"Run on the Pound" -> by July 1/3rd GB Gold Reserves had been used paying off foreign investors who had withdrawn their money from british banks
-By August 1st 1931 British gold reserves fell to £133m, needed foreign loans to prop up banking system
-Committee reports came out in - eg May Committee said 20% cut in benefits, JMK called it "the most foolish document I have ever read"
-Snowden managed to secure agreement for a huge loan from NewYork banks to keep britain on the gold standard- but with the condition of a 10% cut on spending. Only other option was to take britain 'off gold' and 'float' the pound, but RMD and Snowden opposed.
Fall of Labour Gov Aug 1931
-RMD agreed on cuts of £78m-> but Cabinet split on issue 11-9. RMD still trying to government moderately
-Henderson (foreign secretary), key member opposed, saw it as a betrayal of Labour values
-RMD resigned as PM... Gov ended
Overall Judgement of 2nd Lab Gov
-Minority Government at time of an unparalleled depression, needed majority to take any real action.
-Main criticism: no attempt to solve / ease effects of depressions. didnt consider tariffs (cons) or radical spending ideas (Maynard Keynes).
-Party had once again shown that it was fit to govern + moderately
-Foreign policy was a moderate success
Did RMD betray the labour party?
-Aug 1931, agrees to become PM of all-party coalition therefore betrays party and working class?
-Corrupted by the establishmeent and fallen victim to the aristocratic embrace
-RMD and Snowden described their colleagues ideas as "Bolshevism run mad."
-RMD DID NOT consult his colleagues before choosing to become PM Coalition
-RMD urged by King George V to stay on
-Coalitions necessary in times of emergency
-RMD felt that Labour cabinet members who voted against cuts were betraying nation
-Accepting role of coalition PM = Lab a national party not TU focused
-NG was supposed to be temporary