GREAT DEPRESSION IN THEU.K. EUROPE AND AUSTRALIA
OUTLINE DEFINITION EFECTS OF THE GREAT DEPRESSION IN EUROPE ECONOMICAL SITUATION OF THE U.K. AFTER 1929 WHAT HAPPENED IN 1929 ECONOMICAL SITUATION BEFORE 1929 HOW THE U.K. GOT OUT OF THE GREAT DEPRESSION GREAT DEPRESSION ON EUROPE AND AUSTRALIA
The Great Depression was a huge economic decline that occurred in the 1930’s. The effects of the G.D.: A sharp decline in prices, profits, income and international trades. Massive unemployment. The appearance of political upheaval in several European countries, such as Germany, Italy and Russia.
After 1929 The UK was at war against Germany and avoided being indebted by paying for their own war. The British Merchant Navy was bombed by the enemy and lost 40% of their merchant fleet. The UK also lost 20% of its investments abroad
Winston Churchill (Chancellor of the Exchequer) restored the Pound Sterling to the gold standard at its prewar rate. The industries area was the most affected. The workers called to a General Strike on May 1926, and the transports area joined the strike.
1929 May: a minority Labour government was elected. They had little or just lacked from any knowledge of economy and the same goes to experience of running economy. October: there was a mayor crash on the New York’s stock.
Before 1929 1930: there were nearly 2.5 million unemployed, and the exports value had fallen in 50%. 1931: the government urged public sector wage cuts in public spending specially in benefit payments to the unemployed, to avoid a budget deficit.
1931: split of the Labour party and creation of a National Government of Conservative and Liberal mayority. September 21, 1931: the government was forced to abandon the Gold Standard. Immediately after that, the exchange rate of the pound fell from $4.86 to $3.40, easing the pressure on exporters.
Actions taken by the National Government The creation of an emergency budget, which instituted a round of cuts in public spending and wages. Public sector wages (salaries) and unemployment were cut by 10%. The income tax was raised from 22.5% to 25%. The drop of the Gold Standard.
“Recovery” The abandon of the Gold Standard led to a necessarily devaluation of the pound, making the UK competitive on world markets. The government applied several policies to reduce unemployment, such as road building, loans to shipyards, and tariffs on steel imports. From 1936, began a massive rearmament policy to face the rise of the Nazi Germany.
Consequences The defeat of Winston Churchill at the 1945 elections, because people blamed the economical policies of the pre-war government for the hardships of the 1930’s. The establishment of a tax funded National Health Service. Keynesian economic policies were enacted to create artificial economic demand to prevent unemployment. All of the above: Post-war Consensus.
Great Depression in the rest of Europe France (1931): the damage was less catastrophic than in other countries, due to the high-degree of self-sufficiency that France had. Germany: this country was hit hard by the depression. The Nazi (NSDAP) and Communist (KPD) parties rose. Hitler and the Nazi party came to power in January 1933 and initiated the paths to World War II.
Netherlands (1931-1937): suffered a deep and long depression. The late dropping of the Gold Standard contributed to the prolongation of the crisis. Spain: it began with the resignation of the Prime Minister, the ousting of King Alonso XIII and the establishment of a feeble democracy, which had many social and economic problems, that led to the general election of 1936 and the Spanish Civil War, culminating in the dictatorship of Francisco Franco.
Sweden: in Sweden, the Depression led to political and social changes, such as the first government of the Social Democrats in 1932. Italy: Persistent decline in international trade, Large fall in hours worked and production in the tradable sector, but negligible, changes in the nontradable sector, Large fall in investment, Stability of the real wages. The Uprising of Benito Mussolini and the Fascists.
Russia (URSS): while the rest of the World was struggling, the Soviet Union was prospering. Many Americans and Germans came to the USSR because they couldnt get jobs in Depression era USA or Europe. Stalin nationalized the land that the peasants worked on, their livestock and any machinery they owned, it also paid them wages, rather than them paying themselves out of money made selling their crops. Millions died in Ukraine in the 1930’s as a direct result of collectivization.
Great Depression in Australia it was very hard on Australians because this country was very dependent of the agricultural and industrial exports, and these were the most affected areas during the Depression. Unemployment reached their highest rate in this country ever (29%) in 1932. After this year (1932), the rise of the wool and meat fields allowed the slow recovery of the economy of Australia.
European economy didn’t recovered until 1944- 1945, with the end of World War II, and this War is considered a mayor consequence of the Great Depression.
Terminology Gold Standard: monetary system in which the economic unit of account is a fixed mass of gold. For example, if Venezuela fixes the value of one Bolivar in 3 bars of gold, each bar weighing 1 kg of solid gold, and this bar of gold’s price is fixed in 100 dollars, we can change our Bolivar in 100 dollars for economical transaction, if required.
Keynesian economics: school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes. Keynesian economics advocates a mixed economy — predominantly private sector, but with a significant role of government and public sector — and served as the economic model during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2008 has caused resurgence in Keynesian thought.
Exchequer: is a government department of the United Kingdom responsible for the management and collection of taxation and other government revenues. Chancellor of the Exchequer: is the title held by the British Cabinet minister who is responsible for all economic and financial matters. The current Chancellor is George Osborne, since 11 May 2010.