PPT - Great Depression in Europe - IIA2

1. GREAT DEPRESSION IN THE
U.K. EUROPE AND AUSTRALIA

2. 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

3.  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.

4. 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

5.  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.

6. 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.

7. 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.

8.  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.

9. 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.

10. “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.

11. 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.

12. 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.

13.  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.

14.  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.

15.  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 couldn't 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.

16. 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.

17.  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.

18. 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.

19.  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.

20.  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.