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THE GREAT 1930s
DEPRESSION

      Some Thoughts
TWO BOOKS

    1) The World in Depression 1929-1939


    Charles P Kindleberger

    2) The Great Depression in Europe
...
CAUTION
    “We are in the middle of the greatest


    economic catastrophe----due almost entirely
    to economic issue...
INDEX OF INDUSTRIAL
  PRODUCTION (1929=100)

120

100

80                                                     France
     ...
Post World War One Economic
Instability
    Russian Revolution (Trade and Ideology)


    Loss of Traditional Export Mark...
Continued
    The war had altered the entire financial balance of the


    world. Huge liquidation of European investmen...
Position of the United States after World
War I: An Economic Giant but a Political
Pygmy?
    Dragged into a European


 ...
USA
    In 1928 the USA produced 42% of the world’s


    output putting most producers of raw
    materials in danger of...
World War
     (It was all eventually owed to
USA)
The 1920s a Problem Decade for
Britain
    Loss of Previous Financial and Industrial


    position
    Problems of unbal...
1920s Germany: Life is a Cabaret
  (For Some)
    Still a very young and


    unstable country
    Loss of war


    Lo...
INFLATION
    MEMORIES OF THE


    GREAT 1920s
    INFLATION WOULD
    HAUNT GERMAN
    POLICY MAKERS.
    IT HAD


   ...
But, 1920s Boom Led To The
‘Grapes of Wrath’ in the USA
    Hugely prosperous 1920s




    1930s a Deepening


    Depr...
Some Points
    Longest and most


    severe depression ever
    experienced by the
    western world.
    New York Stoc...
AND
 1932 US Manufacturing
  output had fallen to
  54% of its 1929 level
 By 1932 US

  unemployment had risen
  to betw...
IN CANADA
    Hard by the Depression. Between         REAL GROSS NATIONAL PRODUCT

    1929 and 1933, the gross national
...
Financial Crises Are Not New:
They are Part of Capitalism

    In some shape or form, prior to the


    Second World War...
AND WAS THE DEPRESSION THE
FAULT OF WALL STREET?


    A Stock Market Bubble BUT:





    Less than 8% of USA population...
Stock Markets Fall and
Recessions come and go: But!
    This one effected the “real” economy





    It lasted so long a...
Charles P Kindleberger
THE WORLD IN DEPRESSION


    “The depression was so steep and so


    long because the world eco...
Attitude of American Government
    Saw depression as a necessary


    adjustment
    It was the private sector’s job to...
And it was all Going so well.
    In the mid 1920s there was

    no visible sign of strain on
    the US Economy. Wages
...
Money Supply
        We will return to this at
the end
    From 1928 a reduction in the rate of growth

    of the money ...
Nature of a Financial Crisis
    Unwillingness to lend money


    – prefer to hold cash –
    withdraw money from banks
...
Banks
    1929-1930 over 9,000 US

    Banks Failed.
    It is all a ‘confidence trick’.


    Banks do not have money-
...
In the USA a Vicious Downward
Employment Cycle Set In
    Dust Bowl


    Under-consumption at this time.


    1) Turn ...
Complete Loss of Financial
Leadership in the USA from an
Administration Fighting Past Battles.
    Between August 1929 –
...
THE SMOOT-HAWLEY TARIFF Act of 1930 raised U.S.
tariffs to historically high levels to increase the
protection afforded fa...
THE DEPRESSION SPREADS
    Capital flows dry up and investment


    crashes
    As US loans are withdrawn or not


    ...
Confidence Quickly Leached Out of the
Unstable German Financial System

    Large American loans being recalled


    Not...
GERMANY REACTS TO PROTECT THE
VALUE OF THE CURRENCY BY USING
‘CLASSIC METHODS”
    From 1930 to 1932 the Great Depression ...
UNEMPLOYMENT SOARS
  (30% at the Peak)

6000
5000

4000

3000
                                             Thousands
2000
...
Percentage of Industrial Workers
Unemployed in 1933
 40
 35

 30

 25
 20

 15

 10

  5

  0
      USA   UK   Germany   F...
Did the 1930s Depression
Indirectly Cause World War Two?
    Mass unemployment in Germany and


    Japan hastened in rig...
FOR THE NAZI PARTY AN
ECONOMIC BONANZA
    In 1928 the Nazis were an


    unimportant part of the political
    fringe
 ...
To Germans the Nazi Party and its Policies
Cured the Economy and Staved off
Disaster
To Many in Industrial Countries
Fascism did Appear to Work
    Deficit Financing





    But did the


    unemployed v...
Secure Trade and Markets by
Empire Building?
    Japan (Manchuria)


    Italy (Africa)


    Germany (Eastern Europe)
...
BRITAIN IN THE 1920s/1930s
         (The Mirror Image)
    “The Rule of the Pygmies”


     (Mowat)

                    ...
J B Priestley (1934)
    “ An England of arterial and by-pass


    roads, filling stations and factories that
    look l...
TRADITIONAL VIEW OF 1930s
DEPRESSION
Chances of Long-Term
Unemployment in Britain
    High in old Staple Export


    Industries

    High in old industrial
...
Regional Disaster
    Out of 1,717,000 unemployed in July


    1936 – two thirds were to be found in
    Scotland, Wales...
BECOMING A DIVIDED COUNTRY
AS FASCISM STALKS EUROPE
    Even a fear of


    revolution.
    First Industrial


    revo...
Reflecting Selected Regional
Unemployment Rates

  Place     %        Place      %
Cumberland 28.7    Buckingham   6.2
  B...
But Also: The Rise of the New Consumer
Society and The Modern World
    The 1930s House with


    ‘mod cons’
    The Aut...
BUT THE MOST IMPORTANT
 ‘NEW INDUSTRY’
Two Views of Interwar Britain
The ‘Feminisation’ of Employment
(Nothing to do with Mrs. Pankhurst)
    Move from old ‘muscle

                         ...
For the unmarried young woman
the world was changing fast.
                   Courtaulds Rayon
               

         ...
A SOCIAL REVOLUTION
Changing Attitudes of these working girls

    In Britain between 1861 – 1911


    numbers of female...
Fall of Staple Trades of the First
Industrial Revolution
    COTTON The Industry of the Industrial Revolution.


    WW1 ...
RISE OF NEW INDUSTRIES?
    Automobiles (1931 Ford Dagenham)


    Civil Aviation (Heathrow Mid 1930s)


    Electrical ...
NEW HOUSING
    Same 3 Bedroom House




               1928   1936     1990


    Cost       £600   £450


    £100m
 ...
Why was the depression mild in
Britain?
    Imported food prices fell – people in work actually


    better off which he...
SOME PARTS OF THE WORLD UNDER A DIFFERENT
SYSTEM LOOKED VERY ATTRACTIVE
                      INDEX OF INDUSTRIAL PRODUCTI...
No Flight to Extremes in
Britain
    Communist Party


    Average % Vote = 5.1%


    Party Membership approx:


    1...
THE ARCHITECT OF THE NEW
BRITAIN
    NEVILLE CHAMBERLAIN




    Later to be PM and involved

    in the Munich agreemen...
Some Results of the Slump
    Huge demand for state action by a newly enfranchised

    citizenship.
    Welfare in World...
MONEY SUPPLY REVISITED
    Monetarists, including Milton Friedman and Benjamin Bernanke, stress the

    passive role tak...
MIGRANT MOTHER
REVISITED
THE GREAT 1930s
DEPRESSION

      Some Thoughts
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5 Depression Years

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5 Depression Years

  1. 1. THE GREAT 1930s DEPRESSION Some Thoughts
  2. 2. TWO BOOKS 1) The World in Depression 1929-1939  Charles P Kindleberger 2) The Great Depression in Europe  Patricia Clavin: St. Martins Press, 2000
  3. 3. CAUTION “We are in the middle of the greatest  economic catastrophe----due almost entirely to economic issues, of the modern world” J M Keynes 1931 THIS IS NOT A BLOW BY BLOW ACCOUNT OF  THE INS AND OUTS OF THE ECONOMIC AND FINANCIAL SHENANIGANS OF THE INTER- WAR PERIOD. (Thank Goodness) IF YOU FEEL UP TO IT READ THE BOOK 
  4. 4. INDEX OF INDUSTRIAL PRODUCTION (1929=100) 120 100 80 France Germany 60 UK USA 40 20 0 1929 1930 1931 1932 1933 1934 1935
  5. 5. Post World War One Economic Instability Russian Revolution (Trade and Ideology)  Loss of Traditional Export Markets (India 10% of British  Commodity Exports) In 1913 Britain, France and Germany were the source of 60% of all manufactured goods. Countries such as USA and Japan took up this trade. Many more small nationalistic states. Boundaries redrawn with  scant regard for economic viability. These new economical weak states strove to improve their finances by forcing exports and putting import tariffs in place. Increased borders also slowed down population movement. Europe now could not feed itself. The war had destroyed much  agriculture with a shortage of labour, horsepower and fertiliser. Also the loss of Russia as the ‘granary’ of Europe. Food was having to be imported-much of it on credit. Achieved 1913 levels of production by 1925
  6. 6. Continued The war had altered the entire financial balance of the  world. Huge liquidation of European investments to pay for the war, consequent loss of repatriated earnings. Pre-war USA a great importer of capital; post war a  great creditor nation. American Trade Surplus (Unlike Britain it did not reciprocate trade with primary imports) German Instability and hatred of ‘Versailles” Note:  Reparations France insisted on them to weaken Germany. France would have changed this stance if the USA had agreed to stand by France inside the League of Nations. However the US Senate would not ratify the treaty.
  7. 7. Position of the United States after World War I: An Economic Giant but a Political Pygmy? Dragged into a European  ‘Civil War’ (114,000 dead) Many immigrants came to  the USA to get away from European conditions Almost a self sufficient  country and now a huge creditor nation. Refused to take part in the  League of Nations. Isolationism won the day Not interested in taking  Britain’s position as ‘lender of last resort’.
  8. 8. USA In 1928 the USA produced 42% of the world’s  output putting most producers of raw materials in danger of a slowdown. Failure to generate enough demand to sop  up its rising production. Stagnant wages and agricultural depression led to overproduction and financial speculation. Rapidly increasing productivity added to this  problem. GNP per head grew at 0.8% 1913-1938 
  9. 9. World War (It was all eventually owed to USA)
  10. 10. The 1920s a Problem Decade for Britain Loss of Previous Financial and Industrial  position Problems of unbalanced industrial scene  Continuation of Pre-war Labour unrest (1926  General Strike) High Unemployment  Ireland  Start of lack of confidence in Empire (India)  Changing Franchise  Break-up of Liberal party and rise of Labour 
  11. 11. 1920s Germany: Life is a Cabaret (For Some) Still a very young and  unstable country Loss of war  Loss of Eastern Lands  Civil War  Threat of Communist  uprising Loss of Ruling elite  ‘Versailles  Unemployment 
  12. 12. INFLATION MEMORIES OF THE  GREAT 1920s INFLATION WOULD HAUNT GERMAN POLICY MAKERS. IT HAD  BANKRUPTED A CLASS IN GERMAN SOCIETY
  13. 13. But, 1920s Boom Led To The ‘Grapes of Wrath’ in the USA Hugely prosperous 1920s  1930s a Deepening  Depression Agricultural depression  Now can make much more  than can be consumed. Era of Mass Production Huge emphasis on raising  demand for goods and consumption
  14. 14. Some Points Longest and most  severe depression ever experienced by the western world. New York Stock  Exchange crashed October 1929 By 1933 11,000 of the  USA’s 25,000 Banks had failed. A crisis of Demand 
  15. 15. AND 1932 US Manufacturing output had fallen to 54% of its 1929 level  By 1932 US unemployment had risen to between 12 to 15 millions (20-25% 0f the workforce)  Serious Overproduction in agriculture – falling prices – rising debt
  16. 16. IN CANADA Hard by the Depression. Between REAL GROSS NATIONAL PRODUCT  1929 and 1933, the gross national Can USA Can/USA product dropped 40% (compared to 37% in the US). 1929 100 100 100 Unemployment reached 27% at the  depth of the Depression in 1933. 1930 91.6 87.7 104 Many businesses closed, as fat 1931 77 79.7 97 corporate profits of $396 million in 1929 turned into losses of $98 1932 66.5 65.9 101 million in 1933. Families saw most or all of their 1933 59.6 62 96  assets disappear, and their debts 1934 64.5 65.3 97 become heavier as prices fell. Canadian exports shrank by 50% 1935 67.1 71.5 94 from 1929 to 1933. Worst hit were areas dependent on primary 1936 67.5 76.4 88 industries such as farming, mining 1937 71.8 80 90 and logging, as prices fell and there were few alternative jobs. 1938 69.7 73.2 95 1939 72.4 76.1 95
  17. 17. Financial Crises Are Not New: They are Part of Capitalism In some shape or form, prior to the  Second World War, they occurred in: 1816, 1825, 1836, 1847, 1857, 1866,  1873, 1890, 1907, 1921, 1929, 1937.1980s and today So why was this one a disaster? 
  18. 18. AND WAS THE DEPRESSION THE FAULT OF WALL STREET? A Stock Market Bubble BUT:  Less than 8% of USA population owned  stock Stock market financed only 6% of  investment
  19. 19. Stock Markets Fall and Recessions come and go: But! This one effected the “real” economy  It lasted so long and could not be  beaten It spread outside of national boundaries  It effected political systems 
  20. 20. Charles P Kindleberger THE WORLD IN DEPRESSION “The depression was so steep and so  long because the world economic system was rendered unstable by British inability and US unwillingness to assume responsibility for stabilizing it.” What was needed was Leadership 
  21. 21. Attitude of American Government Saw depression as a necessary  adjustment It was the private sector’s job to adjust  – not the government’s Expansion by government would hinder  re-adjustment. Enterprises are gambles which  sometimes fail ‘Rottenness should be purged out of the  system
  22. 22. And it was all Going so well. In the mid 1920s there was  no visible sign of strain on the US Economy. Wages were stable, savings ample and there was excess capacity in industry. Note: growing problem of demand. By March the  economy looked like it was going into a typical ‘soft spot’ with vehicle production declining. Also: huge productivity  improvements meant that demand must accelerate to mop up unemployment.
  23. 23. Money Supply We will return to this at the end From 1928 a reduction in the rate of growth  of the money supply. Interest rates raised to curb high stock prices  ‘bubble’. Note: short recessions in 1924 and 1929 followed money restraint. Why did the stock market collapse? The sage  Ronald Reagan on a later incident – “I guess they were just too high” But: Even the 1929 low was about as high as  1928. It was government inaction that would drive them down later.
  24. 24. Nature of a Financial Crisis Unwillingness to lend money  – prefer to hold cash – withdraw money from banks Banks have to withdraw  loans to cover shortfall. Note ratio of loans to deposits Credit creation collapses  1931 European banks  indebted to American banks. Kreditanstalt bank in Austria declared bankrupt.
  25. 25. Banks 1929-1930 over 9,000 US  Banks Failed. It is all a ‘confidence trick’.  Banks do not have money-  they create credit. However if there is a ‘run on  the bank’ by depositors banks cannot cover their loans. They certainly will not make  new loans It is the role of Government  to protect depositors.
  26. 26. In the USA a Vicious Downward Employment Cycle Set In Dust Bowl  Under-consumption at this time.  1) Turn down in producing industry  2) Mass Lay-offs  3) No social security so a complete loss of  spending power. 4)Furthet loss of demand as the unemployed  now cannot purchase and consume. 5) Further factory closures  6) Further lay-offs etc. 
  27. 27. Complete Loss of Financial Leadership in the USA from an Administration Fighting Past Battles. Between August 1929 –  August 1933 the stock of money in the US economy fell by one third. Recession was turned  into a catastrophe by the Federal Reserve Board who failed to flood the market with liquidity. It could and should have  been halted with leadership. For Papers: Brunner, 
  28. 28. THE SMOOT-HAWLEY TARIFF Act of 1930 raised U.S. tariffs to historically high levels to increase the protection afforded farmers against agricultural imports. Another Disaster for the World Economy.  NOTE President Wilson vetoed tariff legislation in March 1921, saying in part:  quot;If ever there was a time when Americans had anything to fear from foreign competition, that time has passed. If we wish to have Europe settle her debts, governmental or commercial, we must be prepared to buy from her.quot; The history of commerce in America was always one of high tariffs.  BUT THE USA WAS NOW THE WORLD FINANCIAL SUPER-POWER The tariff provoked a storm of foreign retaliatory measures and stood as a  symbol of the ‘beggar-thy-neighbor’ policies of the 1930s. Such policies contributed to a drastic decline in international trade. U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. Smoot- Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations.
  29. 29. THE DEPRESSION SPREADS Capital flows dry up and investment  crashes As US loans are withdrawn or not  replaced weak European economies cannot cope. Exports to the US slump  Primary Producer prices collapse as US  imports slump. They produce more to keep up income.
  30. 30. Confidence Quickly Leached Out of the Unstable German Financial System Large American loans being recalled  Nothing to replace these loans as USA  Govt. delayed action. (Only ones that could help) Victory of Nazis in Sept. 1930 alarmed  foreign investors Run on the banks  Bank failures  Crisis of liquidity and demand 
  31. 31. GERMANY REACTS TO PROTECT THE VALUE OF THE CURRENCY BY USING ‘CLASSIC METHODS” From 1930 to 1932 the Great Depression reached its low point.  Chancellor Brüning, in line with liberal economic theory that less public spending would spur economic growth, drastically cut state expenditures, including in the social sector. He expected and accepted that the economic crisis would, for a while, deteriorate before things would improve. Among others, the Reich completely halted all public grants to the obligatory unemployment insurance (which had been introduced only in 1927), which resulted in higher contributions by the workers and fewer benefits for the unemployed. This was understandably an unpopular move on his part. The economic downturn lasted until the second half of 1932. By  this time though, the Weimar Republic had lost all credibility with the majority of Germans. While scholars greatly disagree about how Brüning's policy should be evaluated, it can safely be said that it contributed to the decline of the Republic. Whether there were alternatives at the time remains the subject of much debate.
  32. 32. UNEMPLOYMENT SOARS (30% at the Peak) 6000 5000 4000 3000 Thousands 2000 1000 0 1925 1927 1929 1931 1933 1935 1937 1939
  33. 33. Percentage of Industrial Workers Unemployed in 1933 40 35 30 25 20 15 10 5 0 USA UK Germany France Canada Australia
  34. 34. Did the 1930s Depression Indirectly Cause World War Two? Mass unemployment in Germany and  Japan hastened in right wing nationalist governments. 25 countries became dictatorships 1929-39. American loans to Germany called in  causing collapse of German industry. Problems at home can lead to a more  nationalistic foreign policy.
  35. 35. FOR THE NAZI PARTY AN ECONOMIC BONANZA In 1928 the Nazis were an  unimportant part of the political fringe Project the economic growth of  Germany from 1920 or 1924 to 1928 out through the 1930s, and it would have been a different world But after 1928, German  unemployment began to rise. And as unemployment rose, the  Nazi Party vote rose as well. The party that had won 2.9 percent of the national vote in 1924 and 2.6 percent in 1928 won 19.2 percent in the election of 1930, and 38.4 percent in the election of 1932
  36. 36. To Germans the Nazi Party and its Policies Cured the Economy and Staved off Disaster
  37. 37. To Many in Industrial Countries Fascism did Appear to Work Deficit Financing  But did the  unemployed vote Nazi? And we now know  that Hitler intended others to “pay the piper”.
  38. 38. Secure Trade and Markets by Empire Building? Japan (Manchuria)  Italy (Africa)  Germany (Eastern Europe)  Self interest prevents other countries  preventing these actions
  39. 39. BRITAIN IN THE 1920s/1930s (The Mirror Image) “The Rule of the Pygmies”  (Mowat) OR  “—it is difficult to see a feasible policy which  could have achieved appreciably better results” (Andrew Thorpe)
  40. 40. J B Priestley (1934) “ An England of arterial and by-pass  roads, filling stations and factories that look like exhibition buildings, giant cinemas and dance halls, ----- bungalows with tiny garages, Woolworth’s, motor coaches, wireless, factory girls looking like actresses, greyhound racing and dirt tracks, swimming pools”
  41. 41. TRADITIONAL VIEW OF 1930s DEPRESSION
  42. 42. Chances of Long-Term Unemployment in Britain High in old Staple Export  Industries High in old industrial  regions High if unskilled or with  non transferable skill Higher the older the  worker
  43. 43. Regional Disaster Out of 1,717,000 unemployed in July  1936 – two thirds were to be found in Scotland, Wales, Northern Ireland and Northern England. Long Term unemployed situated mainly  in these areas Juvenile unemployment situated mainly  in depressed areas
  44. 44. BECOMING A DIVIDED COUNTRY AS FASCISM STALKS EUROPE Even a fear of  revolution. First Industrial  revolution unwinding Health and Infant  Mortality Parts of the South in  boom conditions Rise of Middle Class  and suburban England
  45. 45. Reflecting Selected Regional Unemployment Rates Place % Place % Cumberland 28.7 Buckingham 6.2 Bishop 53.5 Surrey 6.7 Auckland Airdrie 42 Bletchley 3.1 Durham 34 Norfolk 15 Glamorgan 37 Halifax*
  46. 46. But Also: The Rise of the New Consumer Society and The Modern World The 1930s House with  ‘mod cons’ The Automobile (USA v  GB) Rayon (artificial silk)  The Electric Iron of all  things Electric Lighting  Aviation  Ready to Wear (The  man’s suit) Cinema and mass  entertainment
  47. 47. BUT THE MOST IMPORTANT ‘NEW INDUSTRY’
  48. 48. Two Views of Interwar Britain
  49. 49. The ‘Feminisation’ of Employment (Nothing to do with Mrs. Pankhurst) Move from old ‘muscle  100 industries’ and Domestic 90 Service 80 Cotton was the Industrial PERCENTAGE  70 Revolution !! 60 Move to new lighter industry  50 That Typing Pool  40 Move to Service and Retail 30  work 20 10 Move to London and the  south 0 21 01 11 31 51 19 19 19 19 19 Brainwork rather than  Brawn-work
  50. 50. For the unmarried young woman the world was changing fast. Courtaulds Rayon  Spinning 1929 Bobbed hair  Short Skirt  Silk Stockings  Eye brows trimmed  A new woman with  some money
  51. 51. A SOCIAL REVOLUTION Changing Attitudes of these working girls In Britain between 1861 – 1911  numbers of female clerks increased X 4. Huge rise of working women in ‘white  collar’ trades. In the 1930s looking at age group 18-  34, the numbers of single women in the 1930s were double that of the 1950s. Huge rise in disposable income 
  52. 52. Fall of Staple Trades of the First Industrial Revolution COTTON The Industry of the Industrial Revolution.  WW1 allowed new countries into export markets with lower costs. Also allowed import substitution. (1938 world trade only 66% of Lancashire exports in 1913) Huge impact on Empire. COAL 1.1 million miners in 1919. Industry under  invested and dispersed geographically A huge social problem  SHIPBUILDING Clyde-side build one third of world’s  ships in 1913 Inevitable decline in face of cheaper competitors Socially disruptive locations (Jarrow!) 
  53. 53. RISE OF NEW INDUSTRIES? Automobiles (1931 Ford Dagenham)  Civil Aviation (Heathrow Mid 1930s)  Electrical (Grid, Domestic, Industrial)  Chemicals (ICI, Plastics, Artificial Fibres)  Pharmaceutical (Boots 1931,)  Leisure (Cinema, Mass Sports, Hiking)  Retailing (Woolworth, Restaurants etc) 
  54. 54. NEW HOUSING Same 3 Bedroom House  1928 1936 1990  Cost £600 £450  £100m Interest 6% 4.5%  11% Percentage of a male teacher’s  salary needed to pay the mortgage 1928 = 10%  1936 = 8%  1990 = 43% 
  55. 55. Why was the depression mild in Britain? Imported food prices fell – people in work actually  better off which helped purchasing power. Consumption held up. (Terms of Trade) No financial or bank collapse.  Britain came off the Gold Standard  Cheap Money  Re-armament from 1938  AND MAINLY Increase benefits to allow old staple  areas to survive. 
  56. 56. SOME PARTS OF THE WORLD UNDER A DIFFERENT SYSTEM LOOKED VERY ATTRACTIVE INDEX OF INDUSTRIAL PRODUCTION – USSR (1929 = 100) 300 250 200 USSR 150 UK 100 50 0 1929 1930 1931 1932 1933 1934 1935
  57. 57. No Flight to Extremes in Britain Communist Party  Average % Vote = 5.1%  Party Membership approx:  15,000 Labour Party anti Communist  Fascists  NOTE Mosley in favour of  ‘Keynesian policies’ Party Membership at peak  40,000 Govt. always in control 
  58. 58. THE ARCHITECT OF THE NEW BRITAIN NEVILLE CHAMBERLAIN  Later to be PM and involved  in the Munich agreement with Hitler. Chamberlain decided  ‘appeasement’ was better than another World War and ruination of his economic recovery of the 1930s. (Britain had just completed  repaying her WW2 Debts)
  59. 59. Some Results of the Slump Huge demand for state action by a newly enfranchised  citizenship. Welfare in World War compared badly with the 1930s  A re-writing of history (Political and Economic)  A re-assessment of how governments should treat economic  down-turns. Election of ‘New Deal’ Governments  Strength and Mythology of the Labour Party  Realisation of Importance of Free Trade  Did WW2 spoil all the good work? 
  60. 60. MONEY SUPPLY REVISITED Monetarists, including Milton Friedman and Benjamin Bernanke, stress the  passive role taken by the American Federal Reserve System in failing to reverse the cascading bank failures. They do not argue the Federal Reserve caused the recession, but rather that different policies might have stopped the downward slide into recession. By not acting, the Federal Reserve allowed the money supply to shrink by one-third from 1930 to 1931. In A Monetary History of the United States, Friedman argued that the downward turn in the economy starting with the stock market crash would have been just another recession. The problem was that some large, public bank failures, particularly the Bank of the United States, produced panic and widespread runs on local banks, and that the Federal Reserve sat idly by while banks fell. He claimed that if it had provided emergency lending to these key banks or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, the money supply would not have fallen to the extent and at the speed that it did. With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve, especially the New York branch, which was owned and controlled by Wall Street bankers for inaction. The Federal Reserve, by design, was not controlled by the President or the Congress
  61. 61. MIGRANT MOTHER REVISITED
  62. 62. THE GREAT 1930s DEPRESSION Some Thoughts

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