The Inter-War Years

Problems in Britain
 The Effect of WW1
• Britain over the course of the War spent
7,852 Million.
• Economic Output fell between 1918 and
1921 by 25% and did not recover till the
end of the Depression
• Economic Output is the total value of all of
the goods and services produced in a
countries economy.
• A major cause of financial instability, which
preceded and accompanied the Great
Depression, was the debt that many European
countries had accumulated to pay for their
involvement in the Great War. This debt
destabilised many European economies as they
tried to rebuild during the 1920s.
• The war had permanently eroded Britain's
trading position in world markets through
disruptions to trade and losses of shipping
• The resulting loss of foreign exchange
earnings left the British economy more
dependent upon exports, and more
vulnerable to any downturn in world
markets
• Overseas customers for British produce
had been lost, especially for traditional
exports such as textiles, steel and coal.
 Gold Standard
• But in April 1925 the Conservative Chancellor, Winston
Churchill, on advice from the Bank of England, restored
the Pound Sterling to the gold standard at its pre-war
exchange rate of 4.86 US dollars. This made the pound
convertible to its value in gold, but at a level that made
British exports more expensive on world markets
• The economic recovery was immediately slowed
• The industrial areas of Britain spent the rest of the
1920s in recession, and these industries received little
investment or modernisation. Throughout the 1920s
unemployment stayed at a steady one million.
 Wall Street Crash 1929

• In October 1929 the Stock Market Crash in

New York heralded the Great Depression.
The ensuing American economic collapse
shook the world: World trade contracted,
prices fell and governments faced financial
crisis as the supply of American credit
dried up
 Effect of Depression in Britain
• The effects on the industrial areas of Britain
were immediate and devastating, as demand for
British products collapsed.
• By the end of 1930 unemployment had more
than doubled from 1 million to 2.5 million (20%
of the insured workforce), and exports had fallen
in value by 50%.
• The industrial areas were hardest hit, along with
the coal mining districts. London and the south-
east of England were hurt less. In 1933, 30% of
Glaswegians were unemployed due to the
severe decline in heavy industry.
• Although the overall
picture for the British
economy in the 1930s was
bleak, the effects of the
depression were uneven.
Some parts of the country,
and some industries, fared
better than others. Some
parts of the country such
as the South Wales
Valleys, experienced mass
unemployment and
poverty, while some areas
in the Home Counties did
not.
• Between 1929 and 1932 ship production
declined by 90%
• In turn affected all the supply industries such as
steel and coal
• In some towns and cities in the north east,
unemployment reached as high as 70%. Among
the worst affected towns was Jarrow, where
unemployment led to the famous Jarrow March,
in which unemployed workers marched 300
miles to London to protest against
unemployment.
• In these areas
millions of
unemployed and
their families were
left destitute, and
queuing at soup
kitchens became a
way of life
• With the mass unemployment of the 1930s, contributions
to the insurance scheme dried up, resulting in a funding
crisis.
• In August 1931, the 1911 scheme was replaced by a fully
government-funded unemployment benefit system. This
system, for the first time, paid out according to need
rather than the level of contributions. This unemployment
benefit was subject to a strict means test, and anyone
applying for unemployment pay had to have an
inspection by a government official to make sure that
they had no hidden earnings or savings, undisclosed
source(s) of income or other means of support. For
many poor people this was a humiliating experience and
was much resented .