1929-39 The Great Depression

This is commonly viewed as a period of almost complete economic failure, typified by deprivation and hunger marches. But is this an accurate picture? The Wall St crash starting on ‘Black Tuesday’ 29 October 1929 was clearly the greatest financial disaster in US history. And its effects were felt all around the globe, not least in Britain. A tsunami event, showing how interconnected the world had become. But the US crash simply dealt another blow to a British economy which had suffered for 10 years from a long term structural weakness. Wall Street’s Black Tuesday was the final straw.

1930s soup kitchen

The Depression, or Great Slump, really lasted longer than a decade in Britain. The end of World War I caused the country’s economic output to fall off a cliff, declining by 25% between 1918 and 1921. It didn’t completely recover until World War II. Some economic historians therefore argue that Britain really suffered a 20 year long depression. As the Wall Street crash hit Britain at a low ebb, with less scope to fall further, the economic decline between 1929 and 1934 was relatively less severe than in the rest of the world. And from 1936 re-armament picked up some of the slack.

Structural economic problems

So what were Britain’s structural problems? From 1921 the economy began a slow post war recovery but was knocked back in 1925 with the return to the gold standard. This saw sterling restored to a pre-war exchange rate of $4.86 to £1, an unrealistic level, making British exports about 14% less competitive on world markets. The economic recovery therefore stalled. To make things worse, inefficient bedrock industries like coal, steel and shipbuilding had not enjoyed the investment or modernisation needed to remain competitive. They sought to cut their workers’ wages as well as laying off thousands of employees.

Shipyard 1935

Governments of all political stripes - including the 1929-1931 Labour administration - stuck to ‘classical economics’. The emphasis during the period was on maintaining a balanced budget. A far better policy, only widely recognised later, would have been to run budget deficits to increase demand via domestic credit expansion. But measures like quantitative easing were then unheard of. With interest rates low, a large scale programme of public works (or infrastructure as we might now call it), would have been both cheap and effective.   

Poor global response

Nevertheless it has to be said President Roosevelt’s New Deal plan, pumping billions of dollars into the US economy, led by huge public works, only gradually lifted unemployment. It was not until World War II that the US economy fully recovered. Other countries suffered similar loss of demand, falls in exports and mass unemployment. But ‘beggar my neighbour’ policies with tariffs on overseas goods were a failure, making the problem worse. Britain cut its imperial tariffs but raised them against the US and others. Globally, many banks failed and governments faced a financial crisis as American credit dried up.

Meanwhile in Britain the 1931 ‘National’ (mainly Conservative) government cut wages and unemployment pay, further reducing purchasing power and worsening the situation. With unemployment reaching nearly 3m something had to give, and in September 1931 the Treasury was finally forced to abandon the gold standard. This effective devaluation proved an immediate success as sterling’s exchange rate fell by 25%. British exports became more competitive, even if the global market was depressed, setting the scene for gradual economic recovery.

Regional UK disparities

Yet the structural problems remained, particularly in the mining, steel and shipbuilding areas of the country. The most depressed regions were the North-East, Yorkshire and Lancashire, Scotland, Northern Ireland and South Wales, areas dominated by heavy industry. From 1929 to 1932 ship production fell by 90%, which in turn hit the coal and steel sectors. 

Jarrow marchers

The export-oriented northern textile industries were also badly hit, as was Glasgow. In some towns unemployment reached 70%, so millions were left destitute, queuing at soup kitchens. These hard times scarred the memories of those living through them and proved socially divisive.

Terrible memories as these were, they were not at all typical of the South and Midlands. Indeed, while in the early 30s unemployment rates in these areas reached over 10%, by the end of the decade they had fallen to historically low levels. Interest rates of 2% powered the economy. A suburban house building boom took place, particularly in the Home Counties. The 1936 new home construction peak was 365,000. People could buy semi-detached homes for typically only £400-£500. Many at the time joined the property class. This was a social and cultural, as much as an economic, change.

1933 new homes advertisement

On top of the building boom, new industries such as electrical goods - radios, cookers and household appliances - developed mass production methods. Nearly half the factories opened between 1932 and 1937 were in the sprawling Greater London area. The other main growth sector was motors. Those Midlands cities that had built a motor industry - Birmingham, Coventry and Oxford - prospered in the 1930s. The number of cars on British roads doubled in the decade.

1930s Hoover building, Perivale, West London 

Employment and unemployment

So if in the 1930s you had a job, and kept it, you were by and large ok. Interest rates were low, and houses were cheap. Cars and other new products might be within reach, and with low inflation, prices of goods were generally not a major problem. More females in the South were taking up work outside the home, with growth of employment from a thriving economy. But in the slump areas of the North, Wales and Scotland none of this occurred and there was little employment growth. These regions remained depressed for most of the decade.

Morris 8 from the boom motor industry

Unemployment in the 1920s may have been higher than previously thought due to varying accuracy of measurement. Unemployment nationally did not exceed 3.5m during the 30s, but crucially this was from a far lower working population - under 20m against today’s 33m. An 18% national unemployment figure was clearly severe enough, but local rates were in practice often much higher, and many families in the worst affected areas had only one wage earner. Today, of course, there might typically be several.

Summary of the British slump

So the Great Depression in Britain started at the end of World War I, not in 1929. A focus on iron and steel, mining and shipbuilding left the country too dependent on this heavy but inefficient sector. There was nowhere near the volume of investment needed to turn it around in what were often single industry towns and cities. The wrong measures were adopted to tackle the problem, but even so, Britain's worst hit areas were those in the North, South Wales and Scotland, the ones most reliant on the old heavy industries.

Some people in hard hit blackspots left home to seek work in the Midlands and Home Counties. In these regions the picture was the opposite, with a boom in housing and new industries. Government policies, in common with most other countries, were indeed misplaced. But even when more suitable moves - creating demand, re-armament, public works etc - were adopted, progress was actually slow. Indeed, as in the US, it wasn’t until World War II that the British recovery was sustained, and the economic picture generally improved.