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.

1850-1875 Peak Victorian Britain

The period after 1850 is often regarded as a golden age in British history, when the country forged ahead at home and internationally. With the restrictive mercantilist policy abandoned, Britain’s industrial and commercial lead saw a thriving economy and booming global trade. In what historian Eric Hobsbawm called ‘The Age of Capital’ Britain dominated the international stage first with manufactured goods, and then through its control of international banking, insurance and shipping. It seemed nothing would interrupt this happy progress.

Great Exhibition, London 1851

Trade and capital

Indeed the 20 years from London’s Great Exhibition in 1851 to 1870, saw a strong economic performance. Apart from a sustained boom in agriculture, production of manufactured goods rose rapidly. In mid-century Britain’s industrial output counted for nearly half the world’s capacity. An astonishing figure, but it could not continue, even with Australia’s Victoria gold rush paying off Britain’s overseas debt.   

Australian gold diggings - Edwin Stocqueler 1855

The key statistic is share of world trade. In 1870 Britain’s slice of the global market was about 24%. From 1875 it started falling, though of course trade volumes continued to rise rapidly. In 1860 Britain ranked as easily the world’s largest trading nation. But from the 1870s it was losing its dominant position, mainly to Germany and the United States, countries industrialising quickly with new products and new efficient production techniques. Britain still outstripped both these nations in trade - and even more if trade-related services are included - but its relative position, if unnoticed at the time, had started an inexorable decline. By 1910 Britain’s share of world trade had fallen to 17%.

This coincided with the ‘Long Depression’ from 1873 to 1896 which followed the boom years. Falling profits and price deflation were accompanied by more control of industry by the banks. Competitors like the USA and newly united Germany applied tariffs while British trade was largely free of them. These and other countries were able to build their industries and export markets protected by tariff walls. The US population passed that of Britain and Ireland in the 1850s (at 27m), and its growth was little affected later by the huge number (600,000), of Civil War deaths.  

Overseas earnings

Britain countered the home depression through exports to the Empire, but also increasingly via income from overseas investments, plus insurance and commercial services. In 1880 more than 50% of world shipping was British owned. By 1875 an estimated 35% of global capital investment was being raised in London. In 1913 this had risen to 50%. And with domestic manufacturing from the 1870s onwards being increasingly less profitable, finance was directed overseas, not always to the Empire. Indeed, Latin America was a favourite location.

Despite the Long Depression, and from 1875 a declining share of world trade, average living standards generally rose in Britain. This was partly due to a sustained fall in prices as the economy benefited from a rising population - it was operating on a bigger scale and more efficiently. And also partly that while British overseas trade was running a deficit, the trade gap was bridged through invisible earnings and international investment income via interest and dividends.

The exports illusion

English merchant ship 'John Wood' approaching Bombay 1850

So the misperceptions? The image of Britain as the ‘workshop of the world’ lingered longer than the reality. From the late 19^th century other countries’ manufacturing industries, especially in the chemicals and electrical spheres, were catching up fast. Also the idea that Britain’s main market was the Empire, and especially India, needs correcting. By the 1880s only a third of British trade was conducted with the whole of the Empire. The country’s biggest market, then as now, was Europe.

The Suez Canal was built, by the French, in the 1860s. But Britain rather shortsightedly opposed it at first. Strangely, it was felt to be a threat to British global trade. Needess to say opinions soon changed as sailing times on the routes to India and the Far East were cut. Indeed in 1875 Disraeli's government bought Egypt's shares in the Canal, giving Britain much more economic and political leverage in that part of the world.

But belief in a self-confident spirit of buccaneering enterprise, capturing global markets with manufactured goods, was illusory. Education in Britain was still classics based, while competitor nations were concentrating more on science and technology. Chemistry, physics and engineering were subjects slow to be taken up by British universities. Graduates were not expected to pursue these disciplines, as they were destined to become administrators in the Empire. The spirit of the amateur was much admired. AP Thornton once described Kennedy's Latin Primer, a standard public school text for much of the 19th and early 20th centuries, as 'one of the winding sheets of empire'.

The country was increasingly relying on overseas investment income. And the rising commercial middle class often preferred to use the money they'd made to buy country estates and ape the nobility. It's a little appreciated fact that most of Britain’s hereditary titles date not from ages past, but from the third quarter of the 19^th century.

Political and social change

William Ewart Gladstone, 1861

In mid-century politics Tories became Conservatives and Whigs Liberals. 1850-1900 was shared in government equally between them. The Gladstone v Disraeli rivalry still holds the public imagination, though it was only a small piece of the political tapestry. Disraeli was prime minister twice, for under seven years in total, while Gladstone was prime minister four times, for over 12 years. By Gladstone’s last stint in 1892 Disraeli had been dead for 11 years. In terms of service, Lord Salisbury’s was the longest. His three terms totalled nearly 14 years, though he was ill for some of the last leg.

Disraeli 1852

Several social and cultural Victorian myths also need dispelling. Up to 90% of women worked outside the home in industrial, commercial, agricultural or service jobs. Yet the false idea of the stay at home wife has stuck. Only a few upper and upper middle class wives were in this category, another example of public perception framed by novelists, often with a mission. The same applies to living conditions. While they were often in many areas still very bad, steady improvements meant that 70% of people did not live in slums.    

Media distortions

Another impression still around today is that the Victorian age was riddled with crime. It was not. The rise of popular print media, especially the ‘penny dreadfuls’, meant a concentration on salacious and/or violent crimes to feed a growing public appetite. Accordingly the press continually distorted and exaggerated events to keep their readership happy. These contemporary sources are hardly balanced or fair minded. The crime rate actually fell over the period. But this is something from which today’s world, as we know, is still not immune.

'Penny dreadfuls' - illustration from Sweeney Todd

Civil marriage was re-introduced in 1836. Before then many people in Britain - perhaps a majority - had not bothered to register via a religious route. Besides, few had property and inheritance to worry about. Church attendance steadily fell, but with the rise in wealth and living standards, formally tying the knot became more popular. The ‘lie back and think of England’ quip actually belongs to the 20^th century. Britain was not full of opium dens (there were two). Matthew Sweet’s interesting work on Victorian myths is a prime source here. Finally didn’t Queen Victoria say after some colonial setback ‘We are not amused’? There is no evidence for this. It first appeared in 1919.