The despair of poverty is hard to imagine for
those who have never suffered it. A decade after
the conclusion of the Great War the era of the
Great Depression began, reducing millions of
people in the advanced Western world to the
levels of grinding poverty suffered throughout the
twentieth century by humanity in Asia, South
America and Africa. The peoples living in the
empires of the West now fell even below the
barest subsistence levels as the price they could
obtain for their raw materials dropped precipitously.
Their economies were dependent on the
demand of the West. Whatever befell the industrialised
West, the effects on the poor of what we
now call the Third World were even more catastrophic.
At the time only one country appeared
immune – the Soviet Union, where industrial production
increased. It was a persuasive argument
to some that communism provided the only solution
to the periodic booms and depressions that
bedevilled the trade cycle. But in the Soviet
Union, Stalin’s state planning actually imposed
hardships as great as, and greater than, anything
happening in the West.
The effect of the depression was aggravated by
its occurring before the trauma of the Great War
had been overcome. It is the shortness of time
that elapsed between one shock and the next that
gives the years from 1919 to 1939 their particular
characteristic. These years came to be viewed
as a ‘continuing world crisis’. The industrial
depression that began in 1929 had been preceded
by an agricultural depression dating from 1921,
not really overcome in the mid-1920s, and then
rapidly deepening after 1926. The ‘boom years’
of industrial expansion of the 1920s, thus, were
not as uniformly prosperous as often supposed.
For all its startling psychological repercussions,
the Wall Street Crash on ‘black Tuesday’, 29
October 1929, did not cause the depression. The
Western world, despite its attempts to return to
the ‘normality’ of the pre-1914 years, was unable
to do so after the Great War. But each nation
sought to return to pre-war practices, some like
Britain to the gold standard, sound money and
balanced budgets, with disastrous results.
The new problem of Allied war debts and
German reparations did necessitate a fresh
approach and international discussion and cooperation.
During the 1920s, before 1931 when all
these payments came practically to a halt, the
international settlements followed a circular route
of German reparations payments constantly scaled
down, making possible the payment of Allied
debts to the US also scaled down, while American
loans to Germany, exceeding German reparations
payments, completed the circle. This was not very
sensible financially, but the actual sums involved,
though not the principal cause of the breakdown
of world trade, contributed to the disruption of
international finance by the end of the decade.
Study of the economic development of each
Western nation reveals how far the depression of
the 1930s had causes going back even before the
First World War. Britain, for example, continued
to rely on textile, coal and shipbuilding industries
of the first industrial revolution, and was shifting
only slowly, too slowly, to industries of the more
advanced technology of the twentieth century.
This lack of progress caused continuous and
heavy unemployment even during the 1920s,
when only in one year did unemployment drop
below 10 per cent.
The US provided a contrast, with the massive
growth of new consumer industries such as the
automobile industry and with unemployment at
around only 4 per cent. The problem here was
that these new industries did not produce necessities
and the decision not to buy a new car
because of a lack of faith in the future could
produce a sudden reversal of fortunes in manufacturing
industry. But it was not until 1931 that
unemployment became the serious problem that
it had been in Britain throughout the 1920s. The
French economy was different again, with half the
population engaged in agriculture. But post-war
reconstruction favoured the rise of new industries
and by 1930 France had emerged strengthened,
even requiring foreign labour. The effect of the
worldwide depression was stagnation throughout
the 1930s.
In Germany the impact of the world economic
crisis was conditioned by the particular experiences
of Germans since the lost war. Having once
experienced hyperinflation, which made money
worthless, the government was determined to preserve
sound money regardless of the cost in terms
of unemployment. Agricultural prosperity had suffered
a serious setback some two years before in
1929, while German industry boomed. The later
1920s saw the affirmation of large industrial cartels
and the introduction of new technology.
Germany not only financed this modernisation by
attracting loans from the US but also paid off
reparations from loans. Other American loans
financed unproductive municipal projects such as
town halls and swimming baths. Much of this
loan capital could be recalled at short notice and
when this happened in 1929 the economy,
already affected by declining international markets,
threatened to spin out of control. The largest
Western percentage of unemployed was
Germany’s in 1932 with 30 per cent out of work.
The state of the US economy was the common
denominator in the world economic crisis. The
American economy had assumed such importance
that the other Western economies depended on
its good health. There is thus general agreement
that the origins of great worldwide depression are
to be sought in the US. With the American
economy running down, the prices of raw materials
slumped; markets all over the world contracted
as a result. When the US reduced the flow
of capital abroad, and in 1930 created a prohibitive
tariff which prevented the European powers
from selling their goods in the US, the rest of the
world could no longer cope.
There were weaknesses in the economic structure
of European nations that had already made
themselves felt, as in Britain, before 1929. The
American recession turned these problems into a
severe crisis. The depression proved to be not just
a short downturn in the business cycle, as had been
expected. The bad year from 1929 to 1930 was
followed by an even worse year in 1931. When
1932 brought no relief, hope of an automatic
upturn collapsed. World economic conditions did
improve from the low point of 1931–2 but only
gradually. The world depression continued down
to the Second World War, which, like the First,
transformed economic activity and absorbed the
unemployed to feed the war machine. Such a long
and deep depression was a new experience and
governments were at a loss as to how best to
handle the economic problems of their day. In
Germany from 1931 to 1933, they made matters
worse.
The depression also provided a test for the different
forms of government by which the peoples
of the world were ruled. They were inevitably
judged by ordinary people according to how
effective they perceived them to be in finding
remedies for the ills of depression, unemployment
foremost among them. In people’s minds, the
communist, the various fascist and Nazi ‘models’,
the conduct of the democratic governments, as
well as colonial rule, could in these circumstances
be compared.
Any government and political system that happened
to exist during the early depression years
was bound to be blamed for the widespread
misery. But those authoritarian governments that
were already firmly established by 1929 were in a
better position to maintain themselves by brute
force and to manipulate the attitudes of the
masses through propaganda. Popular discontent
could no longer threaten the Soviet system of
communist rule. The Western colonial empires
were under firm military control. Mussolini stifled
protest: strikes were prohibited by law; the Italian
state set low rates of interest; and the Institute for
Industrial Reconstruction was created in January
1933 to assist Italian banks, which in turn led to
the state assuming direct responsibility for a range
of industry from shipping to steel. Nevertheless,
unemployment in Italy remained stubbornly high
in the early 1930s and the standard of living
persistently low. Yet there was no open criticism
as Mussolini advertised himself, photographed
stripped to the waist with spade in hand and
working on public works projects.
Hitler came to power during the most serious
period of depression and he quickly consolidated
dictatorial power. Nevertheless, it was his evident
success in reducing unemployment in Germany
from 6 million in October 1933 to just over 4
million a year later and 2.8 million in 1935 that
so increased national popular support for him.
Rearmament and army expansion after 1936 virtually
eliminated unemployment in Germany.
Whatever evils came to be associated with Hitler’s
rule in the eyes of the people, they gave Hitler
credit for ‘curing’ unemployment. Hitler recognised
that he could turn the prevailing despair to
his advantage if he could infuse a spirit of action,
convey concern for the plight of the unemployed
and actually put people to work. His success was
not instantaneous; it was achieved, moreover, by
forcibly destroying the independence of labour. It
was achieved, too, in the face of traditional
banking advice. Hitler listened to the Keynesiantype
economists in Germany who had met with
rejection by Brüning. Hjalmar Schacht, who
returned as president of the Reichsbank, created
large paper credits. Money was spent on new
superhighways – the Autobahnen, which had military
value – on expanding rearmament and on
support for agriculture. The Nazi economy was
tightly controlled by the state in order to achieve
self-sufficiency in agriculture – and as far as possible
in industry – without replacing the actual
private ownership of industry or the land.
At the price of liberty, the Nazi economy from
1933 to 1939 was successful in maintaining stable
prices, full employment, eventually, and a modest
rise in the standard of living of the working man.
Rearmament was not allowed to cut standards of
living drastically. Hitler was anxious to win and
retain German support by providing economic
and social benefits, and used violence only against
open opponents from the beginning and against
the Jews from 1938. The authoritarian models’
apparent good points, which were proclaimed by
their own captive press, radio and film, impressed
the unemployed in the democracies more than
the bad. But the German economy by 1939 was
heading for the rocks, which only a successful war
could evade. Democratic governments requiring
the cooperation of parliament looked less effective
and more cumbersome by comparison.
Poincaré’s government of national union had
restored French finances to health in 1926. The
elections of 1928 had given the right a great
victory, but his retirement a year later, due to
illness and exhaustion, marked the end of an era
in which France had attempted to reassert its
standing as a great power in Europe, and coincided
also with the time when the depression
became more serious worldwide. French governments
after Poincaré lost their stability once
more: between 1929 and 1934 they lasted an
average of three or four months. Albert Lebrun,
elected president in 1932, remained until the fall
of France in 1940, but he was a colourless politician
who gave no lead. At first, the strength of
France’s financial position seemed to make it
immune, alone among the Western nations, from
the debacle following the crash in October 1929
in the US. Throughout 1930 unemployment
remained low. But in the autumn of 1931 the
slump and unemployment finally spread to
France. French governments now sought by
financial ‘orthodoxy’ to meet the crisis, simultaneously
cutting pensions, salaries and public
expenditure. The cessation of German reparation
payments in 1931, coupled with the Americans’
continuing insistence on repayment of debts,
compounded the difficulty. Despite devaluing
once in 1928, successive governments until
1936 added to France’s problems by refusing to
devalue an overvalued franc which made the task
of exporting increasingly hard. During the worst
years from 1933 to 1934 the survival of the
Republic itself seemed very doubtful. Big business
and the extreme right admired the fascist model
as an authoritarian solution behind which they
could operate profitably. Among politicians of the
right, Pierre Laval and André Tardieu as well as
Marshal Pétain, the hero of Verdun, inclined
towards some sort of authoritarian resolution for
the troubles and divisions of the Republic.
The unpopular measures of successive French
governments in a parliamentary Chamber of predominantly
centre and left-wing parties, as well as
fear of communism, played into the hands of the
right. The Socialists led by Léon Blum would
not join any coalition government that included
the ‘bourgeois’ Radical-Socialists, whose main
support came from the conservative peasantry and
the middle classes and whose aims were not in the
least socialist. The communists under Maurice
Thorez meanwhile followed the Moscow line of
the Comintern, which ordered them to regard the
Democratic Socialist Party as their greatest
enemy. So governments were formed mainly by
the Radical parliamentary leaders seeking alignments
to the right. The impact of the depression
gravely weakened and divided the left, with the
communists until 1934 pursuing an apparently
insane tactic of undermining the stability of the
Republic that might well have helped fascism to
power in France as it had done earlier in
Germany. The realisation of the folly of the
Moscow course dawned on Thorez and in 1934
he became a leading and successful advocate of
changing it.
The years 1933 and 1934 also saw the growth
in France of paramilitary fascist ‘leagues’ whose
bands of rowdies brawled in the streets of Paris
like Nazi storm troopers. There was the royalist
Action Française, the oldest of the leagues
founded before the First World War. Another was
the Jeunesses Patriotes composed mainly of students.
François Coty, the perfume millionaire,
financed the Solidarité Française and a fascist
journal, L’Ami du peuple. The most important of
these leagues was the Croix de Feu, made up of
war veterans led by Colonel de la Rocque, whose
main aim was the negative one of overthrowing
the parliamentary Republic. Royalism, extreme
Catholicism, anti-Semitism, other movements
inspired by Mussolini’s and Hitler’s examples, all
had little in common except a determination to
undermine the Republic. With this aim the politically
opposite Communist Party at first also
agreed, and the communists were even ready to
work in parallel with fascists to achieve this object.
The leagues were supported by numerous vicious
Parisian newspapers which were constantly stirring
up popular hatred against the legislators.
At the worst possible moment, with the government
discredited by its instability and inept
handling of the depression, with financial hardship
deepening and polarising class antagonism,
the politicians were smeared with the taint of corruption
by what became known as the Stavisky
scandal. Stavisky was a swindler who had through
the years floated a number of bonds and shares
that defrauded the investors. Although arrested,
he had enjoyed a strange immunity from trial, in
the meantime making more money from shady
deals. In January 1934 he shot himself, and the
police, who could have saved his life, allowed him
to die. It was rumoured that his death had
shielded highly placed politicians and the police
from the revelation of their involvement in his
crimes and in these allegations there was undoubtedly
some truth. All the anti-parliamentary
forces seized on the scandal to make a concerted
effort to overthrow not only the government but
the Republic. The members of the various leagues
were summoned in their thousands onto the
streets of Paris to oust the politicians. The climax
was reached during the night of 6 February 1934
when street battles raged in Paris; the police and
Garde Mobile narrowly gaining the upper hand.
Hundreds of demonstrators were wounded,
some seriously, and it is surprising that the death
toll – some eighteen people – was relatively small.
The supposedly strong government under the
Radical prime minister Édouard Daladier turned
out to be weak after all and promptly resigned.
The Republic was saved by a few of its resolute
defenders among the Paris police by luck and,
above all, by the total disunity of the leaders of
the right. There was no Hitler or even Mussolini
among them.
Weak French governments, which could find
no solution to the political, social and economic
problems, succeeded each other during the next
two years. The elections of May 1936, however,
seemed to herald a turning point: the parties of
the left – the Socialists and Communists –
together with the Radicals had by then formed an
electoral alliance, the Popular Front. This extraordinary
change had been made possible by the
volte-face of the French Communist Party. In
June 1934 the Communists and Socialists had
overcome their mutual suspicions to join in a
United Front to fight fascism. The reasons
for the change have fascinated historians, for
the Communists had regarded the Democratic
Socialists, or ‘social fascists’ as they called them,
as their worst enemies. They accused them of
leading the proletariat away from the true goal of
communist revolution under the guise of representing
the working people’s class interests. The
fascists, on the other hand, could be recognised
as the enemy of the proletariat and were but a
passing phenomenon associated with the later
stages of capitalism before its inevitable demise.
Outside the Soviet Union, some of the communist
parties that subscribed to the Sovietcontrolled
Comintern began to question these
doctrinaire views. How could all Social Democrats
be regarded as enemies when they were fighting
the same foe as in Austria, where the Social
Democrats forcibly resisted the authoritarian clerical
Dollfuss government and were, in 1934, bombarded
into submission in Vienna? In Germany
Hitler’s Nazis looked like consolidating their
power. Communists languished in concentration
camps, their party organisation smashed. There
was a serious danger that fascism would win power
in other European countries. The French communist
leader, Maurice Thorez, became especially
fearful of a fascist triumph in France. The French
Communist Party took the lead in creating a new
United Front with the Socialists. They could not
have openly disobeyed the Comintern in Moscow.
But the Soviet leadership was divided and persuaded
by the brilliant Bulgarian communist
leader, George Dimitrov, the hero of the Reichstag
fire trial, to allow some latitude and experimentation
of tactics. From the summer of 1934 onwards
Thorez pushed on, the Soviet leaders acquiescing.
The socialist and communist trade unions merged.
Not satisfied with a socialist alliance alone, Thorez
extended the alignment even further to include the
‘bourgeois’ Radicals, and so turned the United
Front into the much broader Popular Front. The
electoral pact of the three parties – Socialist,
Communist and Radical – gave the Popular Front
electoral victory over the right in the spring of
1936 and brought Léon Blum to power as prime
minister. Though the Radicals did least well, the
Communists gained greatly and the three parties
together won 378 seats against the right’s 220.
The electoral arrangements, rather than a large
shift in the voting, had achieved this result. But
French society remained more divided than ever.
This polarisation was as important as the election
results. Léon Blum had taken no part in the elections.
He had been nearly beaten to death in the
street when fanatics of the Action Française had set
upon him. Fortunately, he was rescued by building
workers who happened to be nearby. That was the
other side of French politics.
The right now assailed Blum, who headed the
Popular Front government, not only for serving
as a cover for the communists, but also as an alien,
as a Jew. In few countries outside Nazi Germany
was anti-Semitism as crude and virulent as in
some sections of French society. Blum was sensitive
to these attacks; he followed in the socialist
traditions of pacifism and humane consideration
for the poor. He could never quite rise above the
viciousness of the onslaught on him and too selfconsciously
sought to prove himself a patriot and
conciliator. In his Cabinet when facing opposition
he was prone to indecision and weakness, as
became very clear when the Popular Front government
in Madrid appealed to France for help at
the outset of the Spanish Civil War. There was
every reason why the French Popular Front government
should help republican Spain with arms,
not only on ideological grounds but also because
a fascist victory threatened to encircle France.
This, too, was Blum’s view. But the outcry of the
right and the weakness of his Radical and Socialist
ministerial colleagues changed Blum’s mind and
he reversed his earlier decision to respond to
Madrid’s appeal.
In domestic affairs, Blum’s government scored
one spectacular success. At the time that he took
office, France was hit by a huge wave of strikes and
factory sit-ins. Discontent with low wages and
poor working conditions in industry and on the
land had finally led to this confrontation which
served notice to the politicians that as in other
Western countries – except, of course, in fascist
Italy and Nazi Germany – organised labour
demanded basic rights and higher wages. The
employers and propertied were thoroughly frightened.
Blum brought the employers and the trade
unionists – the Confédération Générale du Travail
– together at his official residence, the Hôtel
Matignon on Sunday, 7 June. After a night’s discussion
there emerged a package: a substantial
wage increase, two weeks’ paid holiday, a fortyhour
week and, most important of all, the employers’
acceptance of the trade unions’ bargaining
rights; in return the unions would persuade the
workers to end their sit-ins and the strikes.
Believing themselves on the verge of social revolution,
parliament rushed this constructive legislation
through in a few days – an uncharacteristic
show of good sense and urgency. Industrial peace
was restored for a time. But the impact of the Blum
government on the health of the economy was
small, despite the belated devaluation of the franc
in October 1936. Blum was determined to work
pacifically, by seeking the cooperation of big business
and high finance, which loathed all his government
stood for. There was to be no enforced
socialism. After a year, the stagnating economy and
price rises had wiped out much of the advantage
the workers had gained by wage rises.
Soon after coming to office, Blum banned the
‘leagues’. This proved as ineffectual as in Germany
in 1932. The leagues assumed a new ‘legitimate’
political garb – but the street brawling continued
as before. A particularly violent clash between the
communists and the right in March 1937 ended
in bloodshed; it horrified Blum and damaged the
reputation of the Popular Front. Blum was ready
to resign immediately but, in the end, carried on.
He resigned three months later, in June 1937,
disillusioned and frustrated in his domestic and
foreign policies, when a hostile Senate, dominated
by the Radicals, refused to give him the powers
he had asked for so that his government could
deal with the financial crisis. For a further year a
hollowed-out Popular Front continued. The disunity
of the left, its weakness, the bitterness of
class war, which even took the form of making it
fashionable on the right to mouth ‘better Hitler
than Blum’, allowed government to fall into the
hands of a coalition of the disunited Radicals
and the right. Édouard Daladier in April 1938
emerged as another supposedly ‘strong’ man
whose actual performance belied his reputation.
His finance minister, Paul Reynaud, tried to
restore the economy by increased taxation and a
longer working week. The employers, recovered
from the early days of the Popular Front, were
able to redress the balance again in their favour
but at the expense of social bitterness. The repercussions
for world peace of France’s feebleness
were immense. It was a misfortune that all this
occurred when across France’s eastern frontier a
determined and ruthless dictator was taking full
advantage of the French political and social crisis.
Political division at the centre of government in
the years between the wars did not lie at the root
of Britain’s social and economic difficulties.
Indeed, it is difficult to think of any two decades of
British history where there was such unanimity.
The Liberal Party never recovered sufficiently to
provide an alternative government. The role was
taken over by the Labour Party. Labour had briefly
formed a minority government in 1924, and then
again from 1929 to 1931. Just three years after the
conclusion of the General Strike, Baldwin in May
1929 went to the country confident of electoral
victory. The total Labour vote (8.4 million) was
slightly lower than the Conservative (8.7 million),
but the constituency electoral system gave Labour
more seats, 289 against the Conservatives’ 260,
while lack of proportional representation penalised
the Liberals who, despite their 5.3 million votes,
gained only 59 seats. There was less practical
difference between Ramsay MacDonald’s brand of
Labour policies and the policies of the Conservatives
than between the policies of either party
and those of the Liberals. It was the Liberals who
put forward a radically different economic strategy
masterminded by the most famous economic
thinker of the age, John Maynard Keynes. He and
others produced the pre-election plan Britain’s
Industrial Future, which advocated government
spending as the spearhead to industrial revival.
‘We Can Conquer Unemployment’ was Lloyd
George’s more popular election version of this
plan. Lloyd George, with his own ‘brains trust’
behind him, was ready to provide the British
people with their ‘New Deal’. But there was to be
no political comeback for Lloyd George.
Labour became the alternative to the Conservatives.
Its leadership was anxious not to
present the party as too socialist, let alone as revolutionary,
as the communists had no electoral
appeal. The left wing of the Labour movement
found itself isolated, shunned both by the communists
who were following the Comintern line
of fighting the ‘social fascists’ and by the bulk of
the trade unions and the moderate Labour right.
Despite Ramsay MacDonald’s commitment to a
Labour Party whose theoretical aim was to transform
capitalism into socialism, as leader of the
party he saw this as some very distant objective,
certainly not practical politics in 1929. The predominant
majority of the Labour Party has stood
behind leaders who warned that to embrace farreaching
socialist measures, such as bringing the
greater part of industry under state control,
would alienate the electorate and condemn the
party to permanent opposition. The move to the
left needed to be gradual and pragmatic.
The Labour minority government which Mac-
Donald formed in June 1929 largely excluded the
Labour left. The electoral programme had softpedalled
socialism and the whole issue of public
ownership, except for the coal industry (and even
the Conservatives were to move eventually towards
some form of state supervision over the coal industry);
Labour owed its electoral success to this
stance of ‘respectability’. Philip Snowden, chancellor
of the exchequer, was as orthodox, as sternly
opposed to unbalanced budgets and as fearful of
inflation as any Conservative chancellor.
The most serious problem facing Britain at
home throughout the 1920s was unemployment,
which persisted at over 1 million, more than 10
per cent of the labour force. This average for the
whole country does not reveal its full seriousness,
since unemployment was far more severe in
Clydeside in Scotland and Tyneside in north-east
England where shipbuilding was in the doldrums,
in the coal-mining valleys of south Wales,
in Ulster and in the textile region of south Lancashire.
Whole regions were blighted, sunk in
poverty with unemployment persisting year after
year. The famous hunger marches to London in
the 1930s helped to draw the ‘forgotten’ regions
to the attention of the more prosperous Midlands
and southern England. It brought home to the
man in the street the desperate and seemingly
hopeless plight of the unemployed. The coming
to power of the Labour government was followed
within a few weeks by the Wall Street Crash.
The effects of the American depression soon
spread to Britain. Unemployment rapidly rose.
The government attempted nothing that might
have stemmed this rise. Within the government
Oswald Mosley, taking his cue from Keynes,
recommended radical measures to deal with
unemployment. He resigned from the government
in May 1930 having failed to persuade his
colleagues, and eventually left the party after
his motion against government unemployment
policies was defeated at the party conference in
October and further efforts to change the party’s
policies proved fruitless. His authoritarian inclinations
have obscured the question whether his
economic judgements were sound. Once considered
a potential leader of the Labour Party, he
came to lead instead the British Union of Fascists
and left the mainstream of British politics.
Labour’s meagre legislative record, with unemployment
rising to 2.8 million by the summer of
1931, had severely weakened MacDonald’s standing
in both the country and in the Labour Party
when the financial crisis hit London. The Labour
government had sought to follow financial policies
acceptable to the orthodox bankers and adopted a
course above parties – thus diminishing its independence
of action. Policy recommendations were
left to commissions and committees of experts.
These orthodox financiers now recommended
that government expenditure be cut by lowering
wages of government employees, by reducing
unemployment benefits and by raising new taxation.
MacDonald’s colleagues baulked, but eventually
agreed to most of these measures. They
went much against the grain even of the Labour
moderates. When MacDonald insisted, on the
advice of the bankers, on the full cuts, a minority
of the Cabinet, backed by the General Council of
the Trades Union Congress, which opposed all
cuts, would not accept further economies. The
realisation was growing that the government, in
simply giving in to the financiers, would separate
itself from the bulk of the Labour movement. If
the policy were necessary, would it not be better
to have left it to the Opposition?
At the suggestion of the bankers, who urged
MacDonald that the prime need was to restore
international confidence in the government – a
loan from the US was said to be conditional on sufficiently
stringent government economies –
MacDonald and Snowden had already conferred
with the leaders of the Opposition. At the height
of the crisis King George V played a leading role in
persuading MacDonald, Baldwin and the Liberals
to join in a new ‘national government’. Lloyd
George, who might have blocked a coalition led by
MacDonald, was in hospital. On 24 August 1931
the king’s personal appeal was ‘loyally’ acceded to,
such was still the inherent influence of the Crown.
The next day, MacDonald headed a new national
government with Baldwin serving under him. Only
three Labour Cabinet ministers, including Snowden,
followed MacDonald. The Labour Party formally
rejected the national government and voted
for a new leader. At the general election which followed
in October 1931 the Labour Party suffered
a devastating defeat. They could hold only fiftytwo
seats. The Conservatives won a corresponding
victory of 471 seats and so an absolute majority.
The Liberals were soon as badly split as Labour;
after supporting the national government for a
time about half the sixty-eight MPs, in 1932,
turned against it. MacDonald’s National Labour
following was reduced to thirteen. In all but name,
Britain was ruled by the Conservatives until 1940.
MacDonald had genuinely believed in a financial
crisis and had been panicked into action that the
Labour Party regarded as a betrayal.
What was the domestic record of the Conservative-
National administrations, MacDonald’s (1931–5),
Baldwin’s (1935–7) and Neville Chamberlain’s
(1937–40), in meeting the social and industrial ills
of Britain? There can be no doubt that these governments
followed policies that they believed
would most effectively alleviate the distress of
unemployment and would cure the sickness from
which the British economy suffered. They did care.
But their political philosophy and economic thinking
precluded them from following the communist
or fascist totalitarian remedies. They also rejected
the notion that government could initiate public
spending sufficiently large to mop up unemployment
regardless of other harmful effects on the
economy such spending would have had. The fact
that the national government with its tiny Liberal
and Labour components in Parliament but backed
by the overall Conservative majority could act
decisively without fear of parliamentary defeat, in
itself, helped to restore confidence. MacDonald,
followed by Baldwin in 1935, presided over their
cabinets as prime minister, but the rising star was
Neville Chamberlain, who became chancellor of
the exchequer in the depth of the depression in
November 1931. Winston Churchill might have
become the real force in these governments of the
1930s had he not quarrelled with Baldwin and the
Conservative majority when the Conservatives
were still in opposition over how to deal with the
problem of Indian nationalism. The Labour government
supported by Baldwin wished to make
concessions; Churchill thundered against appeasing
Indian nationalism and resigned from the
Conservative shadow Cabinet. It was a tragic misjudgement
not only as regards India but possibly in
its effect on world history. Churchill was politically
isolated in the 1930s and when he warned against
appeasing Hitler, most of the Conservatives did
not listen.
The later 1930s belonged to Chamberlain not
Churchill. Chamberlain tackled the economic
problem with the characteristic vigour he had
already displayed as minister of health in the
1920s. Nevertheless, government policies were
pretty cautious. They were less spectacular, but
arguably more effective, than Roosevelt’s in
America. Chamberlain sought to create conditions
that would allow British industry to revive.
Recovery was not, however, all a matter of government
economic planning. Equally important
was the behaviour of the British people – those
in employment – who by their spending gradually
helped to lift Britain out of the slump.
Already in September 1931 Britain had gone
off the gold standard and devalued its currency
by a quarter so as to make British exports more
competitive. It followed the US in adopting a
protective tariff to discourage competitive imports
from abroad; a limited degree of imperial preference
was agreed by the Imperial Economic
Conference at Ottawa of July/August 1932,
which lowered mutual tariffs in the Commonwealth,
stimulating empire trade. Currency control
was introduced and not eased until 1979 (it
was abolished soon after). Cheap credit stimulated
the domestic economy, especially in the
house-building trade. Schemes of direct government
subsidies and marketing boards also greatly
aided the British farmer. The government sought
to rationalise and produce a more uniform system
of unemployment benefits. The intentions were
good, but the resulting family ‘means tests’,
which investigated whether a whole family had
sufficient for its needs even if one of its members
was out of work, came to symbolise the heartless
bureaucracy of what was intended as a sensible
policy. The echoes of the resulting bitterness
made themselves felt for decades.
Class distinction was more acceptable to the
man in the street in good times, or in the war when
common hardships and dangers were being shared
by the upper and lower classes in the trenches. In
the 1930s the increasing division between rich and
poor, employed and unemployed, left bitter memories
of Conservative rule that not even Winston
Churchill’s personal popularity could overcome in
1945. The Prince of Wales, by his well-publicised
concern for the misery of the unemployed, did
something to bridge the gap. The abdication crisis
of November and December 1936, which forced
Edward VIII to renounce the throne unless he
gave up his proposed marriage to the divorced Mrs
Simpson, was seen by some embittered working
men as a manoeuvre to get rid of a king who
sympathised with them.
Unemployment, nevertheless, in the mid-
1930s was slowly declining. It never reached the
proportions of German and American unemployment
at their peak in 1932–3, and fell steadily
from 1933 to 1937 from just under 3 million to
1.7 million. Even with rearmament getting under
way thereafter, it did not fall below 1 million and
since it was heavily concentrated in the depressed
areas it actually varied from 26 per cent in
Northern Ireland and 24 per cent in Wales to 6
per cent in the Midlands. Such gestures as subsidising
the completion of the liner Queen Mary on
the Clyde and other limited public schemes could
not touch the hard-core unemployment problems
of these regions. This, rather than the fact that
total production in 1934 exceeded the level of
1929, was what made the deepest impact on the
public mind in the 1930s.
One serious consequence of the depression was
that the democracies became preoccupied with
problems at home. Chamberlain saw rearmament
as a waste of national resources. Gradually recovery
was proceeding. For those in work living standards
were rising rather than falling. War threatened the
better way of life governments were seeking to
achieve for their peoples. But it was the war effort
alone that ‘cured’ unemployment in Britain and
the US.
The social consequences of the depression, the
despair of the unemployed, the failure to provide
adequately for the poor and the sick, the undernourishment
of millions of children, unhealthy
slum housing and many other ills in the early
years of the 1930s turned the mass of people on
the continent of Europe towards a search for
new solutions. Since Stalin’s Russia appeared to
have found the answer to banishing the capitalist
trade cycle, communism attracted millions. Their
support was given not only for materialistic but
also for idealistic reasons. Communists fought
fascism and in claiming to provide a better and
healthier life for the poor acted in a way that
seemed ethical and good. The realities of Stalin’s
tyrannical regime were unknown to many, overlooked
or explained away. Mussolini and Hitler
were seen by millions as the saviours who would
restore a sense of national unity, orderly government
and employment to their people. They had
many admirers outside Italy and Germany, even
some in Britain. The deep divisions and the
turmoil in France discredited parliamentary government
in this part of Europe too. In Britain,
the Labour government had ignominiously fallen,
though parliament itself survived the crisis.
Humane and democratic socialism was everywhere
the main victim. Such desperate conditions,
millions of people felt, demanded not
compromise but radical remedies. The left battled
the right politically, in Spain even on the battlefield.
But there was at least one country in Europe
where humanity, democracy and social progress
were safe and which did not follow the pattern of
most of the rest of the continent.
Sweden had not bypassed the depression, but the
economic slump led to the establishment of a
democratic form of government which determined
the social and economic policies of the
country for almost six decades. It was ceasing to
be a predominantly agricultural country: its steel,
ball-bearings and other advanced industrial products
like telephones were in worldwide demand,
in addition to its older exports such as wood-pulp
and matches. Nonetheless, in this large, underpopulated
northern region of Europe, farming
continued to play an important role in the 1930s.
The impact of the depression, at its height in
1932 and 1933, was devastating. One in three of
the workforce was unemployed; many farmers
could no longer meet their mortgages and were
forced to sell. But Sweden recovered relatively
quickly from the crash compared to the rest of
Europe and it was politically strong and stable.
The credit for this must go largely to the coalition
administration of the Farmers’ Party and the
Social Democrats, led by the Social Democrat Per
Albin Hansson. In the first three years of the
administration, bills to promote active state intervention
were passed, regulating the working
hours of agricultural labourers, statutory holidays
and unemployment insurance. The simple slogan
was to make Sweden ‘a home for all its people’
and so to create social harmony.
By 1939 Sweden’s unemployment problem
had been solved and the plans for a welfare state
had been worked out. The Social Democrats,
since their election victory in 1936, had become
the dominant political force in the country. The
war postponed the extension of social welfare, but
from 1946 to 1950 the reforms were enacted,
including comprehensive old-age pensions, child
allowances, health insurance and educational
reforms. The Swedish people were to be safeguarded
from ‘cradle to grave’, in sickness and in
health. The socialist element of the government
policies was to tax the better-off heavily to pay for
the welfare state and to redistribute income,
rather than to try to nationalise private industry.
For once a utopian vision seemed to correspond
to reality. Sweden and its people prospered.
Swedish research, technology and design were
second to none. The Social Democratic dominance
for all but six years since 1932 came to an
end only in 1992.
Sweden exemplified a distinctive and much
admired social, political and cultural way of life.
The emphasis on closeness to nature and on individual
choice and liberty extended to the sphere
of sexual permissiveness long before it did so in
the rest of Europe. In many areas of social reform
Sweden was the pioneer. The Swedes enjoyed one
of the highest standards of living in Europe,
along with the Swiss, the Norwegians, the Finns,
the Germans and the people of Luxembourg.
Swedish society was egalitarian and unshakeably
democratic, although it had to make readjustments
in the early 1990s.
The hopes of those who continued to pin their
faith on liberalism and democracy in the 1930s as
providing a better answer to the world’s ills than
totalitarian leadership, came to rest on Franklin
Delano Roosevelt. Roosevelt’s New Deal was
to be the answer to those who, in the crisis,
despaired of reconciling freedom with the measures
necessary to bring about economic recovery.
Keynes wrote in December 1933 that Roosevelt
had made himself ‘the trustee for those in every
country who seek to mend the evils of our condition.
If you [Roosevelt] fail, rational change will
be gravely prejudiced throughout the world,
leaving orthodoxy or revolution to fight it
out.’ The shortcomings of the New Deal are very
evident to historians today. Unemployment
remained obstinately high. It fell from some 13
million in 1933 to under 8 million in 1937 but
it rose again to 9.5 million in 1939. In fact,
Roosevelt’s administrations failed to ‘cure’ the
blight and waste of human resources until the US
geared industry to war. But the attitude of the
president and administration, brilliantly publicised,
gave renewed hope to the nation and provided
leadership without the destruction of
democracy. There is thus a stark contrast between
the general psychological impact of the New Deal
and the real success of the many different laws,
special agencies and programmes which constituted
it.
The depression provided Roosevelt with the
opportunity of attaining and retaining political
power for more than a decade until his death in
1945. But its onset destroyed the political power
of his predecessor at the White House, Herbert
Hoover. Hoover in 1929 had begun his term at
the moment of highest confidence. The failure of
his economic policies to halt the steep rise in
unemployment shattered his reputation. He had
a clear concept of the role of the state. He wished
to limit federal powers, which he warned would
throttle individual initiative. He was by conviction
a conservative, though he was willing to adopt
new ways to stimulate business. His inability,
nevertheless, to halt the steep slide into depression
did more than discredit him personally, it
also discredited the whole philosophy of minimal
state intervention. But Hoover did act to contain
the effects of the onset of the depression. He
appealed to businessmen not to contract their
activities and to maintain their workforce. He
appealed to the banks to extend credit. Besides
such exhortations, federal policies were limited –
though in the right direction. The nation should
help itself by enlightened voluntary cooperation
between the different interest groups. Prosperity
‘lay just around the corner’.
When the voluntary approach did not work,
Hoover took more energetic steps to influence the
economy. He persuaded the bankers to establish a
National Credit Corporation in October 1931;
the strong banks were to assist the weak and failing
ones. But banks, in their thousands, continued
to close their doors. Business confidence was not
restored. In 1931 Hoover belatedly halted international
financial chaos for a time by calling for
a year’s moratorium of Allied debts to the US;
German reparations also ceased in practice.
Hoover broke with his traditions by establishing
the Reconstruction Finance Corporation in 1932,
empowered to make loans to banks and financial
institutions. That summer he accepted a congressional
bill to advance federal loans to individual
states to provide unemployment relief and
public works. The federal budget, despite his misgivings,
allowed for more state expenditure than
income. But the funds thus pumped into the
economy were overshadowed by the stringent
credit policies followed by the banks, paradoxically
because they were better supervised and receiving
financial support. The net result was that from
1929 to 1934 the American money supply contracted
by nearly a third, inevitably deepening the
depression and increasing unemployment.
Roosevelt had no basic understanding of the
overall management of the economy and, in the
election campaign of 1932, attacked President
Hoover for his unbalanced budgets, promising as
one of his remedies for the depression to cut
federal spending by a quarter! Roosevelt’s electrifying
inaugural address of 4 March 1933 reveals
the other, psychological side of his mixture of
ideas together making up the promised New
Deal. He cautioned against unnecessary fear,
attacked the ‘unscrupulous money changers’ and
vigorously promised action: ‘our greatest primary
task is to put people to work’. He was now determined
to put into practice what a year earlier he
had called ‘bold persistent experimentation’. If
something fails, he declared, admit it frankly and
try something else, but ‘above all try something.
The millions who are in want will not stand by
silently forever while the things to satisfy their
needs are within easy reach.’
Roosevelt spoke to the ordinary people and
they were at last convinced that the new president
was not prepared to capitulate to seemingly
uncontrollable economic forces, to the inexorable
workings of the business cycle. Roosevelt
exuded confidence, charm and sincerity. There
was something else about him. Crippled by polio
in 1921, he had lost the use of his legs. Now, as
president, he personified the fact that adversity
could be triumphantly overcome. Quite possibly
one consequence of his serious disability was that
he developed a new homely touch in politics, a
charisma in the eyes of the mass of the people that
became an invaluable asset to him. The pampered
child of wealthy Americans, privately educated at
the best schools and at Harvard, Roosevelt bore
a famous family name. He modelled himself on
his famous relative Theodore.
His early political career advanced by easy progression
from the Senate of the state of New
York, to a junior place in the Navy Department
in Wilson’s administration. Then to the governorship
of New York State when already stricken
with polio. The Republicans seemed firmly in
power in the 1920s, but the depression gave the
Democrats their chance and Roosevelt secured
the nomination in 1932. Roosevelt was happiest
when active. During the first Hundred Days of
his own administration he initiated measure after
measure, backed by a bevy of academics and
politicians who served as his think-tank, or brains
trust as it was then called. One associate who
knew him well described Roosevelt’s mind as ‘flypaper’.
There was a tremendous array of New
Deal policies, Washington became the centre and
source of new federal powers hitherto undreamt
of, and a vast sprawling bureaucracy administered
the programmes. The public’s thirst for action
was satisfied. This thirst was also slaked by the
twenty-first amendment in February 1933, ratified
by the States in December. It was the end of
Prohibition. ‘Happy Days are here again.’
An emergency banking act restored confidence
in the banks and in June 1933 deposits were
insured by the Federal Deposit Insurance. In May
1933 the Agricultural Adjustment Act (AAA)
tried to raise farm prices by paying federal subsidies
to farmers for reducing production; marketing
agreements were supervised by the federal
authorities. In June 1933 the National Industrial
Recovery Act (NIRA) created corporate committees
representing the public, management and
labour to establish codes on production, prices
and competition. Labour was aided by the laying
down of maximum hours and minimum wages
and by being conceded the right to join a trade
union, which at last gave a great impetus to
the unionisation of the less skilled workers.
Underlying NIRA was a belief in national planning.
But the biggest businesses dominated the
codes, as government supervision was small.
Among the most celebrated early measures was
the creation of the Tennessee Valley Authority
(TVA) in May 1933, which established government
authority over a vast impoverished region
containing a hydroelectric dam and fertiliser factories.
The Authority promoted scientific agriculture,
prevented flooding and engaged in a variety
of social programmes to aid the poor. Another
part of the NIRA established the Public Works
Administration with a fund of $3.3 billion. Under
the secretary of the interior, Harold Ickes, it was
set up to promote construction that was in
the public interest, and employed during its first
year 1 million men. But Ickes was cautious in his
approach; not so ex-social worker Harry Hopkins.
Hopkins worked for speedy aid to restore the
morale of the unemployed. The Civilian Works
Administration run by the indefatigable Hopkins
employed 4 million people on public works
schemes and cost $2,000 million in 1933 to
1934. Roosevelt thought this was too much and
abolished it in the spring of 1934. His own programme
in 1933 was the Civilian Conservation
Corps, which offered American unemployed
young men from the cities work in army-style
camps in the countryside. Over a thousand camps
accommodated 300,000 men planting trees and
working in rural areas. Other New Deal measures
sought to supervise and regulate Stock Exchange
dealings and financiers.
The work of many minds, the New Deal measures
were not intended to introduce ‘socialism’.
Roosevelt attempted to make capitalism work better,
to use the power of representative democratic
government to secure social justice for all the
people. Despite the measures comprising the New
Deal, the US’s unemployment figures disappointingly
showed only gradual improvement. The reason
for this is not now difficult to find. Congress
and the president in 1933 and in 1934 were not
prepared to tolerate large deficit budgets. Funds
spent on the programmes of the New Deal were
balanced by savings secured by reducing veterans’
allowances, curtailing unemployment reliefs and
discharging government employees. What one
hand gave, the other took away, and federal deficits
increased only gently in 1933 and 1934. The federal
government had played a larger role and
Roosevelt was genuinely responsive to the needs of
the poor; but in the end practical achievements,
when seen against the vastness of the problem,
proved insufficient to ‘cure’ unemployment.
The New Deal policies ran into trouble in
1935. While the congressional elections of 1934
had strengthened the reformers, the Supreme
Court took a conservative view of constitutional
rights. In May 1935 the Court invalidated the
NIRA as an unconstitutional delegation of power
and regulation of business. Roosevelt’s administration
was already moving towards changes in
the New Deal and so did not attempt to reenact
any parts of the NIRA. The attempt to
cooperate with business had not led to the
expected beneficial results. The New Deal legislation
of 1935 to 1936 sought to reform business
practices and to destroy concentrations of business
power. Another important decision was
to create many more jobs – ‘work relief’ – by
setting up the Works Progress Administration
under Harry Hopkins and providing it with
large funds; $1.47 billion on average in a full
year (1936–40). Besides public works, Hopkins
created projects for out-of-work artists and
writers. The latter collected information and
wrote guide books. Many suddenly discovered a
new vocation for writing. Nearly 1.5 million projects
were set up which, at different periods of
time, employed a total of more than 8.5 million
people during its years of operation. Even so,
all these programmes absorbed only one-third of
the unemployed.
One of the most significant reforms of the
New Deal era was the introduction – belated in
comparison to other Western nations – of basic
welfare policies such as old-age pensions. The
passage of the Social Security Act in August
1935, inspired by the efforts of Frances Perkins,
provided – besides federal old-age pensions –
unemployment insurance and help to the less
privileged. Many of the poorest sections of
American society were still excluded, but the Act
marked a beginning on which later expansion
could be built. The growth of labour unions and
recognition of their rights by the National Labor
Relations Act (Wagner Act) further limited business
power. All in all, the New Deal had redistributed
power in the community and greatly
increased that of the federal government.
In November 1936 Roosevelt was re-elected
to a second term by a bigger victory than in 1932,
gaining 61 per cent of the popular vote. He represented
the non-revolutionary change the majority
of voters wished to see. His biggest personal
political setback occurred soon after the election,
when he attempted to change the composition of
the Supreme Court, which threatened his New
Deal legislation. He requested Congress to legislate
that the Supreme Court could be enlarged by
the president appointing an additional supplementary
justice for every existing justice over the
age of seventy who did not wish to retire. But
Congress refused to tamper with the Court in this
way. Nevertheless, Roosevelt’s complaints of the
Court’s unresponsiveness to social needs seems to
have produced a change of attitude; the Court
ceased to be the conservative obstacle to New
Deal legislation after 1936. In any case, gradually
Roosevelt’s nominees came to predominate as the
older judges retired.
That the New Deal was not even larger in
scope was not so much due to the attacks of its
opponents as to the policies of the administration
itself. Roosevelt never could abandon his belief in
a ‘sound money’ policy. He favoured keeping
spending within well-controlled limits. A recession
in 1937 was followed by a slow recovery but,
even in 1940, 15 per cent of the workforce
remained jobless. Yet, America in 1940 was very
different from when Roosevelt first entered the
White House. He had sought reform and change,
but not a revolution of the capitalist system. His
bold approach, his faith in democracy and his
desire to help the ordinary people, the disadvantaged
and the poor, not only brought hope where
there had been despair but also significantly
changed American society and attitudes.
World History
