Some background first.
The second UK Labour government (1929-31) was elected at a difficult time - it was a minority government (supported by the Liberal party), and spent much of its time in office grappling with the economic issues stemming from the Great Depression.
Yes, most of my links in this post are to Wikipedia - I know, not an authoritative source or anything. But it gives a general idea.
They did get a fair amount done in terms of social legislation, but were unable to agree on solutions to the seemingly ever-increasing unemployment crisis. When they entered office in 1929, unemployment already stood at a little over 10% - by the time the government fell apart in 1931, this had doubled (from graph here).
The government fell over whether to cut unemployment benefits by 10%, or to make cuts elsewhere - the Cabinet couldn't agree over that issue, but it was generally agreed that cuts had to be made. Apart from anything else, American bankers were refusing to offer the UK Government any further loans unless such measures were made. They were split 11 to 9 in favour of cutting benefits - the government fell apart - MacDonald formed a National Government - then the 1931 election saw Labour eject MacDonald and others from the party for their betrayal in doing so, and lose about 4/5ths of their MPs. It also saw a Conservative / National government with an absolutely ridiculous majority - see here for more.
From my reading around this, it seems one of the main problems was that Keynesianism, or the idea of defecit spending in general, wasn't really an established idea at this point (not to say the idea didn't exist - more on that later - just that it wasn't widely understood or accepted as valid). In fact, the economic approach of Labour politicians at the time seems to have been in general quite traditionally Liberal - that is, in favour of a balanced budget. Under the circumstances, this meant making cuts to government expenditure because fewer taxes were being paid.
The approach is typified by the Chancellor of the Exchequer of the time, Philip Snowden (no known relation to Edward) -
So - the actual question.
How could MacDonald's second government have found its way through the Great Depression?
My thinking is that they would have needed a radical change of policy - either towards proto-Keynesian counter-cyclical spending (i.e. major public works, a UK-flavoured New Deal-type programme), or come down heavily in favour of protectionism. Both of these would be a major departure from tradtional / Gladstonian Liberal balanced budgets and free trade.
The Liberal party had gone into the 1929 election with a manifesto entitled "We Can Conquer Unemployment", with contribution from Keynes himself (among others), promising to... well, do that, by means of major public works. Wihin a year, no less.
So, it's not as if the idea wasn't around at all.
Any thoughts on this? Do feel free to bring up Oswald Mosley - he had argued for similar measures as a member of the Government, then resigned in frustration at resistance from those like Snowden in 1930, going on to found the 'New Party'... and we know where he ended up from there. But then, he always was convinced he had the answers.
The second UK Labour government (1929-31) was elected at a difficult time - it was a minority government (supported by the Liberal party), and spent much of its time in office grappling with the economic issues stemming from the Great Depression.
Yes, most of my links in this post are to Wikipedia - I know, not an authoritative source or anything. But it gives a general idea.
They did get a fair amount done in terms of social legislation, but were unable to agree on solutions to the seemingly ever-increasing unemployment crisis. When they entered office in 1929, unemployment already stood at a little over 10% - by the time the government fell apart in 1931, this had doubled (from graph here).
The government fell over whether to cut unemployment benefits by 10%, or to make cuts elsewhere - the Cabinet couldn't agree over that issue, but it was generally agreed that cuts had to be made. Apart from anything else, American bankers were refusing to offer the UK Government any further loans unless such measures were made. They were split 11 to 9 in favour of cutting benefits - the government fell apart - MacDonald formed a National Government - then the 1931 election saw Labour eject MacDonald and others from the party for their betrayal in doing so, and lose about 4/5ths of their MPs. It also saw a Conservative / National government with an absolutely ridiculous majority - see here for more.
From my reading around this, it seems one of the main problems was that Keynesianism, or the idea of defecit spending in general, wasn't really an established idea at this point (not to say the idea didn't exist - more on that later - just that it wasn't widely understood or accepted as valid). In fact, the economic approach of Labour politicians at the time seems to have been in general quite traditionally Liberal - that is, in favour of a balanced budget. Under the circumstances, this meant making cuts to government expenditure because fewer taxes were being paid.
The approach is typified by the Chancellor of the Exchequer of the time, Philip Snowden (no known relation to Edward) -
Wikipedia said:
So - the actual question.
How could MacDonald's second government have found its way through the Great Depression?
My thinking is that they would have needed a radical change of policy - either towards proto-Keynesian counter-cyclical spending (i.e. major public works, a UK-flavoured New Deal-type programme), or come down heavily in favour of protectionism. Both of these would be a major departure from tradtional / Gladstonian Liberal balanced budgets and free trade.
The Liberal party had gone into the 1929 election with a manifesto entitled "We Can Conquer Unemployment", with contribution from Keynes himself (among others), promising to... well, do that, by means of major public works. Wihin a year, no less.
So, it's not as if the idea wasn't around at all.
Any thoughts on this? Do feel free to bring up Oswald Mosley - he had argued for similar measures as a member of the Government, then resigned in frustration at resistance from those like Snowden in 1930, going on to found the 'New Party'... and we know where he ended up from there. But then, he always was convinced he had the answers.
