How far can the fortunes of the British economy in the 1930s be explained in terms of British industrial decline?
After the Wall Street Crash of 1929, the economy of those countries dependent on trade collapsed due to the crisis in America. Britain was one of these countries. The aim of this essay is to establish the extent of the effect that Britain’s industry had on her economy after this depression.
There is no doubt that the stock market crash had a profound and disastrous effect on the economy. Between 1929 and 1931 the value of British exports fell by 50%, and Britain had a trade deficit of £100 million. There were also 3 million people unemployed in 1931. All of this goes to show that at the beginning of the decade, the British economy was in crisis not because of industry, but because of the collapse of share values in America. Despite this, it was American investors that formed the majority of Britain’s ‘new’ industries, such as the Ford car company and the Hoover Corporation. These industries, whilst booming in the South, totally bypassed the North of the country, and only provided 7% of employment in 1934. Therefore, these newer industries did not really have a significant effect on the economy as a whole.
Throughout the 1930s, unemployment fell. However, although this may sound like a positive factor of the economy, the number of people unemployed never dropped below 1.5 million, and at its peak was 3 million. This high figure was due to the decline of traditional industries such as coal mining, steel production and shipbuilding. These were the very industries that had allowed Britain to attain such a position of power in the first industrial revolution. However, Britain’s policy of laissez-faire meant that other countries had the opportunity to catch up with her, and so increased competition and decreased demand led to the decline in employment in these areas. This drop in production, which led to such large numbers of unemployed people, obviously had an adverse effect on the financial situation of Britain, as unemployment benefits rose from £12 million in 1929 to £125 million in 1931.
It is obvious that there was a North/South divide in Britain, which affected the economy of the country as a whole. The divide was an industrial one, as 80% of the ‘new’ industries were located in London, and as workers flocked to the more prosperous areas of the country, the rate of unemployment rose at a far higher rate in the North. For example, according to Source E, 67.8% of workers living in Jarrow were unemployed in 1934. This divide is also apparent in Source N, as the map shows the areas that were growing industrially and those that were in absolute industrial decline. Sources D and H are photographs showing the new industries of Britain. The Hoover factory is an example of foreign investment, as Hoover was an American company, and the new Marks and Spencer shop in Source H shows how Britain was becoming Americanised, as this was a chain store, rarely seen before 1930. As a whole, the country was growing industrially, as production rose by 46% with the introduction of a national electricity grid.
Britain of the early 1930s was in absolute decline, as the production index of Source F shows. Even after these years of decline, when production rose by 25%, the country was still in relative decline, as other countries such as USA, Germany and Japan were producing more than Britain. This is because after prospering almost accidentally in the first industrial revolution, the British government wanted to try and repeat this success by simply leaving the British economy to run itself. Because of this policy of laissez-faire, the other major countries had the chance to develop their own industries, with the result that Britain lagged behind in the second industrial revolution. This absolute decline of the economy therefore came about entirely as a result of the failure of Britain’s industries to keep up with their foreign counterparts. This helps to provide an answer as to the question of to what extent the fortunes of the British economy can be explained in terms of industrial decline.
As I have already said, the old industries of Britain were in decline, as although output increased in many sectors, such as coal mining, where output increased by a third, Britain actually began to import more ships than she was exporting, and cotton production fell by a half. According to Source A, 123 out of 1000 coal miners were unemployed in 1936, and this goes to show that the so called staple industries of Britain were in relative, if not absolute decline during the 1930s. At the same time, the economy was in crisis, as the Wall Street Crash meant that Britain had to be taken off the Gold Standard, and public spending was reduced in order to cut down the national debt. This would seem to suggest that the British economy was very closely linked to the state of the country’s industries, but would also point more to the fact that the industry was reliant on the economic state of the country.
There can be no disputing the fact that in the years directly subsequent to the Wall Street Crash, the British economy was in crisis. As I have already said, this was nothing to do with the industry of Britain, and so it is possible to reason that the fortunes of the economy cannot be conclusively explained in terms of industrial decline. However, from 1934 onwards, industry was actually in absolute growth, as production was increasing year by year. This coincides with a boom period in British economy, especially after 1936, when the British army began an extensive rearmament programme, which created 1 million jobs. This, together with the housing boom and the growth of the newer industries such as car manufacture, meant that the British economy was prospering at the same time as an absolute industrial growth. Therefore, although other countries were growing at a faster rate, and Britain was in relative decline, the industrial sector was still growing, as was the economy.
The question that I am trying to address is how much the economy of Britain in the 1930s was dependent on the industry of the country. Although there is a strong case for saying that the economy was dependent on the industrial growth of the country, it is also possible to conclude that there is not a definite link, but perhaps a coincidental one. Although the economic boom of the mid to late 1930s coincided with an upturn in the fortunes of the staple British industries, the two may not necessarily be linked, as it is well documented that the economy has cycles of boom and bust lasting roughly 10 years. The absolute industrial growth may have simply occurred at the same time as one of the boom periods. Industry was still in relative decline, as other countries were racing ahead of Britain in new technologies such as plastics and electronics. The economic boom of this period was perhaps inevitable after the disaster that was the Wall Street Crash, as the government had to take drastic measures to ensure the recovery of the country’s economy.
Despite these views, I think that there is a definite dependency of the economy on industry. This is because fortunes of the economy directly correspond with those of the industrial sector, and although the country was strictly divided into North and South, and new industries were beginning to grow in the South. The economic boom of the 30s occurred at the same time as the absolute industrial growth in such a way as to negate any possibility of coincidence. Also, the country was experiencing industrial decline relative to other nations and the economy collapsed due to the Wall Street Crash, to such an extent that the country had to be taken off the Gold Standard. This shows that there was a direct link between the economy and industry, and that they were co-dependent.