The inter-war years were dominated by unemployment. This essay considers government responses to unemployment. It examines policies which were introduced intent on decreasing the number unemployed. It will also examine measures taken by foreign governments in dealing with unemployment.
The National Insurance Act of 1911 only provided unemployment benefit to workers of selected trades. In 1916 however this act was extended to include munitions workers maybe in recognition of their work in the war effort.
During the war unemployment remained stable somewhere around 4%, the average between 1881-1913. (Hill M)
Returning to Britain after the First World War, soldiers found a very different Britain to the one in 1914. Unemployment was high, the cost of living was rising and there was a severe shortage of houses, hardly a land fit for heroes to live in. As more soldiers returned home and found it difficult or impossible to find work, the government needed to act quickly.
In 1920 the government extended the Unemployment Insurance Act to include almost all manual and non manual workers earning less then £250 per year. There were exceptions, mainly workers in agriculture, domestic service, armed forces, and workers whose employment was usually for life, for example teachers, railway workers and civil servants. Swann, Turnbull. (1975)
During 1920 and early 1921 Britain enjoyed an economic boom and unemployment was reduced. This boom however was transient and before long unemployment in Britain was soaring.
By the end of 1921 over two million people were unemployed and there was widespread suffering and deprivation. The government’s response to this was the ‘Geddes Axe’. The ‘Geddes Axe’ named after Sir Eric Geddes, was the term used for the cuts in public spending introduced during 1922. Workers were forced to accept pay cuts and taxes and bank rates were increased. These policies achieved nothing in helping the unemployed. It maybe as a result of these measures that unemployment rose even further.
Britain’s staple industries were coal, steel, ship building and textiles. High unemployment was almost geographical, with the North of Britain most severally affected. The textile industry was also based in the North of England mainly around the Manchester area. Ship building was located in the North and coal and steel were mainly in the North and parts of Wales.
American and European industries were quick to develop more advanced machinery then anything in Britain. Once these countries reached full production, British exports of coal and steel decreased.
Certain industries were expanding although they were concentrated in the South of England.
In the 1922 Unemployment Act the government attempted to reduce the number of unemployed by introducing the ‘genuinely seeking work test’.
By the end of 1923, 1 in 20 of all claimants was failing this test. (Thane P p.164)
A report published in 1932 by the National Unemployed Workers Movement titled, Mass Murder: an exposure of the means test, considered that the ‘means test caused stark poverty, misery and starvation to enter thousands of working class homes. Working class parents are slowly but surely being driven insane by its use and many workers are driven to escape it by committing suicide.’ Elias.S, p5
In 1924 the conservatives were in government with Winston Churchill as Chancellor of the Exchequer. In 1925 Churchill returned Britain to the Gold Standard, the pound immediately became overvalued against foreign currencies. As a result of a weak pound foreign imports were relatively cheaper, but British exports became more expensive.
Employers considered wage cuts would help in competing with overseas competition. These measures did not assist those unemployed, there situation was made worse as a result of an overvalued pound.
Coal mining was the most severely effected industry. By 1925, British mines were unprofitable as demand for British coal fell due to cheaper imports. Miners hours were to be increased and pay cuts were to be introduced to try and compete with cheaper imports. The miners strongly rejected these measures and went on strike. The Trade Union Congress supported the miners and called a general strike in early May 1926. This strike only lasted eleven days although the miners stayed on strike for six months. (Jones K)
Ultimately, wage cuts proved insufficient and unemployment increased.
In 1929 the Liberal General Election Manifesto promised ‘We Can Conquer Unemployment’. This manifesto was supported by Keynes who considered that free enterprise could not eradicate unemployment. A major public works programme on roads, housing, electricity and housing was offered as an alternative. Keynes highlighted that the unemployed made no contribution to the economy, purchased fewer goods, therefore the demand for goods fell.
The worst period of unemployment preceded the Wall Street crash of 1929. In 1932 unemployment in Britain peaked at just under three million.
In the early 1930s, the conservatives introduced the Special Area Bill. This bill gave grants to depressed areas for social improvements. These grants assisted in the building of hospitals, roads and various social projects. These measures were not very effective as they did not progress fast enough. By the time the scheme was fully implemented long term unemployment had begun to lift. The staple industries were busy again preparing for the war that would inevitably come.
During the inter war years other countries severed unemployment and economic decline. In the Soviet Union unemployment was diminishing due to central planning. Russia was to become a modern industrial country, eliminating the need for foreign imports. Employees worked longer hours creating a surplus available for export. Lenin allowed a restricted return of private trade in consumer goods. (Thane P)
In Germany unemployment insurance was introduced in 1927. In 1933 when Hitler came to power he extended the public works. A huge road building programme commenced, house building was subsidized, school leavers were offered training, and employers were given incentives to take on the unemployed. (Thane P)
In Sweden the Social Democrats came to power in 1932, with the promise of reducing unemployment. This was achieved by massive public spending on a programme of public works.
In the United States Roosevelt promised a New Deal. This included massive public works and unemployment insurance.
In examining unemployment during the inter-war years in Britain and abroad it would appear that public spending actually assists the unemployed. Although unemployment began to steadily decline during the late 1930’s, it was solely owing to re-armament immediately before World War Two that the problem of unemployment receded. (www.bbc.co.uk)