The Great Slump
While the exact causes of the stock market crash of 1929 are complex and disputed (Galbraith, 1992: 187, ties it to the ‘great speculative orgy [that] occurred in 1928 and 1929’), what resulted was a financial crisis and subsequent depression that was international in scope, reflecting the complexities of the global finance system and the vast international loans that had been made during the Great War. The global nature of the crisis and ‘the complicated interaction between political, economic, social and psychological factors [meant that it] profoundly affected and changed the lives of ordinary men and women throughout the world, condemning millions of them to destitution, misery and despair’ (Rees, 1970: 282). As America began to drastically reduce international lending, the new vulnerability of the UK currency became increasingly apparent. The Great Depression that followed the crash saw UK unemployment rise from 1.2 million in March 1929 to 1.7 million a year later. We discuss the wider impacts and the extreme poverty that resulted in some areas of the UK in Chapter 4.
The crisis and Labour’s inability to address it, especially from the position of a minority government, led to the formation of a coalition government of all parties. Then, with the General Election on 27 October 1931, coalition-supporting politicians were returned, with Ramsay McDonald continuing as Prime Minister. This National government had intended to establish business and international confidence but failed to do so and this period saw the ‘flight from the pound’ (Skidelsky, 1967: 384). The country left the gold standard (again) and introduced a form of imperial trade protection. With subsequent crises (in particular the Second World War in 1939), national and coalition government would continue to be the norm, generally dominated by a substantial parliamentary majority for the Conservative Party, albeit with shifts in emphasis and control, until the Labour government that was elected after the war in 1945.
This period saw an intensification of key debates that had existed since the end of the Great War, for example significant lobbying for a reduction in the ‘burden of taxation’ by politicians, banks and business groups including the National Confederation of Employers’ Organisations and Federation of British Industries (Skidelsky, 1967: 297). Government engaged with economists in debates around the degree and form of investment in public works, how to increase exports and free trade versus tariffs and protectionism (with political opinion largely now opting for the latter).
Despite the dominance of the Conservative Party in the coalition governments, the 1930s saw significant state intervention in the economy and industry, including government loans for shipbuilding, the continuation of agricultural marketing board schemes and, in 1933, the nationalisation of the passenger rail and bus system in London. Hannah (2004: 92) attributes this process to an acceptance among ‘a wide range of middle opinion’ that public corporations could offer a solution to problems encountered in parts of the national economy, just as earlier interventions at municipal level were generally accepted in response to sets of pressures (also see Millward, 1995).
In one of the central patterns that will come to shape the history of enterprise policy and the development of key institutions, in the 1930s tough economic conditions saw an upsurge in the number of people entering self-employment, prompting greater attention to these businesses and their concerns. However, the specific issues of small business and how they might relate to exporting or reducing unemployment struggled to gain traction in political debates.
