The International Financial Crisis in 1929 Essay

The International Financial Crisis in 1929 Essay

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The International Financial Crisis in 1929

Throughout the 1920's in Britain there were
economic problems. Unemployment was increasing; therefore there was
low domestic demand and large amounts of poverty. Markets were also
being lost abroad, leading to a decrease in trade. However in 1929-31
these problems reached crisis point, when in 1929 The Wall Street
Crash called for an end of American Loans to Britain, and the re-call
of all Britain's debt. This had impact worldwide, as prices for goods
slumped due to lack of demand and business confidence disappeared. In
Britain it became clear that the 'Laissez-faire' policy was not going
to work, but there was a divide in thoughts over which policy to adopt
to deal with the crisis. Pressure built in 1930 as government spending
rose to an all time high due to high unemployment, and defeat at the
next general election looked likely. In 1931 the crisis in Britain
reached its peak with the 'run on the pound' causing major change and
unrest within the labour government to try to solve the crisis.

(b) Explain the reactions of the Labour Government to the proposals of
the May Committee. (7) In July 1931 the May Committee reported a
deficit of £120 million . It recommended a 20% cut in government
spending in order to balance the budget. This proposal caused an 11-9
split within the labour government that made continuation as a
government impossible. Although the Labour government was essentially
a socialist party, Macdonald had always argued that since they were a
government without a majority, they must act in a way that would
reflect this, hence his and several other Labour MP's wish to act in

... middle of paper ...

...te having been
corrupted somewhat by the establishment, he was trying to act in a
manner that would benefit the country as a whole rather than simply
the working class. There would have been pressure on him to act in
this way due to Labour's lack of a majority, which forced them to
follow some of the policies of the Conservatives and Liberals. There
was also pressure on MacDonald from King George V, who was in favour
of the formation of a National government. He had at first intended to
resign and hand leadership to the Conservatives and Liberals to deal
with the crisis however the King persuaded him to stay. There is no
evidence that Macdonald had changed his views on the national
government as a result of the establishment however, as theoretically
he had backed the idea of a national government right from the start.

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