Economic Recovery in the Uk

ECONOMIC RECOVERY IN THE UK 1932-37

1. CAUSES OF RECOVERY

2. NATURE OF RECVERY

3. HISTORIOGRAPHY: OPTIMISTS vs. PESSIMISTS

OPTIMISTS: ALDCROFT AND RICHARDSON

ALDCROFT: ECONOMIC PERFORMANCE

1920-29 1924-29 1900-13 INDUSTRIAL 2.8% PRODUCTION INDUSTRIAL 3.8% PRODUCTIVITY GDP 2.3% 1.00%

CAUSES OF IMPROVED PERFORMANCE:-

LEGAC OF WAR

(i) TECHNOLOGICAL PROGRESS

(ii) NEW PRODUCTS ‘VIABLE INDUSTRIAL BASE’ (iii) INDUSTRIAL STRUCTURE

UNEMPLOYMENT IN 1920s = NECESSARY ‘SHAKE-OUT’ OF LABOUR FROM STAPLES

H. W. RICHARDSON

ECONOMIC RECOVERY AFTER 1932 (1) BEGAN EARLIER THAN ELSEWHERE

(2) WAS MORE SUSTAINED

(3) WAS MORE RAPID

CASUAL FACTORS

(1) ‘NEW’ INDUSTRIES (VEHICLES, ELECTRICALS, CHEMICALS) = A DISTINCT ‘DEVELOPMENT BLOCK’ (2) RISING REAL INCOMES + CONSUMPTION AFTER 1929 (3) CHANGING TERMS OF TRADE (4) CHEAP MONEY (5) HOUSEBUILDING BOOM, 1932-35

N.B. EXPANSION OF ‘NEW’ INDUSTRIES SUFICIENT TO CAUSE RECOVERY

EVALUATION OF RICHARDSON (1) WERE THE ‘NEW’ INDUSRIES RESPONSIBLE FOR RECOVERY?

(2) WAS THERE AN ECONOMIC RECOVERY WORTHY OF THE NAME IN THE 1930s?

1. ‘NEW’ INDUSTRIES AND RECOVERY

PESSIMISTS: ALFORD; DOWIE; BUXTON; VON TUNZELMANN

(a) ‘NEW’ INDUSTRY DEVELOPMENT BLOCK TOO SMALL 1932: ALL EXCEPT VEHICLES DISINVESTING 1932-4: 7% OF TOTAL EMPLOYMENT 3 ½ % OF INDUSTRY NET INVESTMENT

(b) SLOW PACE OF STRUUCTURAL CHANGE 1937: VEHICLES, ELECTRICALS, ARTIFICIAL FIBRES = 9.7% OF MANUFACTURING CAPITAL STOCK COTTON TEXTILES = 8.4%

(c) SUPPLY-SIDE DEFICIENCES (i) FAILURE TO ACHIEVE US-STYLE SCALE ECONOMICS (ii) ORGANISATIONAL INERTIA (iii) WEAK LABOUR RELATIONS STRUCTURES WERE NEW INDUSTRIES CAUSE OF RECOVERY? NO RECOVERY INITIATED BY ONSET OF BOOM IN PRIVATE-SECTOR HOUSE BUILDING- INTENSIFIED BY RELAXATION OF MONETARY CONSTRAINTS ON GROWTH (CHEAP MONEY)

CYCLICAL RECOVERY AUGMENTED AFTER 1933 BY:- (i) RISING NET INVESTMENT IN ‘NEW’ INDUSTRIES (ii) REVIVAL OF STAPLES (N.B. IRON AND STEEL) (iii) CONFIDENCE + NOTE ROLE OF REARMAMENT AFTER 1936

WAS THERE AN ECONOMIC RECOVERY IN THE 1930s?

1932-37 % INCREASE

REAL INCOMES 19% GDP 23% IND. PRODUCTION 46% GROSS FIXED INVESTMENT 47% EXPORTS 28%

UNEMPLOYMENT IN THIRD QUARTER, 1937:-

9% = 1.4M 1938 = 12% +

IN TERMS OF UNEMPLOYMENT UK ACHIEVED A CYCLICAL RECOVERY WITH LIMITED EFFECTS ON STRUCTURL UNEMPLOYMENT CHANGES IN DURATION OF UNEMPLYOMENT, 6/32-2/38

% APPLICANTS AVERAGE UNEMPLOYMENT SPELL UNEMPLOYED 12 MONTHS (WEEKS) OR MORE JUNE 1932 FEBRUARY JUNE 1932 FEBRUARY 1938 1938 LONDON 4.4 5.8 16.2 15.5 SE 3.8 6.6 15.3 17.0 SW 8.8 8.6 19.7 20.0 MIDLANDS 14.6 15.9 25.4 30.3 NORTH 19.6 25.0 31.0 49.3 SCOTLAND 27.6 29.7 41.8 56.1 WALES 21.1 30.7 33.3 61.8

SOURCE: N.F.R. CRAFTS, Ec.H.R. 1987

AGE RANGE WORST AFFECTED: 45-64

WAS UNEMPLOYMENT BNEFIT SYSTEM RESPONSIBLE FOR PERSISTENCE OR UNEMPLOYMENT

BENJAMIN & KOCHIN

SIGNIFICANT PROPORTION OF 1930s UNEMPLOYMENT WAS ‘VOLUNTARY’ DUE TO EXCESSIVELY HIGH RATIO OF U BENEFIT TO WAGES REDUCED WORK AND JOB-SEARCH INCENTIVES

CRITICISMS

1. FAULTY STATISTICAL PROCEDURES 2. GENEROSITY OF BENEFIT SYSTEM EXAGGERATED

3. MISUNDERSTANDING OF JUVENILE LABOUR MARKET

4. NO EVIDENCE OF ‘MALINGERING’

LEGACY OF STRUCTURAL UNEMPLOYMENT RESOLVED BY REARMAMENT AND WWII