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Did The Macdonald Governments Effectively Tackle Unemployment And Poverty From The Depression In 1929 Up To 1935?

1503 words - 6 pages

The depression of 1929 to 1935 was a particularly severe one, resulting primarily from the Wall Street Crash, however there were many other contributory factors. During this period two governments came in to power. The Labour government 1929-3, led by Ramsey Macdonald and the national government 1931-5, which consisted of Conservative and Liberals led by Macdonald, in a coalition. The policies adopted by the parties were very different despite having the same leader. A Laissez Faire policy was pursued by Labour up until the end of their office, whilst the National Government abandoned this policy in favour for policies of more direct action, to deal with the now record level of 2.5 million unemployed.During it's term in power Labour employed various policies in order to stabilise the economy, which had been ravaged by the depression. Many of the policies were pursued with the right intention but proved to be of no particular use. One example of this being 'Balancing the Budget'. The Labour government believed that if the economy was left alone, in accordance with Laissez Faire, it would eventually stabilise itself as long as expenditure was the same as the income, allowing equilibrium. Although this was one of the safest approaches the government could adopt it did little to tackle the major problem created by the depression, unemployment. Similarly a 'Policy of Drift' was applied when the budget became unbalanced but this inevitably did nothing to counteract the effects of high unemployment and low tax revenue. Despite Macdonald's optimism this equilibrium was never achievable. The amount of taxes used as unemployment benefit unbalanced the government further and created no long-term solution. This became apparent to Macdonald in 1930 when he raised the expenditure on public work schemes from Februarys £70 million to Septembers £140 million. Although this offered some help by allowing people to become self sufficient again rather than living of government benefits it was not very efficient and unemployment continued to rise.Affairs finally came to a head for the Macdonald and the Labour Government in June, 1931 when the May Report was published. The report suggested cutting unemployment benefits by 20%, as this was the only way to get the country stable again. Others disagreed that these cuts were the right approach and discussed other methods. Maynard Keynes one of Britain's most trusted economists even suggested a repeal of the Gold standard 'The gold standard is preventing Britain from being competitive'*1. After much discussion Macdonald reluctantly implemented 10% cuts in September 1931, thus ensuring Britain's ability to secure loans from France and the US, however this decision had serious social implications. In doing so, Labour had contradicted the principles of its re-distribution of wealth policy and as a consequence the loss of their support and subsequently the loss of the general election in 1931.The Liberal and...

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