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
INDUSTRIAL
PRODUCTION
INDUSTRIAL
PRODUCTIVITY
GDP
1920-29
2.8%
1924-29
1900-13
2.3%
1.00%
3.8%
CAUSES OF IMPROVED PERFORMANCE:LEGAC OF WAR
(i)
TECHNOLOGICAL PROGRESS
(ii)
NEW PRODUCTS
(iii)
INDUSTRIAL STRUCTURE
‘VIABLE INDUSTRIAL
BASE’
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)
(2)
(3)
(4)
(5)
‘NEW’ INDUSTRIES (VEHICLES, ELECTRICALS, CHEMICALS) = A
DISTINCT ‘DEVELOPMENT BLOCK’
RISING REAL INCOMES + CONSUMPTION AFTER 1929
CHANGING TERMS OF TRADE
CHEAP MONEY
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
GDP
IND. PRODUCTION
GROSS FIXED
INVESTMENT
EXPORTS
19%
23%
46%
47%
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
LONDON
SE
SW
MIDLANDS
NORTH
SCOTLAND
WALES
% APPLICANTS AVERAGE
UNEMPLOYED 12 MONTHS
OR MORE
JUNE 1932
FEBRUARY
1938
4.4
5.8
3.8
6.6
8.8
8.6
14.6
15.9
19.6
25.0
27.6
29.7
21.1
30.7
UNEMPLOYMENT SPELL
(WEEKS)
JUNE 1932
16.2
15.3
19.7
25.4
31.0
41.8
33.3
FEBRUARY
1938
15.5
17.0
20.0
30.3
49.3
56.1
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