Essay: "Why did inter-war governments find it so difficult to reduce unemployment?"
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Course
BPG - British Politics And Government (202)
Institution
University Of Oxford
Oxford PPE tutorial essay answering: "Why did inter-war governments find it so difficult to reduce unemployment?". This was for the interwar unemployment week of the British Politics and Government since 1900 (BPG) module.
Kate Patrick
Why did inter-war governments nd it so dif cult to reduce unemployment?
This essay will argue that inter-war governments found it so dif cult to reduce unemployment
ultimately because it was not their primary objective. Rather, a staunch commitment to Treasury
orthodoxy placed stability and business con dence at centre stage, rendering the issue of
unemployment something to be tackled indirectly or ameliorated in the short-term. I will rstly
argue that the governments’s ad hoccery toward unemployment, was not indicative of a lack of
overall economic strategy, but rather the by-product of the 'purposeful policy' of 'consistent,
deliberate absence of action’ that was deeply entrenched within the political establishment (Miller,
1976: 454). I will then contend, arguing against the thrust of Booth and Pack’s (1985) claims, that
the lack of viable theoretical or ideological alternatives was not what constrained government
policy. It was in fact the lack of political pressure, as well as the ‘innately conservative’
bureaucracy, that meant the government had little incentive to deviate from orthodoxy (Garside,
1990).
Firstly, I will note that the question implies that governments were genuinely attempting, yet
struggling, to reduce the ‘endemic disease’ of unemployment that characterised the inter-war years
(Garside, 1990: 380). Yet, this implication is one that I aim to contest in what follows. Moreover, it
is important to note that the unemployed were not one 'homogenous group’, and the combination of
temporary cyclical unemployment and longer-term structural unemployment (with 25% of
applicants for unemployment bene ts in 1936 having been out of work over a year), particularly in
‘outer Britain’1, combined to produce an economic situation that even the most competent and
motivated government would have struggled to tackle (Garside, 1990). Having said this, when
Britain is put in the world context of the 1930s it becomes apparent that, while the inter-war years
were characterised by unemployment, Britain was one of the only countries to successfully maintain
democratic stability and the continued acceptance of the 'apparent logic of capitalism’ (Miller,
1976: 453). As such, failure to successfully tackle unemployment need not imply a failure overall.
I will consider how the inter-war governments’s ad hoc approach to unemployment policy resulted
in successive governments struggling to effectively tackle unemployment. Garside (1990) argues
that governments drew on a ‘heady mix of remedies’ rather a systematic or sustained strategy. For
instance, consider the uctuations in the initial waiting period that claimants of unemployment
insurance were subject to: just 3 months after the creation of the Unemployment Fund in February
1921 the waiting period was raised from 3 days back to 6 days2, then in response to falling levels of
unemployment MacDonald reverted it back to 3 days, and this was reversed twice more in response
to the number of unemployment claimants and a bid to reduce de cits. Moreover, the continued
extension of the transitional periods once the eligibility periods of unemployment insurance
claimants was due to expire, evidences how policies were not designed to deal with the long-term
unemployed or tackle the root of the problem. Thus, instead of unemployment policy being
deliberate and strategised, it was reactionary and ad hoc.
Yet, just because the inter-war governments had 'little deliberate anti-unemployment strategy’, does
not mean that they can be accused of having little deliberate economic strategy overall (Garside,
1 ‘Outer Britain’ refers to the regions that were characterised by a reliance on staple export industries, and as
such experienced a high proportion of long-term unemployment.
2 This was part of the response to the fact that, due to an increase in unemployment claimants, the Fund was
losing £1.2 million per week by May 1921 (Garside, 1990: 39).
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, Kate Patrick
1990). 3On the contrary, it was the staunch commitment to orthodoxy under-pinning the ad hoccery,
based on a 'rational, comprehensive and widely accepted theoretical foundation’, that prevented
inter-war governments from tackling the root cause of unemployment, namely that of under-
consumption and weak aggregate demand (Keynes, 1931). Treasury orthodoxy held that the
government should use policies like retrenchment, de ation, and minimum intervention to balance
budgets and maintain stable exchange rates to help the economy return to ‘normalcy’ during slumps
(Stevenson, 1983). This approach would encourage con dence by creating a ‘safe environment for
investment’, aiding the transition back to equilibrium, which would thereby return the economy to
fuller levels of employment (Miller, 1976: 457). Given these beliefs, radical policies that likely
would have relieved unemployment, particularly that of large-scale expenditure on public works,
were incompatible with orthodoxy. In fact, they were believed to crowd out private investment,
reduce the ef ciency, raise costs, and thus deepen recession.
The use of the means test is a prime example of orthodoxy taking priority over not only reducing
unemployment, but even ameliorating it. Rising levels of unemployment meant that an increasing
number of people were eligible for bene ts, raising government expenditure and threatening the
budget balance. The stringency of the means test was thus used as a break pedal to control the
number of citizens eligible, thus prioritising . For instance, with rising levels of unemployment in
the wake the Wall Street Crash, and thus rising levels public expenditure on unemployment
insurance, the government passed the 1931 Anomalies Bill which tightened the eligibility criterion,
meaning that by 1932, 82% of married women’s claims and 75% of seasonal worker claims were
being rejected (Garside, 1990: 55). Thus, the conventional neo-classical view held that if the
government acted in such a nancially ‘responsible’ manner, and pursued a strategy of minimal
intervention, that mass unemployment would essentially x itself.
Booth and Path (1985) argue that it was the dearth of coherent or genuinely unorthodox programs
on the part of the Labour Party that meant the commitment to orthodoxy remained unchallenged.
For instance, the Labour Party seemed to be committed to a contradiction through simultaneously
supporting expansionary policies and public works schemes inspired by the ILP and Mosley’s
Memorandum, while also possessing a ‘stunningly orthodox current’ that resulted in a ‘depressing
lack of vision and coherent thought’ (1985: 17). This was evident in the both the 1918 manifesto
which called for ‘work and full maintenance’ and the 1931 pamphlet For Socialism and Peace
which framed the unemployment issue as one of 'lack of competitiveness’, implying that
improvements in ef ciency and business con dence would indirectly solve the worry of
unemployment. This was a continuation of the acceptance of orthodoxy Labour had shown in
government in 1924, offering piecemeal policy spending of £77 million on public works through
Unemployment Grants Committee - employing just 200,000 (less than 10% of the unemployed),
(Stevenson, 1983: 187). Thus, in a absence of the main progressive party mounting a serious
political challenge, Stevenson claims that ‘there was no obvious alternative strategy available’ until
Keynes’s 1936 General Theory (1983: 189).
Yet, even if radical alternatives had bestowed the most comprehensive, coherent and fruitful policy
recommendations, the structure of the bureaucracy meant that these ideas had little chance of being
absorbed into the policy apparatus (Garside, 1990). Despite the post-war creation of independent,
specialised ministries, the commitment to Treasury orthodoxy was so deeply entrenched within the
‘innately conservative’ civil service, that an increase in policy innovation did not follow. For
instance, The Ministry of Labour shared responsibility with the Board of Trade, creating
'departmental limbo’, meaning that it ultimately ‘succumbed to Treasury control’ (Garside, 1990:
3 In fact, it is arguable that had the inter-war governments’s economic strategy been lacking, they may have
been much more receptive to the radical alternative ideas circulating in the likes of Keynesian and Socialist
circles at the time, and likely would have had less difficulty dealing with unemployment.
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