Forty years ago this month—on June 5 1929—the second Labour government in British history came into office. They had, in fact, won the election with about 300,000 votes less than the Conservatives but the electoral system had given them 27 more seats. They relied for their majority in Parliament on support from the 59 Liberal MPs—support which, in their previous attempt at government in 1924, had let them down. The Prime Minister, Ramsay MacDonald, was quite firm that there would be no repetition of that; “I am,” he said, “going to stand no monkeying.”
The Labour governments which have been elected since 1929—Attlee’s in 1945 and Wilson’s in 1964—faced problems similar to those which savaged MacDonald’s between 1929 and its collapse in 1931. All of them have struggled to defend sterling as an international trading currency and to energise a drive to capture export markets. But the 1929 government also had on their hands the effects of a world depression and chronic unemployment which was responsible for what the economist Pigou called “the intractable million”—the figure below which the number of unemployed in Britain could not be reduced.
When Labour took office in 1929, a great investment boom was under way on Wall Street and there had indeed been considerable optimism expressed about the chances of beating the depression. As the year opened Philip Snowden, who was to be Labour’s Chancellor of the Exchequer, wrote in the Daily Express:
There are some grounds for hope that trade will improve in the year on which we are now entering . . . On the whole I think the outlook for 1929 is better than at the opening of any New Year since 1922 . . .In truth, there was little cause for optimism among the British capitalist class or their administrators in 1929. By that time it was clear that they had little chance of regaining their pre-1914 dominance. Many of their investments abroad had had to be sold to pay for the war and the basic British industries had lost many important export markets. Some hope was put in schemes to re-organise old industries and to develop new ones but this needed substantial injections of capital, and after the years of bad trade there was little confidence or incentive for that.
For some time before the first world war, the British capitalist class had enjoyed a position which depended extensively upon the dominance of their coal, textiles, and heavy engineering. In 1913 coal and textiles contributed 55 per cent of British exports and cotton alone provided a quarter of the value of total exports. Before 1914 unemployment had fluctuated; it was between 3 and 4 per cent in good years and rose to 10 per cent in bad. But after the war it soon became apparent that the basic industries had suffered a setback. The coal mines were affected by the development of new forms of power and by the more economical use of coal in power stations. More serious was the loss of export trade, of the markets in Russia, Poland, and the Baltic countries and the competition from increased exports from Germany, some of which went out as war reparations. This decline was the background to the bitter struggle between the miners and the owners over wages and hours, which reached its peak in 1926.
The textile industry was hit because many countries which had once been ready markets for British produce had built up their own production — often with plant imported from Britain. In India, for example, cotton output trebled between 1913 and 1929 and the Indian government imposed protection against British goods. By 1929 Japan had captured 19 per cent of the world’s trade in cotton, after starting from virtually nothing in 1913. It was a similar story in iron and steel; between 1913 and 1923 British exports to Italy fell by 38 per cent, to Japan (which started importing from India and China) by 87 per cent, and to France (which had turned to local production after the accession of Alsace-Lorraine) by 63 per cent.
Dole queues grew
The war was followed by a mild boom in Britain and the post-war governments were reluctant to upset this by returning to the gold standard which, they thought, would hinder industrial renewal and development. This policy was changed with the serious inflation of the European currencies and in 1925 the pound became once again convertible into gold, at the pre-war parity—a measure which, the unemployed were doubtless overjoyed to hear, was "making the pound look the dollar in the face”. As usual, there was a division of opinion among the experts over the wisdom of this attempt to re-establish pre-war monetary and trading conditions; in the Labour Party Snowden was in favour and Pethwick-Lawrence against, although by 1931. when the gold standard was abandoned, Pethwick-Lawrence had changed his mind.
But no amount of financial juggling could save the leading British export industries. From 1925 onwards, with hardly a break, the dole queues grew longer. As American investments were drawn into the Wall Street bonanza, and as the French government adopted a policy of building up their gold reserves in preference to investing abroad, British financiers were left alone trying to make the gold standard work and virtually financing the depression themselves.
This was the situation when Labour took office in 1929. The gravity of unemployment had made it the main issue of the election and one of MacDonald’s first acts as Prime Minister was to appoint a special, high ranking committee of Ministers to study the problem and suggest remedies. Of course this went down very well with the men lining up at the labour exchanges, who had too much to think about to remember that ever since it came on the scene unemployment had been studied and probed and had been the subject of countless nostrums.
The committee—George Lansbury, Tom Johnston, Oswald Mosley, and J. H. Thomas —was not one of the happiest episodes in the history of Labour government. Lansbury and Johnston did little to distinguish themselves, and Mosley, who was sold on Keynesian theories and who produced masses of memoranda, resigned when the frustrations of the job became too apparent to him.
Nothing but promises
But the most remarkable figure on the committee—perhaps in the entire government—was Thomas. He had come up through the trade unions—he was once secretary of the NUR—and obligingly conformed to all the music-hall conceptions of the cloth-cap worker turned foreman. He dropped aitches here and stuck them back there; he loved dressing up and mixing in high society; at the Lord Mayor's banquet he ended up slumped drunkenly across the table. Beatrice Webb described him in her diaries: “. . . a boozer, his language is foul, he is a Stock Exchange gambler, he is also a social climber.”
Yet Thomas was no joke. Millions of workers were desperately relying on him to relieve unemployment and he was not above cruelly raising their hopes. In August 1929, for example, he went to Canada with the accepted mission of arranging markets for British products. In fact there was never much reason to think that Thomas would succeed; nevertheless he carried the hopes of all those men in the dole queues. On the way back he cabled: "Satisfied in my mission and certain that work for the unemployed will result.” On his return he would not be drawn further, except to hint: "I have a lot of things up my sleeve.” A few days later he was more specific: “I have a complete cure. There are a few people who won’t work and we can’t do anything for them. But for all ordinary forms of employment, yes.” But it soon became clear that Thomas had brought back nothing more than promises — there were no orders for coal, or textile goods, or for ships to carry them. Very quickly Thomas’s mission faded into memory.
Arthur Henderson (who was a political rival) said that Thomas was “. . . completely rattled and in such a state of panic that he is bordering on lunacy . . .” and perhaps, to be charitable, that explains the lies which continued to come from him. All along he kept assuring the unemployed that things were about to improve (and in this he was not alone):
November 4 1929: ‘‘I have no hesitation in saying there is a trade improvement.”
February 12 1930: “I think the bottom has been reached.”
March 12 1930: “Thinks could only improve.’’
March 20 1930: “The worst is past.”
But by August 1930, after he had lost his job at the head of the special committee, Thomas dropped his mask and made this callous remark which presumably was supposed to be funny:
Do not be too keen about this humbug of breaking records. I broke all records in the number of the unemployed.
After Thomas and his blather had been dismissed to the Dominions Office, unemployment kept on rising while the economists and the politicians looked on helplessly. Some of the experts were sure that an energetic programme of public works — road building, land reclamation and so on—was the answer. They were, if anything, farther from the real world of capitalism than were men like Thomas, who at least had to face the fact that a slump, most of all, is the time when capital cannot be directed at the stroke of a pen and that in any case public works could offer employment for only a fraction of the out-of-work and then not at once. A road, for example, cannot be built by assembling all the necessary labour and materials at one go—this must be a gradual process, in time with the progress of the work. Any public works programme, supposing it were economically possible and supposing it had any noticeable effect, would have taken about two years to make itself felt through the economy.
In the autumn of 1929 the great boom on Wall Street collapsed and the downward slide became an avalanche. In America, bankrupt capitalists, who had always preached the virtues of hard work to their employees, committed suicide when they became confronted with the possibility of having to do some themselves for a living. On March 28 1930 Margaret Bondfield, Minister of Labour, described the government’s bewilderment at the events which had overtaken them:
Nothing in the case of the live register before Christmas gave any inkling of the phenomenal rise (in unemployment) which has taken place since the turn of the year.
Thenceforward, Labour was caught in what MacDonald later called an ’economic blizzard’—just as if it had not always been their boast that they could control the winds and the weather of capitalism. '
MacDonald’s advice
This is not the place to tell the rest of the sorry story of that government—the story of millions of underfed people existing alongside ’surpluses’ of food, of Labour’s desperate search for economies to reassure the international financiers and of their final collapse into the National government of 1931. Nor is this the place to tell how that National government, which was formed specifically to deal with the emergency, also failed. Let it be enough to say that when MacDonald's men took over at Westminster, pledged to cure unemployment, there were 1,163,000 out of work. When Parliament broke up on July 31 1931 for the last time under Labour—there were 2,713,000.
The final surprise was that the Labour Party survived. When MacDonald called his junior Ministers together to tell them that he was going to lead a National government, he advised them, as ambitious men (no word about principle, or Socialism, or even softening capitalism) not to follow him; they should, he urged them, consider their future careers; it would in the end be more profitable for them to dissociate themselves from him and the National government and to join the Labour opposition. They took his advice—men like Attlee, Morrison, Dalton. The Labour Party lived—just—to fight another day and although it took time, in the end they managed to blame for that debacle of 1929-31 a combination of a 'bankers’ ramp’, the ignorance of the economists, and MacDonald’s treachery.
By 1945 the British working class had all but forgotten the experiences of 1929 and they were ready again to trust Labour as the party with a heart. In fact there are many parallels between the Attlee and Wilson governments and that of MacDonald — and we can all think of Labour Ministers of 1945 and 1964 who are counterparts of men like Thomas and Snowden. Labour, like any other party of capitalism, does not change. It is all up to the workers with the votes; when, we may ask, will they ever learn?
Ivan
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