Carroll Quigley - Tragedy and Hope - A History of the World in Our Time

The MacDonald government of 1929-1931 was even less radical than that of 1924. The Labour members were unfriendly to their Liberal supporters and were divided among themselves so that there was petty bickering even within the Cabinet. The Liberal members were more progressive than Labour, and became impatient with Labour’s conservative policies. Snowden, as chancellor of the Exchequer, kept the import duties and raised other taxes, including the income tax. Since this was not sufficient to balance the budget, he borrowed from various separate funds and moved forward the date on which income-tax was due.

The Lord Privy Seal, J. H. Thomas, a railroad union leader, was made head of a group seeking a solution to the problem of unemployment. After a few months the task was given up, and he was made secretary of state for the Dominions. This failure appeared worse because both the Liberals and Sir Oswald Mosley (then of the Labour Party) had worked out detailed plans based on public-works projects. Unemployment benefits were increased, with the result that the Insurance Fund had to be replenished by loans. The Coal Mines Act (1930) set up a joint-selling agency, established a subsidy for coal exports and a national wage board for the mines, but left hours of work at seven and a half a day instead of the older seven.

The House of Lords refused to accept an Electoral Reform bill, an Agricultural Land Utilization bill, and Sir Charles Trevelyan’s Education bill. The last of these provided free secondary education and raised the school-leaving age to fifteen years; but the Labour government was not insistent on these bills, and Trevelyan resigned in protest at its dilatory attitude. An Agricultural Marketing bill, which benefited the landed group in the House of Lords and raised food prices to the consumer, was passed. Throughout these efforts at legislation it was clear that the Labour Party had difficulty controlling its own members, and the Labour protest vote on most divisions in Commons was quite large.

The problem of the growing budgetary deficit was complicated in 1931 by the export of gold. The National Confederation of Employers and the Federation of British Industries agreed in prescribing wage cuts of one-third. On February nth a committee under Sir George May, set up on a Liberal motion, brought in its report. It recommended cuts in government expenditures of £96 million, two-thirds to come from unemployment benefits and one-third from employees’ wages. This was rejected by the Trades Union Congress and by a majority of the Cabinet.

In June the Macmillan Committee, after two years’ study, reported that the whole financial structure of England was unsound and should be remedied by a managed currency, controlled by the Bank of England. Instead of making efforts in any consistent direction, MacDonald, unknown to any of his Cabinet except Snowden and Thomas, resigned but secretly agreed to continue as prime minister supported by the Conservatives and whichever Labour and Liberal members he could get. Throughout the crisis MacDonald consulted with the leaders of the other two parties but not with his own, and he announced the formation of the National government at the same Cabinet meeting at which he told the ministers that they had resigned.

The National government had a Cabinet of ten members, of which four were Labour, four Conservative, and two liberal. The non-Cabinet ministers were Conservative or Liberal. This Cabinet had the support of 243 Conservatives, 52 Liberals, and 12 Labour, and had in opposition 242 Labour and 9 Independents. Only thirteen Labour M.P.’s followed MacDonald, and they were soon expelled from the party.

This crisis was of great significance because it revealed the incapacity of the Labour Party and the power of the bankers. The Labour Party throughout was wracked by petty personal bickering. Its chief members had no understanding of economics. Snowden, the “economic expert” of the Cabinet, had financial views about the same as those of Montagu Norman of the Bank of England. There was no agreed party program except the remote and unrealistic one of “nationalization of industry,” and this program was bound to be regarded with mixed enthusiasm by a party whose very structure was based on trade unionism.

As for the bankers they were in control throughout the crisis. While publicly they insisted on a balanced budget, privately they refused to accept balancing by taxation and insisted on balancing by cuts in relief payments. Working in close cooperation with American bankers and Conservative leaders, they were in a position to overthrow any government which was not willing to crush them completely. While they refused cooperation to the Labour government on August 23rd, they were able to obtain a loan of /80 million from the United States and France for the National government when it was only four days old. Although they would not allow the Labour government to tamper with the gold standard in August, they permitted the National government to abandon it in September with bank rates at 4% percent.

The National government at once attacked the financial crisis with a typical bankers’ weapon: deflation. It offered a budget including higher taxes and drastic cuts in unemployment benefits and public salaries. Riots, protests, and mutiny in the navy were the results. These forced Britain off gold on September 21st. A general election was called for October 27th. It was bitterly fought, with MacDonald and Snowden attacking Labour while Conservatives and Liberals fought on the issue of a tariff. Snowden called the Labour Party “Bolshevism run mad.” He was later rewarded with a peerage. The government used all the powerful methods of publicity it controlled, including the B.B.C., in a fashion considerably less than fair, while Labour had few avenues of publicity, and was financially weak from the depression and the Trades Disputes Act of 1927. The result was an overwhelming government victory with 458 members supporting it and only 56 in opposition.

The National government lasted four years. Its chief domestic accomplishment was the ending of free trade and the construction of a cartelized economy behind the new trade barriers. The construction of cartels, the revival of the export trade, and the continuance of low food prices gave a mild economic boom, especially in housing. The ending of free trade split the Liberal Party into a government group (under Sir John Simon) and an opposition group (under Sir Herbert Samuel and Sir Archibald Sinclair). This gave three Liberal splinters, for Lloyd George had never supported the government.

The domestic program of the National government was such as to encourage a cartelized economic system, and to curtail the personal freedom of individuals. On this, there was no real protest, for the Labour opposition had a program which, in fact if not in theory, tended in the same direction.

A national system of unemployment insurance was set up in 1933. It required the insurance fund to be kept solvent by varying contributions with needs. With it was a relief program, including a means test, which applied to those not eligible for unemployment insurance. It placed most of the burden on local governments but put all the control in a centralized Unemployment Assistance Board. Unemployed youth were sent to training centers. All educational reform was curtailed, and the project to raise the school-leaving age from fifteen to sixteen was abandoned.

The London Passenger Transport Act of 1933, like the Act creating the B.B.C. seven years earlier, showed that the Conservatives had no real objection to nationalization of public utilities. All the transportation system of the London area, except the railroads, was consolidated under the control of a public corporation. Private owners were bought out by generous exchange of securities, and a governing board was set us of trustees representing various interests.