Causes and Consequences of the Depression

Causes of the Depression

Post-World War I economic instability: After the end of World War I, Britain - like other major economies - dealt with high public debt and significant reparations costs, contributing to fiscal challenges in the subsequent decades.
Overdependence on old industries: The British economy was reliant on ‘staple’ industries such as coal, steel and textiles, which were already struggling and were unable to cope with the worsening global economic conditions in the late 1920s.
Wall Street Crash of 1929: This was a significant external influence. The Wall Street Crash is seen as the inauguration of the Great Depression, leading to severe losses in the American economy which had a ripple effect on British trade and economy.
Poor economic policy response: The government response, such as the decision to return to the Gold Standard at the pre-war parity in 1925, is seen as constraining the economy, undermining competitiveness, and worsening the depression.

Consequences of the Depression

High unemployment rates: The Depression led to mass unemployment with unemployment rates peaking close to 25% in 1932. Regions such as Wales and Northern England were especially hard hit, with certain areas experiencing rates even higher than the national average.
Social unrest: The economic hardship and high unemployment led to increased social unrest and hostility towards the government, as seen in events like the National Hunger March of 1932.
Regional economic disparity: The unequal impact of the Depression heightened the north-south divide within England. New industries like electrical goods and car manufacturing concentrated in the south, while the north, reliant on older industries, suffered more.
Policy changes and state intervention: In reaction to the Depression, the government introduced measures like the Unemployment Act of 1934 and shifted towards a more protective economic stance, marking the start of the Welfare State. This period saw an increased role for the state in managing and directing the economy.
Changes in political landscape: The economic turmoil and unemployment also led to a shifting political landscape. Labour replaced the Liberal Party as the main opposition to the Conservatives and the decade closed out with the outbreak of World War II, which brought profound changes to the nation.