Labour Arrives; Summer 1929:
In response to John Gorman’s request for photographs for his 1980 book (see the list of sources below), Helen Hathaway of the Reading North Labour Party contributed the picture of women supporters of The Daily Herald at the start of the circulation campaign for the election of the 1929 Labour government. Under the editorship of George Lansbury, before the First World War, the newspaper had become uncompromisingly socialist and was a paper for rebels, supporting strikes, opposing wars and providing a platform for suffragettes and syndicalists. But during the war, Lansbury’s pacifist stance meant that it could not compete with the war stories of the right-wing popular newspapers which were avidly sought by the public. From September 1914, the paper appeared only as a weekly. In 1919, there was a resurgence of the paper, financed by the trade unions and Co-operative societies, but it continued to struggle until 1922 when Ernest Bevin led the TUC and Labour Party into joint ownership. ‘Labour has arrived’, proclaimed the poster proudly held by the working-class women lined up for the photograph, ‘heralding’ the advent of the second Labour government, as shown below:
Elected in 1929 for the first time as the largest party in Parliament, the second Labour Government had succeeded the Conservatives relatively smoothly, largely as a result of the usual ‘wax and wane’ of party popularity with the electorate. The Labour Party was now the second greatest of the political camps in Britain, having clearly displaced the Liberal Party as the main rivals of the Tories to power. Though its professed ‘creed’ was socialism, it had little in common with the socialist parties on the Continent. Its backbone was the trade unions, which were, according to the writer and politician John Buchan, the most English thing in England. They were more radical than socialist and in a sense more conservative than radical. Their object was not to pull things up by the roots but to put down even deeper roots of their own. Their faults lay in occasional blindness of eye and confusion of head, not in any unsoundness of temper or heart. As a Scottish Unionist MP, Buchan recalled that the hundreds of new Labour MPs …
… brought to the House of Commons a refreshing realism, for they spoke as experts on many practical things, and their stalwart vernacular was a joy amid the clipped conventions of parliamentary speech. But larger questions they were apt to judge on too low a plane and with imperfect knowledge. The corrective was to be looked for in the socialist intellectuals, of whom they were inclined to be suspicious, but who applied to policy a wider education and broader sympathies. … as a group they were serious students of public affairs, with a genuine scientific apparatus behind them. It was well for Labour, and well for the country, to have thislaboratory of experiment and thought.
It had been five years since Labour had carried the ‘Bolshie’ tag and Ramsay MacDonald introduced his Cabinet as chosen for very hard work and because I believe the nation fully believes they are perfectly competent to perform it. In the event, they proved as incompetent as any of the previous governments to stem the rising tide of unemployment. But although Labour was the largest party in Parliament, the Labour government of 1929 was still a minority government. Besides, any government, whatever its election programme, has to face the same problems as its predecessor. On taking office, the Labour government floundered in a quagmire of conservative remedies for the worldwide slump. Pledged to solve the problem of unemployment, the newly-appointed ‘Minister for Unemployment’, J. H. Thomas, had boasted I have the cure as he ‘hob-nobbed’ with bankers and watched the number of registered unemployed soar. He demonstrated a complete lack of imagination and ineptitude but was not aided by the resistance of the Civil Service, the innate conservatism of Snowden at the Exchequer and the world-wide financial and economic crises which beset this administration. In her diary for 21 December 1929, Beatrice Webb recorded her conversation with ‘Jimmy’ Thomas, in which she tried to console the unfortunate minister, who naturally thought he was being scapegoated for the Government’s failure to keep its election promise:
We sat down for a chat together. The poor man was almost hysterical in his outbursts of self-pity; everyone had been against him and the ‘damns’ flowed on indiscriminately. Margaret Bondfield and her d_ insurance bill, the d_ floods, the d_ conspiracy between restless Lloyd George and weathercock W. Churchill to turn out the Labour Government, and the d_ windbags of the Clyde responsible for his not fulfilling the d_ pledge which he had never made, to stop this d_ unemployment. There is honesty and shrewdness of his deprecations of doles and relief work for the unemployed. But he took no counsel, not even with Mosley and Lansbury who had been appointed to help, either about the appointment of his staff or about remedial measures. Then he lost his nerve and with it his strength. Poor Jimmy is egregiously vain and therefore subject to panic when flattery ceases and abuse begins. For years he has looked upon himself as the Future Prime Minister; today the question is whether he will be fit for any position at all in a future Labour Cabinet. …
Labour’s Conservatives & Radicals:
Neither is there any evidence that the Labour Government of 1929-31 sought to abandon transference as the main means of dealing with unemployment, though Margaret Bondfield (pictured standing on the left below), now Minister of Labour (and first woman minister of any government), did not consider that the continuance of the policy should exclude attempts to attract industries to the depressed areas or to develop public works schemes. Oswald Mosley also tried hard to get Thomas, whom he considered a ‘useless minister’, to ‘do something’ about the unemployed. He had a ‘sensible plan’ for increased allowances and organised public works, but the ‘old men’ of the party didn’t want to know about it. So he walked out on it early in 1931 to form the ‘New Party’, taking some of the more dynamic men of the Left like John Strachey. But they soon left him when he took off down the right-hand road to Fascism. However, the scale and widespread nature of unemployment in these years, making it more than a structural problem in the ‘staple’ industries, tended to preclude either the possibility of a radical response to the problem, while at the same time preventing the effective operation of the transference scheme. There were few areas that were not experiencing a significant level of unemployment during these years which actually showed the greatest convergence between regional and national figures in terms of absolute volumes of workless.
Ramsay MacDonald was, by all accounts, including that of René Cutforth, a young journalist at the time, a noble-looking creature, in the manner of some great Highland chieftain. Originally the Labour Government of 1924 had had some qualms about wearing even evening dress when attending Buckingham Palace or in Parliament, remembering the lone cloth cap in the House of Commons of their first independent Labour member, Keir Hardie. MacDonald never subscribed to such qualms, as the picture below shows, and the higher he rose in social circles, the more he was in his element. In fact, he became something of a ‘snob’; at one time he so frequently attended the soirees of Lady Londonderry, wife of the coalowner so hated in MacDonald’s own constituency in South Wales that, and an upper-crust socialite and political hostess, that James Maxton, the ILP MP asked him in the House of Commons whether the Labour anthem was still the ‘Red Flag’ or whether it had been exchanged for ‘The Londonderry Air’. Churchill said of MacDonald that he liked the Tory atmosphere and tradition; the glamour of old England appealed to him. Of course, MacDonald was to die with the curses of those in whose service he had spent his life ringing in his ears for the ‘great betrayal’ of 1931.
The truth is that, even before taking office and despite its pledges to solve the problem of unemployment within three months, the Labour leadership had accepted Conservative economic philosophy. The proposal of the Chancellor, Philip Snowden (on the right of the steps below) to effect economies by cutting maintenance for the unemployed was to precipitate not just the political crisis which led to the formation of a National Government, but the biggest and most controversial demonstrations witnessed in Britain since the days of the Chartists, the hunger marches of the 1930s. Snowden, according to Churchill, …
… viewed the Socialist creed with the blistering intellectual contempt of the old Gladstonian radical. To him Toryism was a physical annoyance, and militant socialism a disease brought on by bad conditions or contagion, like rickets or mange. …
Snowden’s rigidity of doctrine was otherwise inpenetrable. Free imports, nomatter what the foreigner may do to us; the Gold Standard, no matter how short we run of gold; austere repayment of of debt, no matter how we have to borrow the money; high progressive direct taxation, even if it brings creative enegies to a standstill; the ‘Free breakfast-table’, even if it is entirely supplied from outside the British jurisdiction! …
We must imagine with what joy Mr Snowden was welcomed at the Treasury by the permanent officials … here was the High Priest entering the sanctuary. The Treasury mind and the Snowden mind embraced each other with the fervour of too-long-separated kindred lizards, and the reign of joy began. …
... He was a man capable of maintaining the structure of Society while at the same time championing the interests of the masses. …
Above: Forming the National Government, August 1931 (see full picture below).
Most of the published memoirs, with the possible exception of Churchill’s, still reek of contemporary prejudice, ignorance, and partisan blindness to facts. The historian’s interpretation of the contemporary judgements both of MacDonald and his ministers by others and by MacDonald himself should depend first on the evidence available, and secondly on analysis of this evidence on the basis of fair-minded, non-partisan criteria. The historian, seeking some ‘truer’ perspective, must recall how different the problems of 1925-31 were compared to those of 1945-51, though at both times Labour faced almost insurmountable obstacles. So, before we fast-forward to the failure and fall of the Labour government in 1931, we need to understand why and how it had accepted Conservative economic philosophy. John Buchan, writing in 1935, provides an alternative contemporary perspective to that of the Labour diarists. He took a longer-term perspective of the economic orthodoxy of the Twenties:
The main concern for Britain, as for other nations, was economic – how to keep body and soul together. In its preoccupation with material needs all the world had gone Marxist. The problem was how to pass from the unbridled extravagance of the war to a normal life. We had been living on stimulants, and we must somehow transfer ourselves from dope to diet. There was a brief gleam of prosperity just after peace, when the replacement of stocks required still further expenditure, and then the nation settled itself to a long, thankless toil in the shadows…
The first duty was to cease spending more than we could afford; no easy thing, for our obligatory expenses were almost beyond our earnings. We had to face some eight thousand millions of war debt, and this meant a scale of taxation which crippled industry and bore crushingly on all but profiteers. … But while our costs had risen our business was declining. We had lost our industrial pre-eminence in the world’s markets … Our exports, visible and invisible, looked like soon ceasing to pay for our necessary imports. The whole nineteenth century fabric of British trade was breaking down.
With shrinking markets, and the cost of Government, local and central, nearly three times what it had been in 1913, Britain’s economy was failing to pay its way. The fact was that industrial workers were already receiving a higher remuneration than could be justified according to the value of their products. The situation was met by a vigorous effort on the part of industry both to enlarge its range of products and to set in order its older ones. Agriculture had slipped back into a trough, but a second industrial revolution by which a variety of new businesses arose, chiefly making luxury products and based mostly in Southern and Midland England. There were also notable technical advances in production, which while improving industrial efficiency, also led to increasing unemployment. There was also a growing economic nationalism throughout much of the industrialised world, though not yet in Britain, so that the British industrialist, already heavily taxed, and facing rising costs, had to compete in export markets hedged around by tariffs, and in domestic markets against cheap foreign imports, often subsidised.
Added to all of this, at the heart of national economic policy was a banker’s policy. Deflation was the watchword of this, and the international stability of the currency was considered the key to a revival in trade. In April 1925, as Chancellor of the Exchequer, Winston Churchill had taken the fateful step of returning to the gold standard at the level of pre-war parity. As a result, the amount of money was curtailed, leading to a drop in internal prices while interest charges and wages remained relatively high. In turn, this added to the costs of production at home, while the price of exported goods automatically increased. This return to orthodox fiscal measures re-established Britain’s role and reputation as the world’s financial centre, but at the cost of its export trade, leading to wage troubles in the exporting industries, especially coal. Seven difficult years followed this decision as unemployment grew and it became clear that some of Britain’s heavier industries had sunk to a permanently low level of output. Under the futile system of war debts and reparations, the debtor countries could not pay their debts since their creditors had erected colossal tariff walls, and the consequence was that their exports were diverted to Britain, the one free-trade area that remained. But the payments received for these were not used to buy British goods in return, but to buy gold with which to pay off their creditors.
The disaster was already imminent by the time Labour took charge in the summer of 1929 as the whole mechanism of the world’s commerce was out of gear, and the climax began in the autumn of that year with the downfall of America’s swollen prosperity. Historians have since argued about the extent to which the Crash of October 1929 and the Great Depression which followed were caused by the First World War, as well as to the extent which it led, in turn, to the Second World War. However, from the perspective of the time, certain facts seemed undeniable. The money system of the world was no longer adequate to deal with the complexities of international trade, made even more complicated by political troubles and economic nationalism as well as by the unbalanced position of gold, and by a lack of trust of politicians and bankers among the general populations.
Bleak Scenes, Hard Times:
The bleak scene shown below from April 1930 at Ferryhill in the north-east coalfield features the lone figure of George Cole, local miner’s leader and militant trade unionist. The small contingent with banners and rucksacks are the north-east section of the unemployed march to London, on their way to join another thousand from Scotland, Plymouth, Yorkshire, Lancashire, the Midlands and Kent. The first march of the unemployed in the thirties, it was a small demonstration compared with those to follow over the rest of the decade, but what gave it special significance was that it was the first of its kind to be directed against a Labour government. The march was organised by the Communist-inspired National Unemployed Workers’ Movement (NUWM), founded in 1921 as part of the British Communist Party’s ‘Class against Class’ policy. The marches, therefore, divided the loyalties of Labour members and supporters. Northampton Labour Party said that it could not support a movement in opposition to the government.
The marchers arrived in London on May Day, to be greeted by twenty thousand at the entrance to Hyde Park, with another thirty thousand at the meeting inside. That night the weary marchers presented themselves at the Fulham Workhouse, refused to be treated as ‘casuals’, won the right to beds and food and, to the fury of the Workhouse Master, hoisted the red flag over their quarters. Ten months after taking office, the MacDonald government had failed to halt the steadily increasing number of jobless and in fact, unemployment had increased from 1,169,000 when Labour came to power to 1,770,000 by May 1930. After eighteen months in office, the numbers of workless under Labour had risen to two and a half million. Wal Hannington, the Communist leader of the NUWM, sarcastically remarked that as Minister of the Unemployed, J. H. Thomas is a howling success.
The conditions of working-class life had on the whole been greatly improved since the Great War. Higher wages did not lead to waste, but to higher standards of living. The average household had better food, better clothing, more margin for amusements and wider horizons of opportunities. Small wonder then that they struggled to maintain what they had won. That was for those in employment, of course. For the unemployed, who now (by the end of 1930) reached two million in number, there was a bare subsistence and tragic idleness, a steady loss of technical skill, and a slow souring and dulling of mind. In the heavy industry towns of Northern England and valleys of the South Wales Coalfield, unemployment became a permanent way of life, sometimes for whole communities. A problem of such magnitude required for its solution not only the energies of the State but the thought and good-will of every private citizen and public body. Owing partly to the work of the Prince of Wales and the National Council of Social Service, of which he was patron, these were forthcoming. People began to develop a sense of personal and civic duty for the unemployed, especially the miners in the ‘distressed areas’.
By early 1930, the ‘social service movement’ had obtained a substantial footing throughout a wide area of the South Wales Coalfield in particular. At Brynmawr, one of the ‘blackspots’ on the northern edge of the Coalfield, over a hundred people took part in a Survey which was begun in 1929, but these were mainly professional and business people since the trade unions, the Labour Party and the Urban District Council refused to co-operate. As a former member of the ‘settlement’ reflected in the 1980s, …
… they felt that they had been slighted: they resented interference and they felt their dignity and authority undermined … the local people were suspicious of a group of English Quakers with middle-class backgrounds interfering in the town … the Quakers became known as the BQs (Bloody Quakers)!
Another settlement at Maes-yr-Haf in the Rhondda spawned over fifty unemployed clubs throughout the valleys from 1929 and provided an advice centre for the settlements which were established elsewhere, the first of which was at Merthyr Tydfil in 1930. Percy Watkins, Head of the Welsh Section of the National Council of Social Service, saw the settlements as representing the idea that those who had been privileged to enjoy university education should live and ‘settle’ among the workers. This was, in itself, not a new idea. Clement Attlee, the future Labour leader, had done this in the East End of London before the Great War. But what was new was the way in which these ‘settlers’ were to help open up ‘lines of communication’ between the coalfield communities and the outside world, to act as a means of cultural ‘irrigation’, in order to establish ‘an educated democracy’. Watkins and Thomas Jones, Deputy Secretary to the Cabinet before becoming Secretary of the Pilgrim Trust in the 1930s, combined to offer charitable help for Maes-yr-Haf for it to spread the settlement idea throughout the coalfield. At the beginning of 1930, it had become affiliated to the Educational Settlement Association and it soon became seen as a model of ‘intervention’ in working-class communities.
Some historians have suggested that the movement was not well enough funded to imply that the government saw it as a major barrier to revolution, but it was not the level of funding which the government itself provided which was significant, but the way in which civil servants were able to facilitate and direct charitable funds from the Mayors of various cities, the Society of Friends and those poured in by the Carnegie Trust and Pilgrim Trust. The last of these was established by the New York businessman, Edward S. Harkness, who provided a gift of over two million pounds. The trustees included Stanley Baldwin, Lord Macmillan, Sir Josiah Stamp and John Buchan. Although a Labour Government was in power committed to ending unemployment, these men continued to exert considerable influence over the affairs of the depressed areas both in South Wales and the North of England and over the Government’s policy towards the unemployed. It was the duty of the trustees, …
… to apply their resources at key points of the present distress, … to prevent many places where moral and intellectual leadership is absent, from sinking into despair.
Meanwhile, in the spring of 1931, 2,500 unemployed marched on London and were met by a baton charge of police in Hyde Park. The march was broken up on what, for a time and for some at least, became a very rough occasion (see the photo below, taken later in Hyde Park). They had deposited an enormous petition which they hoped to present to Parliament in the left luggage office at a London terminus. When they went back to pick it up, it had ‘unaccountably’ disappeared and so was never presented.
However, the numbers involved in such demonstrations were often limited, of necessity perhaps, to a small segment of the unemployed. As the depression worsened, the political energies of an increasing number of the unemployed were drained away by decreasing resources. Successful political agitation depended upon the addressing of the immediate issues facing the unemployed, such as the actions of the ‘Courts of Referees’, and matters such as these took up nearly all of the time of the Trades Councils in the late 1920s as well as bringing about the growth of the NUWM under the leadership of Wal Hannington. But the available evidence does not suggest any accompanying widespread shift towards the ideological position held by Hannington.
The Crisis of 1931 & The Cuts:
In early 1931, as the Labour government continued to pursue the traditional conservative remedy for a recession by cutting expenditure and wages, the whole European credit system sustained a near-fatal jolt when the Austrian bank, Kredit Anstalt, failed and had to be shored up with a loan from the Bank of England, among others. There had been a steady drain of gold from the Bank of England ever since the US loans had ceased to flow into Central Europe, and now the Bank of England asked the New York banks for a loan. They refused this until Britain had taken steps to balance its budget. The Cabinet turned to the advice of Sir George May, former Secretary of the Prudential Insurance Company and Sir Montague Norman, Governor of the Bank of England. At this point, few in the government were able to read the signs of the impending crisis. The warnings of the Chancellor, Philip Snowden, had little effect upon some of his colleagues, whose financial creed was a blend of mysticism and emotion. During the summer, a creeping sickness was spreading over Europe, and the symptoms were becoming acute, first in Austria, then in Germany and last in Britain.
The crisis came to a head in Britain in the late summer of 1931, beginning with a conference of European Ministers in London in July provided no remedy. At the end of that month, the May Report was published, showing that the Government was overspending by a hundred and twenty million a year. It proposed cutting expenditure by ninety-six million pounds, two-thirds of which was to be made by reducing maintenance for the unemployed by twenty per cent. There followed immediately a heavy withdrawal of foreign balances, but the Bank of England failed in its approach to the United States. Without the US loan, the Government faced the prospect of having to default on its repayments which would result in Britain having to go off the gold standard. The effect of that, the Government believed, would be a drastic reduction in the pound sterling, since the gold standard was viewed as a ‘holy cow’ in international financial circles at that time.
A programme of drastic cuts in Government expenditure was the only answer, and MacDonald and Snowden made a plan to reduce the pay of the armed services, civil servants and school teachers, and to cut unemployment pay by ten per cent. The TUC Economic Committee had warned in March 1931, that the application of such a policy can only intensify the slump by reducing the purchasing power of the community thereby leading to further unemployment. Now Ernest Bevin and Walter Citrine led a trade union delegation to a Cabinet Committee and declared total hostility to the cuts. Sidney Webb, now Lord Passfield and a Secretary of State in the Cabinet, told his wife Beatrice, the General Council are pigs, they won’t agree to any cut of unemployment insurance benefits, or salaries, or wages. But although the Opposition said the cuts were too small, half of the Cabinet refused to accept the cut in unemployment pay. There was much to be said for their point of view as they were, after all, a Labour government which had been committed to ending unemployment within three months of taking office. Unemployment had stood at one million then, but now it had reached 2.75 million: all they had been able to do for the unemployed had been to go on paying them ‘the dole’.
So the Labour Cabinet dug its heels in and MacDonald resigned on 24 August, together with the rest of the government. The stricken statesman went to the Palace to tender his resignation to the King, who had arrived in Balmoral three days earlier, on the 21st, for his annual Scottish holiday only to have to return to London the next day. It was not for him to have any public opinion on economic policy or any preference among the parties. But as the ‘trustee’ of the nation, the King felt that a national emergency should be faced by a united front. According to many popular Socialist narratives, ‘what happened next’, almost inevitably, was that MacDonald conspired with a ‘traitorous caucus’ which included Snowden and Thomas, in forming a National Government with the Liberals and Conservatives. In fact, the common procedure was would have been for MacDonald to resign, and he was prepared to follow this constitutional precedent, giving way to the Conservatives, but the King’s view was supported by the senior Ministers, and MacDonald accepted his invitation to form a National Government composed of Conservatives and Liberals as well as some of his own senior colleagues. The next day MacDonald returned to Downing Street to proclaim the appointment to a mixed reception from his former Cabinet members, few of whom were willing to follow him.
Divided Opinion & Reaction – Mutiny & Gold Standard:
Contemporary reaction to the Cabinet split and creation of the National Government in August of that year can be seen from two points of view in the following extracts from The Times and The New Statesman:
The country awakens this morning to find Mr MacDonald still Prime Minister, with the prospect of a small Cabinet representative of all three parties. The former Cabinet resigned yesterday afternoon, and a statement issued last night announced that considerable progress had been made towards settling the composition of its successor, which would be a Government of co-operation formed with the specific purposes only of carrying through a very large reduction in expenditure and raising ‘on an equitable basis’ the further funds required to balance the Budget.
All concerned are to be warmly congratulated on this result, so fully in accord with the patriotic spirit which has inspired a week’s most anxious negotiations. The Prime Minister and the colleagues of his own party who have followed him deserve in particular unqualified credit, both for the manner in which they took their political lives in their hands by by facing and forcing the break-up of the late Cabinet, and for their new decisionto translate courage in the Cabinet into courage in the country. The readiness to share the responsibility – honour is perhaps the better word – of carrying through to the end the policy of retrenchment adds enormously to the prospect of its success.
The Times, 25 August 1931
In many respects the situation which confronted the Cabinet was like that of August 1914. … In 1914, Mr MacDonald refused to join a War Cabinet: Mr Henderson accepted. Mr MacDonald was denounced as a traitor: Mr Henderson applauded. In leading arguments in ‘The Times’, for instance, Mr MacDonald’s patriotism is extolled, while Mr Henderson is denounced as a man who put party before country. Meanwhile, in Labour circles all over the country Mr MacDonald is being denounced … for betraying his party. … Mr MacDonald’s decision to form a Cabinet in conjunction with the Liberals and the Tories seems to us a mistake, just as it would have been a mistake for him as a pacifist to join a War Cabinet in 1914. For he must inevitably find himself at war with the the whole of organised labour, and …with all those, in all classes, who believe that the policy of reducing the purchasing power of the consumer to meet a situation of over-production is silly economics. … An effort is being made to represent the whole issue as merely one of a ten per cent reduction in the dole and the refusal to cut it could only be based on cowardly subservience to the electorate. … We oppose it … because it is only the first step, the crucial beginning of a policy of reductions, disatrous, we believe for England and the rest of the world. …
New Statesman, 29 August 1931
On 11 September, a supplementary budget was passed by the House of Commons, which by heavy economies and increased taxes provided a small surplus for that and the forthcoming year. The cuts were duly brought into force by Philip Snowden, who remained as Chancellor. He added sixpence to income tax, ten per cent to the surtax, a penny on a pint of beer, and reduced teachers’ pay by fifteen per cent and Police, Army, Navy and Air Force pay by varying drastic amounts. The dole was reduced from seventeen shillings to fifteen and threepence.
There was an immediate reaction to the wage cuts, as on 14 September a naval mutiny broke out in Invergordon when the ratings of three ships refused to obey orders to put to sea. According to René Cutforth, it was the ‘politest mutiny ever staged’ since no-one was hurt or even intimidated and respect for officers was fully maintained. The few ratings who started to sing ‘The Red Flag’ were considered to be out of order by the other ratings, who preferred to sing, ‘the more we are together the merrier we shall be’, a popular drinking song. They sent a written representation of their case to the Admiralty, stating that while they refused to serve under the new rates of pay, they were willing to consider ‘a cut which they ‘consider within reason’. Although the incident was barely mentioned in the British press, garbled versions of it appeared in the foreign press, which made it look like a revolutionary rising. If the British Navy was disaffected, it was suggested, then Britain itself must be on the road to ruin.
As a result, there was another spectacular run on the Bank of England’s gold. The government dealt quickly with the situation, reducing the cuts and restoring the status quo almost at once. Twenty-four ratings were eventually suspended. But the run on the Bank was so exhausting that the Government which had been formed just a few weeks earlier to safeguard the gold standard was now forced to give it up anyway. Instead of crashing through the floor, however, the pound only fell to about seventy-five per cent of its former value which, if anything, improved Britain’s balance of trade. John Buchan commented:
The gold standard proved to have been largely a bogy; it had seemed the only palladium when we were on it, but we found that we did very well without it. The sterling group soon became a force in the world. There was no fall in the purchasing value of the pound at home, and its depreciation in terms of certain foreign currencies was in effect a bonus to our export trade. We had redressed the inequalities of our 1925 ambitions.
Nevertheless, the psychological impact of this event on those now in government could not have been more dramatic, as Paul Adelman pointed out, with a little help from A. J. P. Taylor, in his 1972 book on The Rise of the Labour Party 1880-1945:
On 21 September 1931 … Britain abandoned the gold standard. Bank rate was then raised to six per cent, and for the moment this brought to an end the long-drawn-out financial crisis. As Taylor comments (in ‘English History, 1914-45):
“A few days before, a managed economy had seemed as wicked as family planning. Now, like contraception, it became a commonplace. This was the end of an age”.
MacDonald – Man, Motives & Myth:
In October, the Prime Minister went to the country as the leader of a National Government, and they were returned to power with an immense majority. The General Election of 1931 was a straight fight between the Labour Party and other parties in office led by MacDonald. In an atmosphere of monetary panic, Labour representation in the house had already been cut from 289 to 46. The National Government was returned with 554 seats, while the Labour opposition was reduced to a mere rump of 52, with the Liberals winning just sixteen seats. The country was convinced that the Socialists had brought the pound to the verge of disaster, and it had only been snatched from the brink by the noble MacDonald. The photo below shows the Transport and General Workers’ Union secretary, Ernest Bevin (on the left), at Gateshead in 1931, with a band of loyal Labour Party supporters. Abolish poverty, abolish slums, wipe out destitution reads the poster on the election van. It was Bevin that was to be wiped out, temporarily, from the parliamentary scene, losing a safe Labour seat to the National Liberal candidate by 12,938 votes.
In the Labour Party, and in the Labour movement generally, there had never been such an uproar as the one which broke out at the end of the election, and the wound would still rankle just below the surface right into the 1970s. No name was too vile for MacDonald and his ‘apostate crew’. Accused of ‘betraying his class’ and ostracised by his own party, he became a tragic, isolated figure for the rest of his political life. Since he was at heart a warm man who needed sympathy and valued loyalty, this rough handling deeply upset him and was directly responsible for his decline and deterioration as a public figure. René Cutforth praised MacDonald’s patriotism, which he identified as the main motivation for his political decisions:
MacDonald was a Victorian. His loyalty to ‘the Nation’ was quite unequivocal. When it was seen by him to conflict with his socialism, it was the socialism that lost out. Though for the rest of his life he was quite sure that he had done his duty by the nation and was unjustly put upon, something in him gave way. …
According to Winston Churchill, Philip Snowden was similarly motivated by his deep love of Britain and his studiously concealed, but intense pride in British greatness. So, these two key questions still remain for historians to answer:
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Was MacDonald’s decision to form the National Government one of patriotism or pragmatism?
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How far did it demonstrate the importance of the consensual nature of British politics, even in times of national crisis?
From the 1960s, historians have been able to look at MacDonald’s decision in a slightly longer-term perspective than just the crisis of July-September 1931 and the subsequent October election. Robert Skidelsky’s analysis of the second Labour government, with his emphasis on the distinction between economic radicals and economic conservatives, began this discussion in 1970, although Ralph Miliband had published his Marxist critique of Parliamentary Socialism in 1961. Perhaps Skidelsky had this study in mind when he wrote that previous studies of MacDonald’s second government had tended to reinforce the tendency to view interwar politics in terms of a struggle between socialism and capitalism, between the Labour Party and the ‘Rest’. The real division, between radicals and conservatives, cut right across party lines, with the latter defeating the former. This economic debate was centred on unemployment, ten per cent of which Skidelsky claims was ‘endemic’ in the 1920s. It was often argued that before Keynes’ General Theory (1936) governments were bound to pursue conservative, orthodox, economic policies. Yet, as Skidelsky pointed out …
… most economists and most businessmen at the time rejected the ‘treasury view’, and dissent from orthodoxy increased progressively as traditional policies failed to restore prosperity. By 1929 there existed a substantial body of economic and political support for a radical unemployment policy embracing an expansionist monetary policy and a big programme of government investment. …
Why then, he asked, did the Labour Party fail to make use of this dissent for the ends of a radical unemployment policy? He argued that the consequences of that failure determined the politics of the following decade and that it was a failure that could have been avoided. Usually, criticism of MacDonald and his colleagues started with their handling of the financial crisis which began in early 1931, rather than with their omissions over the previous two years. But whereas between 1929 and 1931 there were plenty of effective choices open to the Government, in 1931 itself there was virtual unanimity on the need to defend the gold standard. But MacDonald broke with half his Cabinet, not over economic policy, but over primary loyalty:
As Prime Minister he considered his first duty was to the ‘national interest’ as it was almost universally conceived; the Labour Party saw its first duty to its own people. … The real criticism of MacDonald is not that he formed the National Government, but that under his leadership, the Labour Government had drifted into a position which left it so little choice. … the Government rejected Conservative protection, the Liberal national development loan, the Keynesian and Mosleyite amalgams of both, preferring instead the advice of the least progressive sections of the ‘economic establishment’.
Skidelsky’s ‘neo-Keynesian’ approach was challenged by Ross McKibben in his 1975 Past and Present article, who criticises the narrowness of an interpretation which was chiefly interesting as an explanation of the Labour Party’s apparent economic conservatism, but didn’t properly identify the alternative strategies available to MacDonald. McKibben provided some useful comparative material to support those who argued for a deflationary policy. He argued that the government fell essentially because it failed to agree on a programme of budgetary economies that would satisfy both the Conservatives and the Liberals, the latter party providing the majority which Labour, by itself, was short of in the Commons. McKibben emphasised that …
The ‘desertion’ of MacDonald caused great bitterness and generated a partisan history usually designed to justify the behaviour of one side or the other in the debacle. … a newer school has sought only to explain why the Labour government did not adopt economic policies which might appear to have been obviously the right ones. Why did it not, for example, attempt to reverse economic contraction by a programme of public works financed by budget deficits, or by tax-cuts, or a policy less untypical of a socialist party – by a redistribution of income that might have raised demand? Why was the government apparently so inflexibly attached to existing monetary policies?
The 1929 Labour government assumed, first, that the problems of the British economy were partly structural, and secondly, that Britain’s place in the international economy almost uniquely influenced its monetary policies. These assumptions were related: structural weakness in the older export-based industries led to falling exports and payment difficulties. On the other hand, the requirements of ‘the City’ led to monetary policies that made internal economic reconstruction difficult. Both these problems weres were powerful disincentives to economic unorthodoxy when it had become obvious that British industry had failed in the Twenties because it was still focused on the old staples, producing goods that people no longer wanted or needed. McKibben further argues that there were practical alternatives available to the Labour government, but these were not ‘drift or reflation’ but rather ‘drift or deflation’. This strategy would not have been such a ‘leap in the dark’, as there was already plenty of evidence from around the world of its efficacy as a remedy:
Until the crisis of July-August 1931, Britain alone of the major countries seriously affected by the depression refused to follow deflationary policies. Her relatively generous social services were not only maintained but somewhat increased in scope; despite the shrinkage of the tax-base, government expenditure continued to rise; no serious attempt was made to balance the budget.
Consequently, when the pressure to abandon drift and adopt deflation became too strong, the government collapsed. Two pressures came together, in fact: the pressure to solve Britain’s internal budgetary problems by deflation which reached a peak when the May Report was published on 31 July, and, almost simultaneously, the pressure created by the European liquidity crisis reaching London, which immediately called into question the exchange rate of the pound. The budgetary crisis and the exchange crisis had been distinct phenomena before this point, but throughout August 1931 they played off each other like thunder and lightning in a perfect storm.
Adelman provided some useful criticisms of Skidelsky’s assertion that the economic failures of the Labour Government before the crisis of 1931 were a necessary consequence of the ‘Utopian ethic’ to which the party was committed. On this, Skidelsky had written:
The Labour Party’s commitment to a nebulous Socialism made it regard the work of the ‘economic radicals’ such as Keynes as mere ‘tinkering’, when in fact it was they who were providing the real choice. It was the failure of the Labour Party to recognise that this was the choice that doomed it to failure and sterility in this crucial period.
In a subsequent article, published in the Society for the Study of Labour History Bulletin in 1970, Skidelsky went further, arguing that the Labour Party’s failure was a failure, not so much of socialism itself, but of Victorian liberalism, the parent ideology from which British socialism sprang and which, in its economic aspect at least, had persisted virtually unchallenged well into the twentieth century. Adelman argued that both Skidelsky’s original thesis, and this later refinement, seemed to exaggerate the influence of ideas, or their absence, as an explanation of economic and political events. Motivation is one of the primary interests of the historian, who cannot explain events without understanding the reasoning behind the people actually involved or connected with them. To deny its importance seems to imply that human action is somehow controlled by impersonal factors like economics or political philosophies, and this would lead on to a deterministic view, and a de-personification of history. Adelman argued the case for the analysis of motives behind MacDonald’s actions, suggesting that the second Labour Government’s failures had rather deeper roots in human psychology:
How are we to explain MacDonald’s conduct? It is probably true that, as his critics aver, he was a vain, ambitious and increasingly out of touch with rank-and-file sentiment within the party, and this explains his inability to appreciate the depth of feeling over the ten per cent cut. But there is no real evidence … that MacDonald was either in sympathy with or had been planning to become leader of a ‘National Government’ before the events of August 1931 thrust the role upon him. For a generation after this crisis Ramsay MacDonald was branded as a traitor to the Labour movement, but most impartial historians now agree with the spirit of Bassett’s remark that ‘he was moved primarily by his sense of duty’, even though we need not accept his further implication that what was good for MacDonald was also good for the Labour Party. What gave weight to MacDonald’s actions too was his belief that his leadership of the National Government would be temporary: as he stressed to his colleagues at that last fateful Cabinet meeting, it was to deal with an extraordinary crisis only, and, as had happened in 1918, he would return to the fold later on to lead a reunited party.
For his Labour colleagues, as MacDonald himself seems to have accepted, the position was different: for them the primary issue was one of party loyalty and not the question of the unemployment cuts (over which the gap between the two groups was very narrow), or a vague ‘national interest’ over whose meaning no one could agree. After all, a majority of the Cabinet had supported all of the cuts, and even the minority must have accepted that they would in any case be imposed by the next Conservative/ Liberal government. For most Labour ministers the major question was, therefore, … how to avoid a major split within the party, and on this issue a majority preferred to resign together rather than follow the Prime Minister into the National Government and accept a major breach in the Cabinet and the party.
The Dole, ‘Dope’ & The Means Test:
The newly-returned National Government not only cut the dole by ten per cent but also introduced the means test. The photograph above shows a protest meeting developing spontaneously among the crowd of disappointed unemployed outside the St Pancras Labour Exchange in London. Of all the blows which fell upon the poor and unfortunate in the Thirties, whether by accident, intelligence or design, this measure was the best calculated to divide the nation and the most bitterly resented. The dole had grown out of the old poor law system and the old unemployment benefit system when, back in 1921, it had proved inadequate to cope with the new scale of mass unemployment. The unemployment fund had had to thirty million pounds from the Treasury in order to finance ‘the dole’, with a new bureaucracy growing up to administer it, which after 1931 enlarged itself to administer the means test. The unemployed man who had come to the end of his insurance stamps was now at the mercy of the Public Assistance Committee, empowered to enquire into every halfpenny that found its way into his household, camping out in his front room and then adjusting his dole accordingly.
There was not much The Labour Party could do to help the unemployed and defend them against the cruelties imposed by the means test since it had put itself out in the cold in 1931 and remained there for the rest of the decade. Outside Parliament, protests and demonstrations were mostly led by the Communist Party and the NUWM. Labour politicians polished up their propaganda and tried to formulate a clear alternative to ‘MacDonaldism’. For a time its leader was yet another Victorian figure who had been in MacDonald’s cabinet before the split. George Lansbury was a Christian Socialist of real integrity and piety. His line was that all would be well when we had complete Socialism and power as well as office. In the meantime, he encouraged his comrades to sing the ‘Red Flag’. John Strachey wrote Marxist books and articles and gave speeches in which he seemed to hover between Fascism and Communism. On the Left, the Independent Labour Party, a few revolutionary Socialists, retained their seats. The most notable and charismatic of these was James Maxton, with his fringe of black hair falling across his burning eyes and reaching his shoulders, looking as if he was ready at any moment to ‘Man the Barricades’. Another ILP MP, John McGovern, recalled his intervention in the King’s Speech following the 1931 Election:
I happened to be standing beside Lady Astor M.P. , and she said “McGovern, this is a wonderful scene. This is what makes Old England such a great nation.” I replied, “But there are two Englands …” (As the King finished his speech) I called out, “What about the restoration of the cuts in unemployment allowances and the end of the Means Test?!” …
The return of the National Government led to the Social Service movement becoming a clearly recognised substitute for direct State intervention. The Cabinet took the decision that neither local authorities nor the Central Government should assume direct responsibility for welfare work for the unemployed (but that such work could) more appropriately and effectively be undertaken by private agencies with limited financial help in appropriate cases from National funds. The role of the National Council for Social Service as the main agent in this was soon established by its patron, the Prince of Wales. In political, social and economic terms, the year 1931 marked the end of the Victorian régime which had given Britain prosperity. Changed conditions forced it to accept some degree of economic nationalism, and free trade of the nineteenth-century form had departed for good. The corporate effort of total war had led, eventually, to a greater acceptance of the need to seek collectivist solutions to modern problems, like the onset of mass unemployment. Capital came more under state control and direction because it had to seek the support of the State more often. In addition, there was a collectivist stimulus to clearer thinking and Planning. This was to bear greater fruit later in the decade. It was no longer simply a matter of ameliorating the effects and defects of industrialisation, but of transforming industrialism itself.
Socialism, Parties & Patriotism:
Yet the phrase, ‘the new socialism’ remained a misnomer. Collectivist methods were used, not because they were deduced from a particular creed, but because they happened to meet a particular need. In accordance with its long-held secular practice, Britain and its people remained largely uninterested in political theory, accepting change when there was a compelling case for it, supported by clear evidence. Above all, the English working-class remained deeply patriotic, as did the Scots and the Welsh. In 1937, a Nottinghamshire coal miner recalled his interaction with a Socialist speaker earlier in the decade and how his admiration had turned to annoyance when the speaker had turned to this subject:
“What is this England you are supposed to love? It is only a tiny portion of the earth’s surface. Why should you be expected to love it, or be prepared to die for it, any more than you would for Russia, China or Greenland?”
I was thunderstruck. “Because it’s England!” I yelled out in a fury.
Didn’t he know that most of the happiness that ever I had came from this love of England that he spoke so contemptuously about? Didn’t they know that in the early winter mornings when the frost glittered on the half frozen fields and the air was so clear and so sharp that it hurt one’s nostrils, or in the hot summer afternoons when the forest of Sherwood was quiet under the heavy heat except for the popping of the bursting broom-pods – that England spoke to you? How she told you the wonderful stories of famous men who fought and ruled and died because of their love for her. Of the simple men who toiled, ploughed, reaped, loved every handful of her brown soil and died still loving her.
Andrew James 
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