The United Kingdom through The Great Depression

During the 1920s while the United States' economy was booming with new inventions, massive industrial growth, and an exciting new city night-life, the United Kingdom remained stagnant. This was largely due to the government's debt amounting to 180% of its yearly GDP. This debt, created during The Great War, was almost entirely due to the United States and cast a shadow over the decade throughout the United Kingdom. On top of the debt, the United Kingdom faced significant deflation further heightening the burden of debt. This deflation occurred mainly because of the government's decision to revert back to the gold standard to back the pound Sterling. This would have been fine if it was not for the United Kingdom's overvalue of gold by roughly 13% compared to the world market.

The immediate effects of the United States' stock market crash in 1929 brought the slow-churning British economy to a complete standstill. The United Kingdom saw unemployment double from 10%-20% and a large increase in the amount of those in poverty. The unemployment rates through the 1929 stock market crash were not as low as those felt by the United Kingdom after the worldwide recession in 2008, however, because the United Kingdom had little to no unemployment benefits during this time, the low rates during the years 1929 and 1930 were much more crippling than those in 2008. What little industry the nation had compared to the United States suffered greatly because of this.

Although the United Kingdom did not go unscathed through 1929, it did make a much speedier recovery than the United States did. This was due to the fact that most of the UK's consumers had not been using credit on the scale the United States had been. The United States suffered a stock market crisis largely due to the popping of the credit "bubble;" the UK was able to recover because there was hardly any "bubble" to be popped. When compared again to the 2008 recession, the United Kingdom's annual GDP actually recovered much faster in through the 1930s.

By the end of 1930 the United Kingdom's economy was not in too bad a shape, however, the nation did fall back into economic crisis with the failing of numerous major German and Austrian banks during 1931. The United Kingdom managed to navigate safely out of the year, however, with the clever budgeting of Lord Snowden and Ramsay MacDonald. These two men were able to form a coalition between their parties in Parliament in a successful effort to pass a more radical budget. The United Kindom's treasury was also given more freedom with the re-abandoning of the gold standard. This let them ease interested rates on the nation's domestic debt. After these two crises, The United Kingdom even experienced a small industrial boom in the late 1930s.

Despite the recovery of the United Kindom's economy and the industrial boom of the later 1930s, between 15% and 22% of the nation's workforce remained unemployed entering the 1940s. This was likely due to the meager unemployment benefits when compared to today's United Kindom. Many temporarily unemployed workers never got back on their feet economically due to the less-forgiving system of benefits, and so into the 1940s the United Kingdom brought much greater wealth disparity than it once had.

Group of unemployed men marching into London to protest.

Sources:
http://www.economicshelp.org/blog/7483/economics/the-uk-economy-in-the-1930s/
http://www.bl.uk/learning/timeline/item107676.html