Labour history uncut: Crash! Bang! Wallop! What an economy

by Pete Goddard and Atul Hatwal

On 31st May 1929, Ramsay Macdonald departed Darlington for London, cheered by a massed crowd swathed in green and white, Labour’s minty-fresh colours in the north east.

At each stop crowds were gathered at the platform demanding a speech from the election victor. He duly obliged where he could, although thanks to the use of station Tannoys, nobody actually understood any of it.

By the time Macdonald arrived at King Cross station at 11pm there were 12,000 people waiting. This wasn’t simply because of over-running engineering works outside Peterborough, either. The huge crowd was there to herald the return, albeit as a minority administration again, of a Labour government.

No pressure then.

Nobody was impressed by Ramsay Macdonald’s impression of a stamp

The next day Macdonald began the painful process of sulks and tantrums that came with forming a new government.

His first appointment should have been easy. Like last time Macdonald wanted to select an unfailingly loyal foreign secretary – himself.

But Arthur Henderson rather fancied a job where he could visit foreign countries and then invade them. He threatened to boycott the government if he didn’t get the job.

Jimmy Thomas was rebellious too. He refused to take his old job as secretary of state for the colonies, insisting he couldn’t handle any more curries.

Instead he wanted something to do with the economy, eventually winning the dubious prize of responsibility for 1.1m unemployed in his new role as lord privy seal.

And, as ever, there were problems with the left. After ongoing struggles with the ILP, Macdonald was reluctant to bring John Wheatley back into government. True, Wheatley had been regarded as the only unalloyed success of the first Labour term in his role as housing minister. But, this being politics, loyalty was far more important than ability.

Macdonald couldn’t entirely ignore the ILP though. He gave the role of token lefty in the Labour cabinet to likeable George Lansbury – a choice nowhere near as threatening as some of the ILP alternatives. Lansbury became first commissioner of works, helping Jimmy Thomas solve the unemployment problem.

For the key role in reviving the economy, Macdonald wasn’t taking any chances. He handed the chancellor of the exchequer job back to the high priest of economic orthodoxy, Philip Snowden.

It was a largely predictable line-up, looking very much like the 1923 vintage cabinet, except for three notable minor cabinet appointments.

The name’s Bondfield. Margaret Bondfield

Former Brighton shop girl, Margaret Bondfield was brought in as the first woman to serve at cabinet rank. This wasn’t a soft appointment to a minor ministry for women, children, culture, baking or kittens either. She was given the extremely non-token role of minister for labour.

A certain William Wedgewood Benn, recently joined from the Liberals became secretary of state for India, beginning that most socialist of Labour traditions, a dynasty of cabinet members.

And the new chancellor of the duchy of Lancaster, appointed with a special remit to keep George Lansbury away from anything important on unemployment, was the dashing and excitable Oswald Mosley.

The younger generation had to make do with minor appointments. Even Macdonald’s closest ILP supporter, Manny Shinwell, was only rewarded with the relatively lowly rank of number two at the Mines department; a slight that would be remembered later.

As for the Liberals, they were studiously ignored. Their 59 MPs could have secured the government and their Keynesian programme was virtually identical to Labour’s plans.

But there was to be no big, open offer from the largest party. Memories of Lloyd George’s time at the head of a virtually Tory administration were still too fresh for Macdonald. He himself would, of course, never do such a thing.

The heady days before spin – Ramsay Macdonald introduces his cabinet as they mill around the garden, apparently at random.

As the Labour government settled in, there was one absolute priority – getting the economy to recover.

No problem.

In October 1929, Wall Street crashed.

Oh. Maybe a slight problem.

The shockwaves of the crash reverberated around the world, plunging much of Europe into economic turmoil. Decisive action was required.

Macdonald, a man steeped in Labour party culture, knew exactly what to do.

He appointed a committee.

On 5th November, the Macmillan committee was formed,

“To inquire into banking, finance and credit… and to make recommendations calculated to enable these agencies to promote the development of trade and commerce and the employment of labour.”

The committee was led by Scottish lawyer Hugh Pattison Macmillan, who conveniently knew nothing about finance or economics. Fortunately, he was supported by Ernest Bevin, who thought he did, and John Maynard Keynes who actually did.

As the committee went off to do their thing, the economic situation continued to deteriorate. By January 1930, unemployment had risen to 1.5 million. Clearly this needed addressing.

So Macdonald convened the economic advisory council, which included ministers such as Jimmy Thomas, and economists such as, er John Maynard Keynes.

With both a committee and a council on the case, surely things would get better?

Unfortunately, although Mr Keynes tended to keep popping up on boards, committees, councils and inquiries, his ideas for stimulating the economy with capital spending weren’t gaining any traction with the party.

This came as an enormous frustration to the hyperactive Oswald Mosley. In January 1930 he presented his own, somewhat Keynesian, ideas to Macdonald which included a £200 million investment in roads and other projects.

Macdonald passed Mosley’s report on for consideration by a committee of party luminaries, including chancellor Snowden.

So now there were two committees, an advisory council and a Mosley recovery plan floating around.

Finally, on 1st May 1930, the assortment of committees and councils started to report back.

The committee marking Mosley’s homework went first.

“Must try harder. See me.”

The committee declared that the programme, “cut at the root of the individual responsibilities of ministers, the special responsibility of the chancellor of the exchequer in the sphere of finance, and the collective responsibility of the cabinet to parliament.”

This bore the stamp of Snowden protecting his role as top economic dog, which was at least better than going round peeing on the walls of Number 11.

Mosley didn’t give up so easily though. On 21st May he outlined his proposals to a meeting of Labour MPs and insisted his ideas were put to a vote by the PLP.

He was beaten 210 to 29.

Mosley may have lost his vote, but the Best Dressed MP title was as good as his

Mosley resigned from the cabinet, furious that a) nobody recognised his genius, b) the government seemed unwilling to take the drastic steps necessary to rescue the nation from economic disaster and c) seriously, did nobody recognise his genius?

For all the advice from the economic council or the deliberations of the Macmillan committee, Snowden’s crushing of Mosley signalled the direction Labour would take.

The chancellor’s economic orthodoxy went together with Macdonald’s natural caution like a horse and carriage – specifically a horse that doesn’t want to go anywhere, and a carriage with no wheels.

As far as Snowden was concerned, Labour needed to cut, cut and cut again, until the budget was balanced. In fairness, he was not alone in this. It was simply the prevailing economic thinking of the time.

Then again, most economic thinking is spent working out why things have gone so very wrong.

By June 1930, unemployment had risen to 1.9 million.

Pete and Atul are not historians

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3 Responses to “Labour history uncut: Crash! Bang! Wallop! What an economy”

  1. Nick says:

    So no doubt one should apply the lessons of the 1930’s to today.

    Namely to cure a problem caused by excessive borrowing and not paying loans, one should get the government to force people to borrow lots of money.

    Hmmm, financial voodoo springs to mind. A bit of Paracelsus will do the uk some good.

  2. LesAbbey says:

    A lesson here for Progress boys?

  3. swatantra says:

    Wonder if Gordon should have picked up a few lessons from MacDonalds after our own crash, and offered a Lab-Lib Pact thus creating a broad based Govt of National Unity? But I guess he decided to go easy on the fries.

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