After the Wall Street Crash, how could Britain make the most rapid recovery possible?

I was wondering how Britain could've been in a better economic situation by the end of the '30s and the inevitable confrontation with Hitler. What were the chief problems facing Britain during the Great Depression, and what could've been done to hasten the recovery process?
 

hipper

Banned
Come out of the Gold standard. Raise tariffs barriers around the empire and Commonwealth do some large scale deficit spending on infrastructure art the high points.
 
Come out of the Gold standard. Raise tariffs barriers around the empire and Commonwealth do some large scale deficit spending on infrastructure art the high points.

John Maynard Keynes was an active liberal and helped design their economic manifesto for the election in 1929. This was based on increasing government expenditure to stimulate growth as Hipper stated above (what would later be called a Keynesian response). So a better Liberal Party performance could give them enough seats in Parliament too form a coalition government with Labour on the conditions that some/all of their economic policies would be implemented.
 

Thomas1195

Banned
John Maynard Keynes was an active liberal and helped design their economic manifesto for the election in 1929. This was based on increasing government expenditure to stimulate growth as Hipper stated above (what would later be called a Keynesian response). So a better Liberal Party performance could give them enough seats in Parliament too form a coalition government with Labour on the conditions that some/all of their economic policies would be implemented.
IOTL, snowden sticked to laissez faire and free trade too long. Make either Lloyd George of Liberals or Baldwin of Conservatives winning would be the way to go, although I prefer the former, as it would allow Keynes to have greater influence.
 
I thought Britain IOTL recovered comparatively quickly...

At least for unemployment (there are of course many other potential measures of whether an economy is healthy or not, but employment is a big one), they had suffered fairly significantly until WWII. Even in the '20s unemployment was twice the average of the decades before WWI.

unemployment-1881-2015.png
 
At least for unemployment (there are of course many other potential measures of whether an economy is healthy or not, but employment is a big one), they had suffered fairly significantly until WWII. Even in the '20s unemployment was twice the average of the decades before WWI.

unemployment-1881-2015.png

Britain had >10% unemployment in the 1920s? Yikes.
 
A part of this was due to Mr Churchill when he went back to prewar Gold Standard

A good POD for a healthier British economy for WW2 would be for Churchill to to keep fiat currency. It has always struck me as odd that Churchill was so unconventional in so many ways but when it came to matters of economics he was very orthodox.

If you really want to start w^^king the situation have the BOE do the 1920's equivalent of quantitative easing (printing funny money) to help pay down the British national debt. Sure inflation might be 1% or 2% higher (in a period of relatively low inflation) causing the economy to slow down a little. However it might just be enough to see off the default that hurt Britain's ability to raise loans during WW2 which lead to; first Cash and Carry, then Tizzard then Lend Lease. These collectively so damaged the UK's economy and comparative advantage that I've seen it argued the UK's economy only really started to recover in the 1980's.

Paradoxically if the UK had to find debt repayments right up to and through the war there would be less money available to pay for shiny military toys like trucks, tanks and planes especially pre war. However the long term effect of having US fuelled credit would more than make up for this during the war.
 

Thomas1195

Banned
A good POD for a healthier British economy for WW2 would be for Churchill to to keep fiat currency. It has always struck me as odd that Churchill was so unconventional in so many ways but when it came to matters of economics he was very orthodox.

If you really want to start w^^king the situation have the BOE do the 1920's equivalent of quantitative easing (printing funny money) to help pay down the British national debt. Sure inflation might be 1% or 2% higher (in a period of relatively low inflation) causing the economy to slow down a little. However it might just be enough to see off the default that hurt Britain's ability to raise loans during WW2 which lead to; first Cash and Carry, then Tizzard then Lend Lease. These collectively so damaged the UK's economy and comparative advantage that I've seen it argued the UK's economy only really started to recover in the 1980's.

Paradoxically if the UK had to find debt repayments right up to and through the war there would be less money available to pay for shiny military toys like trucks, tanks and planes especially pre war. However the long term effect of having US fuelled credit would more than make up for this during the war.
A weak currency would make British goods more competitive. Besides, the government can increase money supply to invest in infrastructure and industries, not just paying debts.
 
A weak currency would make British goods more competitive. Besides, the government can increase money supply to invest in infrastructure and industries, not just paying debts.

If the government prints more money to pay for domestic trinkets then the populus starts to expect a rise in inflation and factors this into their wage demands and prices. This effectively reduces the power of the stimulus and all you get is run away inflation. But, if you pay off foreign debts you can firstly keep quiet about it so the populus carry on as usual and secondly some of the cash paid will be used by lenders in the international markets thus reduce the direct effect of domestic inflation. Although it does lead to a weaker pound. Conversely a weaker pound not only helps exports it makes it easier to service the WW1 debts as the financiers of the time where obsessed with the low inflation gold standard so didn't take into effect of moderate levels of inflation available to fiat currencies. The common example of this is the inter war hyperinflation in Germany that for all the damage it did, allowed the Germans to pay of their war debt in full.

People are talking about tariffs to protect industries like the US response to the Great depression. However these only make the situation worse as they close down international trade as a means to grow the economy out of trouble. Britain should promote less tariffs but at the same time imposing like for like tariffs on nations that use them. Places like the US will still impose protective tariffs but other poorer countries will follow the more generous UK approach. This helps the world recover and fosters some international good will. The kind of good will would be useful in the coming war.
 
If the government prints more money to pay for domestic trinkets then the populus starts to expect a rise in inflation and factors this into their wage demands and prices. This effectively reduces the power of the stimulus and all you get is run away inflation. But, if you pay off foreign debts you can firstly keep quiet about it so the populus carry on as usual and secondly some of the cash paid will be used by lenders in the international markets thus reduce the direct effect of domestic inflation. Although it does lead to a weaker pound. Conversely a weaker pound not only helps exports it makes it easier to service the WW1 debts as the financiers of the time where obsessed with the low inflation gold standard so didn't take into effect of moderate levels of inflation available to fiat currencies. The common example of this is the inter war hyperinflation in Germany that for all the damage it did, allowed the Germans to pay of their war debt in full.

People are talking about tariffs to protect industries like the US response to the Great depression. However these only make the situation worse as they close down international trade as a means to grow the economy out of trouble. Britain should promote less tariffs but at the same time imposing like for like tariffs on nations that use them. Places like the US will still impose protective tariffs but other poorer countries will follow the more generous UK approach. This helps the world recover and fosters some international good will. The kind of good will would be useful in the coming war.

Doesn't Keynes suggest that inflation could form part of the stimulus, as people notice the value of their mattress stuffing going down and are encouraged to either spend it or invest?

I do recall something about the German hyperinflation crisis being somewhat orchestrated deliberately to get out of reparations, how did a weaker mark help Germany do this?

It seems like printing money or issuing bonds was going to be the only way for Britain to get cash. Raising taxes would tank any government that tries, and it's not like the were any healthy neighbours wage to lead out.
 
People are talking about tariffs to protect industries like the US response to the Great depression. However these only make the situation worse as they close down international trade as a means to grow the economy out of trouble. Britain should promote less tariffs but at the same time imposing like for like tariffs on nations that use them. Places like the US will still impose protective tariffs but other poorer countries will follow the more generous UK approach. This helps the world recover and fosters some international good will. The kind of good will would be useful in the coming war.
And you don't need to be punitive when other countries don't match your open borders and free trade. Just generally match their tariffs and let it quietly be known that you're willing to ping-pong them down.
 
Doesn't Keynes suggest that inflation could form part of the stimulus, as people notice the value of their mattress stuffing going down and are encouraged to either spend it or invest?

I do recall something about the German hyperinflation crisis being somewhat orchestrated deliberately to get out of reparations, how did a weaker mark help Germany do this?

It seems like printing money or issuing bonds was going to be the only way for Britain to get cash. Raising taxes would tank any government that tries, and it's not like the were any healthy neighbours wage to lead out.

The German war loans and debts where huge but like everyone else's were taken out on the assumption by the creditors that the low inflation global economy of the pre-war era. Got to love the Gold Standard. When hyper inflation hit and it was costing a million marks for a loaf of bread the amount of repayment on the loans didn't increase to take this into account so for the price of a single train load of bread the Germans could pay off their entire national debt. The persistent conspiracy theory that to this end the Germans deliberately caused the hyperinflation are unlikely. The reality is fiat currencies as well as inflation where not well understood in the early 1920's (indeed it was the German experience that formed the basis for much of the subsequent theory on inflation, namely that it is caused solely by the amount of over supply of money) and the temptation to print more cash to pay the crippling WW1 reparations was too great and economic ruin followed.

Until the default of the early 1930's (caused in part by the defaults of other nations who owed Britain like France) Britains international credit rating was as good as it gets. Raising the money was not the issue. The problem was that using debt to fuel growth had never been tried and was an unsubstantiated theory. At this time the British were extremely orthodox in their handling of the economy. It was only when the situation didn't get better quickly after the system shock as they expected that they had to get creative. However by this time the economy was already smashed and wouldn't recover until the stimulus of rearmament. The key is acting as soon as possible to reduce the damage as much as possible.
 
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